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by the undersigned in the capacities thereunto duly authorized. abrdn

ETFs Sponsor LLC Date:

May 9, 2022 /s/

Steven Dunn Steven

Dunn * President

and Chief Executive Officer (Principal

Executive Officer) Date:

May 9, 2022 /s/

Andrea Melia Andrea

Melia * Chief

Financial Officer and Treasurer (Principal

Financial Officer and Principal Accounting Officer) * The

Registrant is a trust and the persons are signing in their capacities as officers of

abrdn ETFs Sponsor LLC, the Sponsor of the Registrant. 17

​ ​ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ​ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the quarterly period end March 31, 2023 ​ OR ​ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the transition period from                      to ​ Commission file number 001-38804 ​ Zynex, Inc. (Exact name of registrant as specified in its charter) ​ ​ NEVADA 90-0275169 (State or other jurisdiction of ​ (IRS Employer incorporation or organization) ​ Identification No.) ​ 9655 Maroon Cir . ​ ​ Englewood , CO ​ 80112 (Address of principal executive offices) ​ (Zip Code) ​ ( 800 ) 495-6670 (Registrant’s telephone number, including area code) ​ (Former name, former address and former fiscal year, if changed since last report) ​ Securities registered pursuant to Section 12(b) of the Ac ​ Title of each class Ticker Symbol Name of each exchange on which registered Common Stock, $0.001 par value per share ​ ZYXI ​ The Nasdaq Stock Market LLC ​ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ ​ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ ​ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ​ Large accelerated filer ☐ Accelerated filer ☐ ​ ​ ​ ​ Non-accelerated filer ☒ Smaller reporting company ☒ ​ ​ ​ ​ Emerging growth company ☐ ​ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ ​ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐ No ☒ ​ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. ​ ​ ​ Class Shares Outstanding as of April 27, 2023 Common Stock, par value $0.001 ​ 36,655,451 ​ ​ ​ ​ ​ ​ ​ Table of Contents ZYNEX, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q ​ Page PART I—FINANCIAL INFORMATION 3 ​ ​ ​ ​ Item 1. ​ Financial Statements 3 ​ ​ ​ Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022 3 ​ ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 4 ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 5 ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 6 ​ ​ ​ ​ Unaudited Notes to Condensed Consolidated Financial Statements 7 ​ ​ Item 2. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 ​ Item 3. ​ Quantitative and Qualitative Disclosures About Market Risk 24 ​ Item 4. ​ Controls and Procedures 24 ​ ​ PART II—OTHER INFORMATION 26 ​ ​ ​ ​ Item 1. ​ Legal Proceedings 26 ​ Item 1A. ​ Risk Factors 26 ​ Item 2. ​ Unregistered Sales of Equity Securities And Use of Proceeds 26 ​ Item 3. ​ Defaults Upon Senior Securities 27 ​ Item 4. ​ Mine Safety Disclosures 27 ​ Item 5. ​ Other Information 27 ​ Item 6. ​ Exhibits 28 ​ ​ SIGNATURES 29 ​ ​ ​ 2 ​ Table of Contents PART I. FINANCIAL INFORMATION ​ ITEM 1. FINANCIAL STATEMENTS ZYNEX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2023 2022 ​ ​ (unaudited) ​ ​ ​ ASSETS ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash ​ $ 16,792 ​ $ 20,144 Accounts receivable, net ​ 32,060 ​ 35,063 Inventory, net ​ 14,184 ​ 13,484 Prepaid expenses and other ​ 2,130 ​ 868 Total current assets ​ 65,166 ​ 69,559 ​ ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 2,281 ​ 2,175 Operating lease asset ​ ​ 11,888 ​ ​ 12,841 Finance lease asset ​ ​ 240 ​ ​ 270 Deposits ​ 683 ​ 591 Intangible assets, net of accumulated amortization ​ ​ 8,843 ​ ​ 9,067 Goodwill ​ ​ 20,401 ​ ​ 20,401 Deferred income taxes ​ 1,554 ​ 1,562 Total assets ​ $ 111,056 ​ $ 116,466 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ Current liabiliti ​ ​ Accounts payable and accrued expenses ​ ​ 5,650 ​ ​ 5,601 Cash dividends payable ​ ​ 16 ​ ​ 16 Operating lease liability ​ 2,003 ​ 2,476 Finance lease liability ​ 127 ​ 128 Income taxes payable ​ 2,015 ​ 1,995 Current portion of debt ​ ​ 5,333 ​ ​ 5,333 Accrued payroll and related taxes ​ 5,915 ​ 5,537 Total current liabilities ​ 21,059 ​ 21,086 Long-term liabiliti ​ ​ ​ Long-term portion of debt, less issuance costs ​ ​ 3,964 ​ ​ 5,293 Contingent consideration ​ ​ 8,600 ​ ​ 10,000 Operating lease liability ​ 12,788 ​ 13,541 Finance lease liability ​ ​ 159 ​ ​ 188 Total liabilities ​ 46,570 ​ 50,108 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ Stockholders’ equity: ​ ​ Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022 ​ — ​ — Common stock, $ 0.001 par value; 100,000,000 shares authorized; 41,575,386 issued and 36,646,041 outstanding as of March 31, 2023 41,658,132 issued and 36,825,081 outstanding as of December 31, 2022 ​ 39 ​ 39 Additional paid-in capital ​ 82,343 ​ 82,431 Treasury stock of 4,485,713 and 4,253,015 shares at March 31, 2023 and December 31, 2022, respectively, at cost ​ ( 36,513 ) ​ ( 33,160 ) Retained earnings ​ 18,617 ​ 17,048 Total stockholders’ equity ​ 64,486 ​ 66,358 Total liabilities and stockholders’ equity ​ $ 111,056 ​ $ 116,466 ​ The accompanying notes are an integral part of these condensed consolidated financial statements ​ ​ 3 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended March 31, ​ 2023 2022 NET REVENUE ​ ​ Devices ​ $ 11,944 ​ $ 6,725 Supplies ​ 30,226 ​ 24,358 Total net revenue ​ 42,170 ​ 31,083 ​ ​ ​ ​ ​ ​ ​ COSTS OF REVENUE AND OPERATING EXPENSES ​ ​ ​ ​ Costs of revenue - devices and supplies ​ 9,269 ​ 6,921 Sales and marketing ​ 21,227 ​ 14,424 General and administrative ​ ​ 11,390 ​ ​ 7,832 Total costs of revenue and operating expenses ​ 41,886 ​ 29,177 ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 284 ​ 1,906 ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ Gain on sale of fixed assets ​ ​ 2 ​ ​ — Change in fair value of contingent consideration ​ ​ 1,400 ​ ​ 200 Interest expense ​ ( 84 ) ​ ( 124 ) Other income, net ​ 1,318 ​ 76 ​ ​ ​ ​ ​ ​ ​ Income from operations before income taxes ​ 1,602 ​ 1,982 Income tax expense ​ 33 ​ 605 Net income ​ $ 1,569 ​ $ 1,377 ​ ​ ​ ​ ​ ​ ​ Net income per sh ​ ​ ​ ​ Basic ​ $ 0.04 ​ $ 0.03 Diluted ​ $ 0.04 ​ $ 0.03 ​ ​ ​ ​ ​ ​ ​ Weighted average basic shares outstanding ​ 36,694 ​ 39,765 Weighted average diluted shares outstanding ​ 37,442 ​ 41,188 ​ The accompanying notes are an integral part of these condensed consolidated financial statements ​ 4 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended March 31, ​ 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ Net income ​ $ 1,569 ​ $ 1,377 Adjustments to reconcile net income to net cash provided by operating activiti ​ ​ ​ Depreciation ​ ​ 615 ​ ​ 500 Amortization ​ 229 ​ 229 Non-cash reserve charges ​ ​ 408 ​ ​ ( 9 ) Stock-based compensation ​ 307 ​ 589 Non-cash lease expense ​ ( 272 ) ​ 97 Benefit for deferred income taxes ​ ​ 8 ​ ​ ( 220 ) Gain on change in fair value of contingent consideration ​ ​ ( 1,400 ) ​ ​ ( 200 ) Gain on sale of fixed assets ​ ​ ( 2 ) ​ ​ — Change in operating assets and liabiliti ​ ​ ​ ​ Accounts receivable ​ 2,596 ​ 787 Prepaid and other assets ​ ( 1,262 ) ​ ( 912 ) Accounts payable and other accrued expenses ​ 369 ​ 2,583 Inventory ​ ( 1,139 ) ​ ( 3,067 ) Deposits ​ ( 92 ) ​ — Net cash provided by operating activities ​ 1,934 ​ 1,754 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Purchase of property and equipment ​ ​ ( 184 ) ​ ​ ( 72 ) Proceeds on sale of fixed assets ​ ​ 10 ​ ​ — Net cash used in investing activities ​ ( 174 ) ​ ( 72 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ Payments on finance lease obligations ​ ( 31 ) ​ ( 28 ) Cash dividends paid ​ — ​ ( 3,613 ) Purchase of treasury stock ​ ( 3,353 ) ​ — Proceeds from the issuance of common stock on stock-based awards ​ ​ 27 ​ ​ 3 Principal payments on long-term debt ​ ​ ( 1,333 ) ​ ​ ( 1,333 ) Taxes withheld and paid on employees’ equity awards ​ ​ ( 422 ) ​ ​ ( 76 ) Net cash used in financing activities ​ ( 5,112 ) ​ ( 5,047 ) ​ ​ ​ ​ ​ ​ ​ Net decrease in cash ​ ( 3,352 ) ​ ( 3,365 ) Cash at beginning of period ​ 20,144 ​ 42,612 Cash at end of period ​ $ 16,792 ​ $ 39,247 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow informati ​ ​ Cash paid for interest ​ $ ( 90 ) ​ $ ( 89 ) Cash paid for rent ​ $ ( 1,382 ) ​ $ ( 995 ) Supplemental disclosure of non-cash investing and financing activiti ​ ​ ​ ​ Right-of-use assets obtained in exchange for new operating lease liabilities ​ $ — ​ $ 211 Inventory transferred to property and equipment under lease ​ $ 438 ​ $ 339 Capital expenditures not yet paid ​ $ 77 ​ $ 56 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 5 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Retained ​ Stockholders’ ​ Shares Amount Capital Stock Earnings Equity Balance at December 31, 2021 ​ ​ 39,737,890 ​ $ 41 ​ $ 80,397 ​ $ ( 6,513 ) ​ $ — ​ $ 73,925 Exercised and vested stock-based awards ​ ​ 38,355 ​ ​ — ​ ​ 3 ​ ​ — ​ ​ — ​ ​ 3 Stock-based compensation expense ​ ​ — ​ — ​ 589 ​ — ​ — ​ 589 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ​ ( 10,873 ) ​ ​ — ​ ​ ( 76 ) ​ ​ — ​ ​ — ​ ​ ( 76 ) Stock dividend adjustments ​ ​ 11,444 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net income ​ ​ — ​ — ​ — ​ — ​ 1,377 ​ 1,377 Balance at March 31, 2022 ​ ​ 39,776,816 ​ ​ 41 ​ ​ 80,913 ​ ​ ( 6,513 ) ​ ​ 1,377 ​ ​ 75,818 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2022 ​ ​ 36,825,081 ​ $ 39 ​ $ 82,431 ​ $ ( 33,160 ) ​ $ 17,048 ​ $ 66,358 Exercised and vested stock-based awards ​ ​ 66,045 ​ ​ — ​ ​ 27 ​ ​ — ​ ​ — ​ ​ 27 Stock-based compensation expense ​ ​ — ​ ​ — ​ ​ 307 ​ ​ — ​ ​ — ​ ​ 307 Warrants exercised ​ ​ 10,000 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares of common stock withheld to pay taxes on employees’ equity awards ​ ​ ( 22,387 ) ​ ​ — ​ ​ ( 422 ) ​ ​ — ​ ​ — ​ ​ ( 422 ) Purchase of treasury stock ​ ​ ( 232,698 ) ​ ​ — ​ ​ — ​ ​ ( 3,353 ) ​ ​ — ​ ​ ( 3,353 ) Net income ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,569 ​ ​ 1,569 Balance at March 31, 2023 ​ $ 36,646,041 ​ $ 39 ​ $ 82,343 ​ $ ( 36,513 ) ​ $ 18,617 ​ $ 64,486 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ ​ 6 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE (1) BASIS OF PRESENTATION Organization Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. The term “the Company” refers to Zynex, Inc. and its active and inactive subsidiaries. The Company operates in one primary business segment, medical devices which include electrotherapy and pain management products. As of March 31, 2023, the Company’s only active subsidiaries are Zynex Medical, Inc. (“ZMI,” a wholly-owned Colorado corporation) through which the Company conducts most of its operations, and Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation). ZMS has developed a fluid monitoring system which received approval by the U.S. Food and Drug Administration (“FDA”) during 2020 and is still awaiting CE Marking in Europe. ZMS has achieved no revenues to date. The Company’s inactive subsidiaries include Zynex Europe, Zynex NeuroDiagnostics, Inc. (“ZND,” a wholly-owned Colorado corporation) and Pharmazy, Inc. (“Pharmazy”, a wholly-owned Colorado Corporation). The Company’s compounding pharmacy operated as a division of ZMI dba as Pharmazy through January 2016. In December 2021, the Company acquired 100 % of Kestrel Labs, Inc. (”Kestrel”), a laser-based, noninvasive patient monitoring technology company. Kestrel’s laser-based products include the NiCO TM CO-Oximeter, a multi-parameter pulse oximeter, and HemeOx TM , a total hemoglobin oximeter that enables continuous arterial blood monitoring. Both NiCO and HemeOx are yet to be presented to the FDA for market clearance. All activities related to Kestrel flow through the ZMS subsidiary. 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 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 the Company’s medical devices are designed to be patient friendly and designed for home use. The devices are small, portable, battery operated and include an electrical pulse generator which is connected to the body via electrodes. All of the medical devices are marketed in the U.S. and are subject to FDA regulation and approval. All of the products require a physician’s prescription before they can be dispensed in the U.S. The Company’s primary product is the NexWave device. The NexWave is marketed to physicians and therapists by the Company’s field sales representatives. The NexWave requires consumable supplies, such as electrodes and batteries, which are shipped to patients on a recurring monthly basis, as needed. During the three months ended March 31, 2023 and 2022, the Company generated all of its revenue in North America from sales and supplies of its devices to patients and healthcare providers. 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, 2022. Amounts as of December 31, 2022, 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, 2022. 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 March 31, 2023 and the results of its operations and its cash flows for the periods presented. The results of operations for the three months ended March 31, 2023 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. ​ ​ 7 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Zynex, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying condensed 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, assumptions related to the valuation of contingent consideration, and valuation of long-lived assets and realizability of deferred tax assets. Accounts Receivable, Net The Company’s accounts receivable represent unconditional rights to consideration and are generated when a patient receives one of the Company’s devices, related supplies or complementary products. In conjunction with fulfilling the Company’s obligation to deliver a product, the Company invoices the patient’s third-party payer and/or the patient. Billing adjustments represent the difference between the list price and the reimbursement rates set by third-party payers, including Medicare, commercial payers and amounts billed directly to the patient. Specific amounts, if uncollected over a period of time, may be written-off after several appeals, which in some cases may take longer than twelve months. Substantially all of the Company’s receivables are due from patients with commercial or government health plans and workers compensation claims with a smaller portion related to private pay individuals, attorney, and auto claims. The Company maintains a constraint for third-party payer refund requests, deductions and adjustments. The Company recorded an allowance for uncollectible accounts of $ 0.4 million during the three months ended March 31, 2023, which is included in the general and administrative section of the condensed consolidated statements of income. See Note 14 – Concentrations for discussion of significant customer accounts receivable balances. Inventory, Net Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard costs, which approximates actual costs on an average cost basis. The Company monitors inventory for turnover and obsolescence and records losses for excess and obsolete inventory, as appropriate. The Company provides reserves for estimated excess and obsolete inventories based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. Long-lived Assets The Company records intangible assets based on estimated fair value on the date of acquisition. Long-lived assets consist of net property and equipment and intangible assets. The finite-lived intangible assets are patents and are amortized on a straight-line basis over the estimated lives of the assets. The Company assesses impairment of long-lived assets when events or changes in circumstances indicates that their carrying value amount may not be recoverable. Circumstances which could trigger a review include, but are not limited t (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or, expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. 8 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Useful lives of finite-lived intangible assets by each asset category are summarized be ​ ​ ​ ​ ​ ​ Estimated ​ ​ Useful Lives ​ in years Patents 11 ​ Goodwill Goodwill is recorded as the difference between the fair value of the purchase consideration and the estimated fair value of the net identifiable tangible and intangible assets acquired. Goodwill is not subject to amortization but is subject to impairment testing in the future. The Company utilized the simplified test for goodwill impairment. The amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value. The valuation methods used in the quantitative fair value assessment was a discounted cash flow method and required management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units. The Company tests more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others, declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. The Company assesses goodwill for impairment at the reporting unit level. The estimates of fair value and the determination of reporting units requires management judgment. Revenue Recognition Revenue is derived from sales and leases of the Company’s electrotherapy devices and sales of related supplies and complementary products. Device sales can be in the form of a purchase or a lease. Supplies needed for the device can be set up as a recurring shipment or ordered through the customer support team or online store as needed. The Company recognizes revenue when the performance obligation has been met and the product has been transferred to the patient, in the amount that reflects the consideration the Company expects to receive. In general, revenue from sales of devices and supplies is recognized once the product is delivered to the patient, which is when the performance obligation has been met and the product has been transferred to the patient. Sales of devices and supplies are primarily shipped directly to the patient, with a small amount of revenue generated from sales to distributors. In the healthcare industry there is often a third party involved that will pay on the patients’ behalf for purchased or leased devices and supplies. The terms of the separate arrangement impact certain aspects of the contracts, with patients covered by third party payers, such as contract type, performance obligations and transaction price, but for purposes of revenue recognition the contract with the customer refers to the arrangement between the Company and the patient. The Company does not have any material deferred revenue in the normal course of business as each performance obligation is met upon delivery of goods to the patient. There are no substantial costs incurred through support or warranty obligations. The following table provides a breakdown of disaggregated net revenues for the three months ended March 31, 2023 and 2022 related to devices accounted for as purchases subject to Accounting Standards Codification (“ASC”) 606 – “Revenue from Contracts with Customers” (“ASC 606”), leases subject to ASC 842, and supplies (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months March 31, ​ 2023 2022 Device revenue ​ ​ Purchased ​ $ 4,642 ​ $ 2,188 Leased ​ 7,302 ​ 4,537 Total device revenue ​ ​ 11,944 ​ ​ 6,725 Supplies revenue ​ ​ 30,226 ​ ​ 24,358 Total revenue ​ $ 42,170 ​ $ 31,083 ​ Revenues are estimated using the portfolio approach by third-party payer type based upon historical rates of collection, aging of receivables, trends in historical reimbursement rates by third-party payer types, and current relationships and experience with the third-party payers, which includes estimated constraints for third-party payer refund requests, deductions and adjustments. Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. 9 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Specifically, the complexity of third-party payer billing arrangements and the uncertainty of reimbursement amounts for certain products from third-party payers or unanticipated requirements to refund payments previously received may result in adjustments to amounts originally recorded. Settlements with third-party payers for retroactive revenue adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price using the expected amount method. These adjustments to transaction price are estimated based on the terms of the payment agreement with the payer, correspondence from the payer and historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Due to continuing changes in the healthcare industry and third-party payer reimbursement, it is possible the Company’s forecasting model to estimate collections could change, which could have an impact on the Company’s results of operations and cash flows. Any differences between estimated and actual collectability are reflected in the period in which received. Historically these differences have been immaterial, and the Company has not had a significant reversal of revenue from prior periods. The Company monitors the variability and uncertain timing over third-party payer types in the portfolios. If there is a change in the Company’s third-party payer mix over time, it could affect net revenue and related receivables. The Company believes it has a sufficient history of collection experience to estimate the net collectible amounts by third-party payer type. However, changes to constraints related to billing adjustments and refund requests have historically fluctuated and may continue to fluctuate significantly from quarter to quarter and year to year. Leases The Company determines if an arrangement is a lease at inception or modification of a contract. The Company recognizes finance and operating lease right-of-use assets and liabilities at the lease commencement date based on the estimated present value of the remaining lease payments over the lease term. For the finance leases, the Company uses the implicit rate to determine the present value of future lease payments. For operating leases that do not provide an implicit rate, the Company uses incremental borrowing rates to determine the present value of future lease payments. The Company includes options to extend or terminate a lease in the lease term when it is reasonably certain to exercise such options. The Company recognizes leases with an initial term of 12 months or less as lease expense over the lease term and those leases are not recorded on the Company’s condensed consolidated balance sheets. For additional information on the leases where the Company is the lessee, see Note 12- Leases. A significant portion of device revenue is derived from patients who obtain devices under month-to-month lease arrangements where the Company is the lessor. Revenue related to devices on lease is recognized in accordance with ASC 842, Leases. Using the guidance in ASC 842, the Company concluded the transactions should be accounted for as operating leases based on the following criteria be ● The lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term. ● The lease does not grant the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. ● The lease term is month to month, which does not meet the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. ● There is no residual value guaranteed and the present value of the sum of the lease payments does not equal or exceed substantially all of the fair value of the underlying asset ● The underlying asset is expected to have alternative uses to the lessor at the end of the lease term. Lease commencement occurs upon delivery of the device to the patient. The Company retains title to the leased device and those devices are classified as property and equipment on the balance sheet. Since the leases are month-to-month and can be returned by the patient at any time, revenue is recognized monthly for the duration of the period in which the patient retains the device. 10 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Debt Issuance Costs Debt issuance costs are costs incurred to obtain new debt financing. Debt issuance costs are presented in the accompanying condensed consolidated balance sheets as a reduction in the carrying value of the debt and are accreted to interest expense using the effective interest method. Stock-based Compensation The Company accounts for stock-based compensation through recognition of the cost of employee services received in exchange for an award of equity instruments, which is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. The stock-based compensation expenses are recognized over the period during which an employee is required to provide service in exchange for the award (the requisite service period, which in the Company’s case is the same as the vesting period). For awards subject to the achievement of performance metrics, stock-based compensation expense is recognized when it becomes probable that the performance conditions will be achieved over the respective performance period. Segment Information The Company defines operating segments as components of the business enterprise for which separate financial information is reviewed regularly by the Chief Operating Decision Makers to evaluate performance and to make operating decisions. The Company has identified our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer as our Chief Operating Decision Makers (“CODM”). The Company currently operates business as one operating segment which includes two revenue typ Devices and Supplies. Income Taxes The Company records deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying condensed consolidated balance sheets, as well as operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured 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. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized. Tax benefits are recognized from uncertain tax positions if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The Inflation Reduction Act (“IRA”) was enacted into law on August 16, 2022. Included in the IRA was a provision to implement a 15% corporate alternative minimum tax on corporations whose average annual adjusted financial statement income during the most recently completed three year period exceeds $1 billion. This provision is effective for tax years beginning after December 31, 2022. We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA will have a material impact on our reported results, cash flows or financial position when it becomes effective. Recent Accounting Pronouncements Management has evaluated 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. ​ 11 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE (3) INVENTORY The components of inventory as of March 31, 2023, and December 31, 2022 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 December 31, 2022 Raw materials ​ $ 3,225 ​ $ 3,506 Work-in-process ​ 1,614 ​ 1,205 Finished goods ​ ​ 7,854 ​ ​ 7,750 Inventory in transit ​ 1,759 ​ 1,291 ​ ​ $ 14,452 ​ $ 13,752 L reserve ​ ​ ( 268 ) ​ ​ ( 268 ) ​ ​ $ 14,184 ​ $ 13,484 ​ NOTE (4) PROPERTY AND EQUIPMENT The components of property and equipment as of March 31, 2023 and December 31, 2022 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 December 31, 2022 Property and equipment ​ ​ ​ Office furniture and equipment ​ $ 3,034 ​ $ 2,819 Assembly equipment ​ 138 ​ 110 Vehicles ​ 203 ​ 203 Leasehold improvements ​ 1,173 ​ 1,173 Leased devices ​ 1,249 ​ 1,162 ​ ​ $ 5,797 ​ $ 5,467 Less accumulated depreciation ​ ( 3,516 ) ​ ( 3,292 ) ​ ​ $ 2,281 ​ $ 2,175 ​ Total depreciation expense related to property and equipment was $ 0.2 million for the three months ended March 31, 2023 and 2022. Total depreciation expense related to devices out on lease was $ 0.4 million and $ 0.3 million for the three months ended March 31, 2023 and 2022, respectively. Depreciation on leased units is reflected in the condensed consolidated statement of operations as cost of revenue. The Company monitors devices out on lease for potential loss and places an estimated reserve on the net book value based on an analysis of the number of units of which are still with patients for which the Company cannot determine the current status. ​ NOTE (5) BUSINESS COMBINATIONS On December 22, 2021, the Company and its wholly-owned subsidiary Zynex Monitoring Solutions, Inc., entered into a Stock Purchase Agreement (the “Agreement”) with Kestrel and each of the shareholders of Kestrel (collectively, the ‘Selling Shareholders’). Under the Agreement, the Selling Shareholders sold all of the outstanding common stock of Kestrel (the “Kestrel Shares”) to the Company. The consideration for the Kestrel Shares consisted of $ 16.1 million cash and 1,467,785 shares of the Company’s common stock (the “Zynex Shares”). All of the Zynex Shares are subject to a lockup agreement for a period of one year from the closing date under the Agreement (the “Closing Date”). The Agreement provides the Selling Shareholders with piggyback registration rights. 978,524 of the Zynex Shares were deposited in escrow (the “Escrow Shares”). The number of Escrow Shares were subject to adjustment on the one-year anniversary of the Closing Date (or in connection with any Liquidation Event (as defined in the Agreement) that occurs prior to such anniversary date) based on the number of shares equal to $ 10.0 million divided by a 30-day volume weighted average closing price of the Company’s common stock. The Escrow Shares were adjusted on the anniversary date, which resulted in the cancellation of 156,673 Escrow Shares. Half of the Escrow Shares will be released on submission of a dossier on a laser-based photoplethysmographic device (the “Device”) to the FDA for permission to market and sell the Device in the United States. The other half of the Escrow Shares will be released upon determination by the FDA that the Device can be marketed and sold in the United States. The amount of escrow shares were recalculated at March 31, 2022, and are included in the calculation of diluted earnings per share for March 31, 2022. No additional calculation was required for the Escrow Shares at March 31, 2023, as the Escrow 12 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Share number was finalized on the anniversary date, and the shares are included in the Company’s calculation of basic earnings per share. The maximum amount of Zynex Shares that may be released are limited to 19.9 % of the total number of common shares and total voting power of common shares of the Company (see Note 13 for more information regarding this liability). The acquisition of Kestrel has been accounted for as a business combination under ASC 805. Under ASC 805, assets acquired, and liabilities assumed in a business combination must be recorded at their fair values as of the acquisition date. ​ NOTE (6) GOODWILL AND OTHER INTANGIBLE ASSETS During the year ended December 31, 2021 the Company completed the acquisition of Kestrel, which resulted in goodwill of $ 20.4 million (see Note 5). For the three months ended March 31, 2023, there was no change in the carrying amount of goodwill, there were no impairment indicators of the Company’s net asset value. The following table provides the summary of the Company’s intangible assets as of March 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Gross ​ ​ ​ ​ ​ ​ Remaining ​ Carrying Accumulated Net Carrying Life (in ​ Amount Amortization Amount years) Acquired patents at December 31, 2022 ​ $ 10,000 ​ $ ( 933 ) ​ $ 9,067 ​ 10 Amortization expense ​ ​ ​ ​ ​ ( 224 ) ​ ​ ( 224 ) ​ ​ Acquired patents at March 31, 2023 ​ $ 10,000 ​ $ ( 1,157 ) ​ $ 8,843 9.73 ​ The following table summarizes the estimated future amortization expense to be recognized over the remainder of 2023, the next five fiscal years, and periods thereaf ​ ​ ​ ​ ​ ​ (In thousands) April 1, 2023 through December 31, 2023 ​ $ 684 2024 ​ 911 2025 ​ 908 2026 ​ 908 2027 ​ 908 2028 ​ ​ 911 Thereafter ​ 3,613 Total future amortization expense ​ $ 8,843 ​ NOTE (7) 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. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential common shares outstanding would be anti-dilutive. 13 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The calculation of basic and diluted earnings per share for the three months ended March 31, 2023 and 2022 are as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended March 31, ​ 2023 2022 Basic earnings per share ​ ​ Net income available to common stockholders ​ $ 1,569 ​ $ 1,377 Basic weighted-average shares outstanding ​ 36,694 ​ 39,765 Basic earnings per share ​ $ 0.04 ​ $ 0.03 Diluted earnings per share ​ ​ Net income available to common stockholders ​ $ 1,569 ​ $ 1,377 Weighted-average shares outstanding ​ 36,694 ​ 39,765 Effect of dilutive securities - options and restricted stock ​ 748 ​ 1,423 Diluted weighted-average shares outstanding ​ 37,442 ​ 41,188 Diluted earnings per share ​ $ 0.04 ​ $ 0.03 ​ For the three months ended March 31, 2023 and 2022, 12,000 and 450,000 shares of common stock were excluded from the dilutive stock calculation because their effect would have been anti-dilutive. ​ NOTE (8) NOTES PAYABLE The Company entered into a loan agreement (the “Loan Agreement”) with Bank of America, N.A. (the “Bank”) in December 2021. Under this Loan Agreement, the Bank extended two facilities to the Company. Specified assets have been pledged as collateral. One facility is a line of credit in the amount of $ 4.0 million available until December 1, 2024 (“Facility 1”). Interest on Facility 1 is due on the first day of each month beginning January 1, 2022. The interest rate is an annual rate equal to the sum of (i) the greater of the BSBY Daily Floating Rate or (ii) the Index Floor (as defined in the Loan Agreement), plus 2.00 % . As of March 31, 2023, the Company had not utilized this facility. The other facility being extended by the Bank to the Company is a fixed rate term loan in the amount of $ 16.0 million (“Facility 2”). Facility 2 was entered into and funded in conjunction with the purchase of Kestrel Labs. The interest rate is equal to 2.8 % per year. The Company must pay interest on the first day of each month which began January 1, 2022 and the Company also repays the principal amount in equal installments of $ 444,444 per month through December 1, 2024. The following table summarizes future principal payments on long-term debt as of March 31, 2023: ​ ​ ​ ​ ​ ​ March 31, ​ (In thousands) April 1, 2023 through December 31, 2023 ​ $ 4,000 2024 ​ 5,333 Future principal payments ​ 9,333 Less current portion ​ ( 5,333 ) Less debt issuance costs ​ ​ ( 36 ) Long-term debt, net of debt issuance costs ​ $ 3,964 ​ NOTE (9) STOCK-BASED COMPENSATION PLANS In June 2017, the Company’s stockholders approved the 2017 Stock Incentive Plan (the “2017 Stock Plan”) with a maximum of 5.5 million shares reserved for issuance. Awards permitted under the 2017 Stock Plan inclu 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 the Company’s common stock on the date of grant and generally vest over four years . Restricted Stock Awards are issued to the recipient upon grant and are not included in outstanding shares until such vesting and issuance occurs. 14 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS During the three months ended March 31, 2023 and 2022, no stock option awards were granted under the 2017 Stock Plan. At March 31, 2023, the Company had 0.6 million stock options outstanding and exercisable under the following pla ​ ​ ​ ​ ​ ​ ​ Outstanding Exercisable ​ ​ Number of Options ​ Number of Options ​ ​ (in thousands) ​ (in thousands) Plan Category 2005 Stock Option Plan 211 ​ 211 2017 Stock Option Plan 356 ​ 355 Total 567 ​ 566 ​ During the three months ended March 31, 2023, and 2022, 62,000 shares and 48,000 shares of restricted stock, respectively, were granted to 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 the Company’s common stock on the date of grant. The vesting on the Restricted Stock Awards typically occurs quarterly over three years for the Board of Directors and quarterly or annually over two to four years for management. ​ The following summarizes stock-based compensation expenses recorded in the condensed consolidated statements of operations (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended March 31, ​ 2023 2022 Cost of Revenue ​ $ 8 ​ $ 15 Sales and marketing expense ​ 61 ​ 59 General, and administrative ​ ​ 238 ​ ​ 515 Total stock based compensation expense ​ $ 307 ​ $ 589 ​ The Company received cash proceeds of $ 27,000 and $ 3,000 related to option exercises during the three months ended March 31, 2023 and 2022, respectively. A summary of stock option activity under all equity compensation plans for the three months ended March 31, 2023, is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Average ​ Aggregate ​ ​ Number of ​ Average ​ Remaining ​ Intrinsic ​ ​ Shares ​ Exercise ​ Contractual ​ Value ​ (in thousands) Price Term (Years) (in thousands) Outstanding at December 31, 2022 793 ​ $ 2.67 ​ 5.03 ​ $ 8,908 Granted — ​ ​ — ​ ​ ​ ​ Forfeited ( 206 ) ​ ​ 6.30 ​ ​ ​ ​ Exercised ​ ( 20 ) ​ ​ 6.07 ​ ​ ​ ​ ​ Outstanding at March 31, 2023 567 ​ $ 1.24 ​ 3.32 ​ $ 6,104 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at March 31, 2023 566 ​ $ 1.22 ​ 3.31 ​ $ 6,099 ​ 15 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A summary of restricted stock award activity under all equity compensation plans for the three months ended March 31, 2023, is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Weighted ​ ​ Shares Average ​ (in thousands) Grant Date Fair Value Granted but not vested at December 31, 2022 431 ​ $ 11.92 Granted 62 ​ ​ 12.10 Forfeited ( 3 ) ​ ​ 14.51 Vested ( 46 ) ​ ​ 12.96 Granted but not vested at March 31, 2023 444 ​ $ 11.82 ​ As of March 31, 2023, the Company had approximately $ 4.5 million of unrecognized compensation expense related to stock options and restricted stock awards that will be recognized over a weighted average period of approximately 2.39 years. NOTE (10) STOCKHOLDERS’ EQUITY Treasury Stock On April 11, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of its common stock at prevailing market prices either in the open market or through privately negotiated transactions through April 11, 2023. From the inception of the plan through May 31, 2022 the Company purchased 1,419,874 shares of its common stock for $ 10.0 million or an average price of $ 7.04 per share which completed this program. On June 9, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through June 9, 2023. From the inception of the plan through October 4, 2022, the Company purchased 1,091,604 shares of its common stock for $ 10.0 million for an average price of $ 9.06 per share which completed this program. On October 31, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through October 31, 2023. From the inception of the plan through December 31, 2022, the Company purchased 495,138 shares of its common stock for $ 6.6 million or an average price of $ 13.43 per share. From the inception of the plan through March 31, 2023, the Company purchased 727,836 shares of its common stock for $ 10 million or an average price of $ 13.74 per share which completed this program. Warrants A summary of stock warrant activity for the three months ended March 31, 2023 is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Weighted ​ Average ​ Aggregate ​ ​ Number of ​ Average ​ Remaining ​ Intrinsic ​ ​ Warrants ​ Exercise ​ Contractual ​ Value ​ (in thousands) Price Life (Years) (in thousands) Outstanding and exercisable at December 31, 2022 99 ​ $ 2.39 ​ 1.76 ​ $ 1,140 Granted — ​ $ — ​ ​ ​ ​ ​ Exercised ( 8 ) ​ $ 2.27 ​ ​ ​ ​ ​ Forfeited ( 2 ) ​ $ — ​ ​ ​ ​ Outstanding and exercisable at March 31, 2023 89 ​ $ 2.41 ​ 1.52 ​ $ 853 (1) Warrants were exercised under a net exercise provision in the warrant agreement. As a result, approximately 2,000 warrants were forfeited in lieu of cash payment for shares during the three months ended March 31, 2023. ​ 16 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE (11) INCOME TAXES The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to excess tax benefits from stock option exercises and the tax impact of the change in fair value of contingent consideration. For the three months ended March 31, 2023 and 2022, discrete items adjusted were $ 1.5 million and $ 0.5 million, respectively. At March 31, 2023 and 2022, the Company is currently estimating an annual effective tax rate of approximately 24.5 % and 25.1 %, respectively. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to various factors. The provision for income taxes is recorded at the end of each interim period based on the Company’s estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 2 % and 30 % for the three months ended March 31, 2023 and 2022, respectively. The decrease in the Company’s effective income tax rate for the three months ended March 31, 2023 compared to the same period in 2022, primarily relate to the tax impact of discrete items. Discrete items recognized during the three months ended March 31, 2023 and 2022, resulted in a tax benefit of approximately $ 0.4 million and a tax expense of approximately $ 0.1 million, respectively. The Company recorded an income tax expense of $ 33,000 and a tax expense of $ 605,000 for the three months ended March 31, 2023 and 2022, respectively. No taxes were paid during the three months ended March 31, 2023 and 2022. NOTE (12) LEASES The Company categorize leases at their inception as either operating or financing leases. Leases include various office and warehouse facilities which have been categorized as operating leases while certain equipment is leased under financing leases. The Company’s operating leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s weighted average borrowing rate was determined to be 4.01 % for its operating lease liabilities. The Company’s equipment lease agreements have a weighted average rate of 9.40 % which was used to measure its finance lease liability. The weighted average remaining lease term was 4.64 years and 2.42 years for operating and finance leases, respectively, as of March 31, 2023. ​ As of March 31, 2023, the maturities of the Company’s future minimum lease payments were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Lease Liability Finance Lease Liability April 1, 2023 through December 31, 2023 ​ 1,672 ​ 114 2024 ​ 3,571 ​ 116 2025 ​ 3,586 ​ 76 2026 ​ 3,362 ​ 15 2027 ​ 3,149 ​ — 2028 ​ ​ 1,064 ​ ​ — Total undiscounted future minimum lease payments ​ $ 16,404 ​ $ 321 L Difference between undiscounted lease payments and discounted lease liabiliti ​ ( 1,613 ) ​ ( 35 ) Total lease liabilities ​ $ 14,791 ​ $ 286 ​ 17 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The components of lease expenses were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2023 2022 Lease ​ ​ ​ ​ ​ ​ Operating lease ​ ​ ​ ​ ​ Total operating lease expense ​ $ 1,121 $ 1,105 Finance lease ​ ​ ​ ​ ​ ​ Total amortization of leased assets ​ ​ 30 ​ ​ 30 Interest on lease liabilities ​ ​ 7 ​ ​ 10 Total net lease cost ​ $ 1,158 ​ $ 1,145 ​ For the three months ended March 31, 2023 and 2022, $ 0.1 million of operating lease costs were incurred at the Company’s manufacturing and warehouse facility and were included in cost of sales. For the three months ended March 31, 2023 and 2022, $ 1.0 million of operating lease costs were included in selling, general and administrative expenses on the condensed consolidated statement of income. ​ ​ NOTE (13) FAIR VALUE MEASUREMENTS The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company’s asset and liability classified financial instruments include cash, accounts receivable, accounts payable, accrued liabilities, and contingent consideration. The carrying amounts of financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The Company measures its long-term debt at book value which approximates fair value as the long-term debt bears market rates of interest. The fair value of acquisition-related contingent consideration is based on a Monte Carlo model. The valuation policies are determined by management, and the Company’s Board of Directors is informed of any policy change. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows: Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to Zynex for identical assets or liabilities; Level 2: Inputs include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and Level 3: Unobservable inputs that are supported by little or no market activity. The Company’s assets and liabilities which are measured at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The Company’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed below in all periods presented. 18 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents Company’s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2023, by level within the fair value hierarc ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at March 31, 2023 ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Priced in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Active ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Markets Significant ​ ​ ​ ​ ​ ​ ​ for Other Significant ​ Fair Value at Identical Observable Unobservable ​ March 31, Assets Inputs Inputs ​ 2023 (Level 1) (Level 2) (Level 3) ​ ​ (In thousands) Contingent consideration ​ $ 8,600 ​ $ — ​ $ — ​ $ 8,600 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 8,600 ​ $ — ​ $ — ​ $ 8,600 ​ The following table sets forth a summary of changes in the contingent consideration for the three months ended March 31, 2023 (in thousands): ​ ​ ​ ​ ​ ​ Contingent Consideration Balance as of December 31, 2022 ​ $ 10,000 Change in fair value of contingent consideration ​ ( 1,400 ) Balance as of March 31, 2023 $ 8,600 ​ ​ NOTE (14) CONCENTRATIONS For the three months ended March 31, 2023, the Company sourced approximately 39 % of the components for its electrotherapy products from three significant vendors. For the three months ended March 31, 2022 the Company sourced approximately 30 % of components from two significant vendors. At March 31, 2023, the Company had receivables from one third-party payer that made up approximately 13 % of the net accounts receivable balance. At December 31, 2022, the Company had receivables from one third-party payer which made up approximately 14 % of the net accounts receivable balance. ​ 19 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE (15) COMMITMENTS AND CONTINGENCIES See Note 12 for details regarding commitments under the Company’s long-term leases. 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. On occasion, the Company engages outside counsel related to a broad range of topics including employment law, third-party payer matters, intellectual property and regulatory and compliance matters. The Company is currently not a party to any material pending legal proceedings that would give rise to potential loss contingencies. ​ NOTE (16) SUBSEQUENT EVENTS No subsequent events identified through April 27, 2023. ​ ​ ​ 20 ​ Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Notice Regarding Forward-Looking Statements This quarterly report contains statements that are forward-looking, such as statements relating to plans for future organic growth and other business development activities, as well as the impact of reimbursement trends, other capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks include the ability to engage effective sales representatives, the need to obtain U.S. Food and Drug Administration (“FDA”) clearance and Certificate European (“CE”) marking of new products, the acceptance of new products as well as existing products by doctors and hospitals, our dependence on the reimbursement from insurance companies for products sold or leased to our customers, acceptance of our products by health insurance providers for reimbursement, larger competitors with greater financial resources, the need to keep pace with technological changes, our dependence on third-party manufacturers to produce key components of our products on time and to our specifications, implementation of our sales strategy including a strong direct sales force, the impact of COVID-19 on our business, and other risks described herein and in our Annual Report on Form 10-K for the year ended December 31, 2022. These interim financial statements and the information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the annual audited consolidated financial statements, and notes to consolidated financial statements, included in the Company’s 2022 Annual Report on Form 10-K and subsequently filed reports, which have previously been filed with the Securities and Exchange Commission. General Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. We operate in one primary business segment, medical devices which includes electrotherapy and pain management products. As of March 31, 2023, the Company’s only active subsidiaries are Zynex Medical, Inc. (“ZMI,” a wholly-owned Colorado corporation) through which the Company conducts most of its operations, and Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation). The Company’s inactive subsidiaries include Zynex Europe, Zynex NeuroDiagnostics, Inc. (“ZND,” a wholly-owned Colorado corporation) and Pharmazy, Inc. (“Pharmazy”, a wholly-owned Colorado Corporation). The Company’s compounding pharmacy operated as a division of ZMI dba as Pharmazy through January 2016. In December 2021, the Company acquired 100% of Kestrel Labs, Inc. (“Kestrel”), a laser-based, noninvasive patient monitoring technology company. Kestrel’s laser-based products include the NiCO TM CO-Oximeter, a multi-parameter pulse oximeter, and HemeOx TM , a total hemoglobin oximeter that enables continuous arterial blood monitoring. Both NiCO and HemeOx are yet to be presented to the U.S. FDA for market clearance. All activities related to Kestrel flow through our ZMS subsidiary. The term “the Company” refers to Zynex, Inc. and its active and inactive subsidiaries. RESULTS OF OPERATIONS Summary Net revenue was $42.2 million and $31.1 million for the three months ended March 31, 2023 and 2022, respectively. Net revenue increased 36% for the three-month period ended March 31, 2023. The Company had net income of $1.6 million during the three months ended March 31, 2023 as compared with net income of $1.4 million during the three months ended March 31, 2022. Cash flows provided by operating activities increased $0.1 million to $1.9 million during the three months ended March 31, 2023 as compared with cash flows used in operating activities of $1.8 million during the three months ended March 31, 2022. Working capital was $44.1 and $48.5 million at March 31, 2023 and December 31, 2022, respectively. Net Revenue Net revenues are comprised of device and supply sales, constrained by estimated third-party payer reimbursement deductions. The reserve for billing allowance adjustments and allowance for uncollectible accounts are adjusted on an ongoing basis in conjunction with the processing of third-party payer insurance claims and other customer collection history. Product device revenue is primarily comprised of sales and rentals of our electrotherapy products and also includes complementary products such as our cervical traction, lumbar support and hot/cold therapy products. 21 Table of Contents Supplies revenue is primarily comprised of sales of our consumable supplies to patients using our electrotherapy products, consisting primarily of surface electrodes and batteries. Revenue related to both devices and supplies is reported net, after adjustments for estimated third-party payer reimbursement deductions and estimated allowance for uncollectible accounts. The deductions are known throughout the healthcare industry as billing adjustments whereby the healthcare insurers unilaterally reduce the amount they reimburse for our products as compared to the sales prices charged by us. The deductions from gross revenue also take into account the estimated denials, net of resubmitted billings of claims for products placed with patients which may affect collectability. See our Significant Accounting Policies in Note 2 to the condensed consolidated financial statements for a more complete explanation of our revenue recognition policies. We occasionally receive, and expect to continue to receive, refund requests from insurance providers relating to specific patients and dates of service. Billing and reimbursement disputes are very common in our industry. These requests are sometimes related to a few patients and other times include a significant number of refund claims in a single request. We review and evaluate these requests and determine if any refund is appropriate. We also review claims that have been resubmitted or where we are pursuing additional reimbursement from that insurance provider. We frequently have significant offsets against such refund requests which may result in amounts that are due to us in excess of the amounts of refunds requested by the insurance providers. Therefore, at the time of receipt of such refund requests we are generally unable to determine if a refund request is valid. Net revenue increased $11.1 million or 36% to $42.2 million for the three months ended March 31, 2023, from $31.1 million for the same period in 2022. The growth in net revenue is primarily related to the continued growth in device orders. In 2022, we saw annual order growth of 23% and additional order growth for the three months ended March 31, 2023 of 61%. Increased order growth has led to an increased customer base and drove higher sales of consumable supplies. Device Revenue Device revenue is related to the sale or lease of our electrotherapy and complimentary products. Device revenue increased $5.2 million or 78% to $11.9 million for the three months ended March 31, 2023, from $6.7 million for the same period in 2022. The growth in device revenue is primarily related to an increase in orders of 61%. Supplies Revenue Supplies revenue is related to the sale of supplies, primarily electrodes and batteries, for our electrotherapy products. Supplies revenue increased $5.8 million or 24% to $30.2 million for the three months ended March 31, 2023, from $24.4 million for the same period in 2022. The increase in supplies revenue is primarily related to an increased customer base from increased device sales in 2023 and 2022. Operating Expenses Cost of Revenue – Device and Supply Cost of Revenue – device and supply consist primarily of device and supply costs, operations labor and overhead, shipping and depreciation. Cost of revenue for the three months ended March 31, 2023 increased 34% to $9.3 million from $6.9 million for the three months ended March 31, 2022. The increase in cost of revenue is primarily due to increased revenue. As a percentage of revenue, cost of revenue – device and supply remained flat at 22% for the three months ended March 31, 2023 and 2022. Sales and Marketing Expense Sales and marketing expenses primarily consist of employee related costs, including commissions and other direct costs associated with these personnel including travel expenses and marketing campaign and related expenses. Sales and marketing expense for the three months ended March 31, 2023 increased 47% to $21.2 million from $14.4 million for the three months ended March 31, 2022. The increase in sales and marketing expense is primarily due to increased headcount and related salary and incentive compensation expenses. As a percentage of revenue, sales and marketing expense increased to 50% for the three months ended March 31, 2023 from 46% for the same period in 2022. The increase as a percentage of revenue is primarily due to the increased headcount and related salary and incentive compensation expenses, offset by an increase in revenue. General and Administrative Expense General and administrative expenses primarily consist of employee related costs, and other direct costs associated with these personnel including facilities and travel expenses and professional fees, depreciation and amortization. General and administrative expense for 22 ​ Table of Contents the three months ended March 31, 2023 increased 45% to $11.4 million from $7.8 million for the three months ended March 31, 2022. The increase in general and administrative expense is primarily due to increased head count within our billing department, increased professional and legal service expenses, a recorded allowance for uncollectible accounts, and increased headcount and research & development costs at ZMS. As a percentage of revenue, general and administrative expense increased to 27% for the three months ended March 31, 2023 from 25% for the same period in 2022. The increase as a percentage of revenue is primarily due to the aforementioned expenses, partially offset by increased revenue. Income Taxes The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 2.5% and 30% for the three months ended March 31, 2023 and 2022, respectively. Discrete items, primarily related to tax benefits on change in fair value of contingent consideration and stock option exercises, of $0.4 million were recognized as a benefit against income tax expense for the three months ended March 31, 2023. Discrete items, primarily related to tax expense on stock option exercises of $0.1 million were recognized as a benefit against income tax expense for the three months ended March 31, 2022. For the three months ended March 31, 2023 and 2022 the Company has an income tax expense of approximately $33,000 and $605,000, respectively. LIQUIDITY AND CAPITAL RESOURCES We have historically financed operations through cash flows from operations, debt and equity transactions. At March 31, 2023, our principal source of liquidity was $16.8 million in cash and $32.1 million in accounts receivable. Net cash provided by operating activities for the three months ended March 31, 2023 was $1.9 million compared with net cash provided by operating activities of $1.8 million for the three months ended March 31, 2022. The increase in cash used in operating activities for the three months ended March 31, 2023 was primarily due to an increase in net income. Net cash used in investing activities for each of the three months ended March 31, 2023 and 2022 was $0.2 and $0.1 million, respectively. Cash used in investing activities for the three months ended March 31, 2023 was primarily related to the purchase of property and equipment. Cash used in investing activities for the three months ended March 31, 2022 was primarily related to the purchase office furniture and equipment and leasehold improvements at our corporate headquarters. Net cash used in financing activities for the three months ended March 31, 2023 was $5.1 million compared with net cash used in financing activities of $5.0 million for the same period in 2022. Cash used in financing activities for the three months ended March 31, 2023 was primarily due to the repurchase of our common stock of $3.4 million and principal payments on notes payable of $1.3 million. Cash used in financing activities for the three months ended March 31, 2022 was primarily due to the payment of a $0.10 dividend to common shareholders totaling $3.6 million, and principal payments on notes payable of $1.3 million. We believe our cash and cash equivalents, together with anticipated cash flow from operations will be sufficient to meet our working capital, and capital expenditure requirements for at least the next twelve months. In making this assessment, we considered the followin ● Our cash balance at March 31, 2023 of $16.8 million; ● Our working capital balance of $44.1 million; and ● Our projected income and cash flows for the next 12 months. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 2 to the consolidated financial statements located within our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 14, 2023. 23 ​ Table of Contents RISKS AND UNCERTAINTIES In December 2019, a novel Coronavirus disease (“COVID-19”) was reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. While the Company did not incur significant disruptions to its operations during the three months ended March 31, 2023 from COVID-19, it is unable at this time to predict the impact that COVID-19 will have on its business, financial position and operating results in future periods due to numerous uncertainties. The Company has been and continues to closely monitor the impact of the pandemic on all aspects of its business. ​ ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK N/A ​ ITEM 4.  CONTROLS AND PROCEDURES Disclosure Controls and Procedures Evaluation of disclosure controls and procedures Our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as amended, or the Exchange Act, as of March 31, 2023. Based on management’s review, with participation of our Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended March 31, 2023, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting as described below. Material Weakness in Internal Control We identified a material weakness related to Information Technology General Controls (ITGCs) that were not designed and operating effectively to ensure (i) appropriate segregation of duties was in place to perform program changes and (ii) the activities of individuals with access to modify data and make program changes were appropriately monitored. Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. The material weakness identified above did not result in any material misstatements in our financial statements or disclosures, and there were no changes to previously released financial results. Our management concluded that the consolidated financial statements included in the Annual Report on Form 10-K, present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by Marcum LLP as stated in their report, which is included in Item 8 of the Annual Report on Form 10-K. Remediation Plan Our management is committed to maintaining a strong internal control environment. In response to the identified material weakness above, management will take comprehensive actions to remediate the material weakness in internal control over financial reporting. We are in the process of developing and implementing remediation plans to address the material weakness described above. Changes in Internal Control over Financial Reporting Except for the items referred to above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Inherent Limitation on the Effectiveness of Internal Control Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. 24 ​ Table of Contents Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. ​ 25 ​ Table of Contents PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not a party to any material pending legal proceedings. ​ ITEM 1A. RISK FACTORS Other than the additional risk factor disclosed below, there are no other material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 14, 2023. Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations. Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Most recently, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impacted. In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our business, financial condition or results of operations. ​ ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Items 2(a) and 2(b) are not applicable. (c) Stock Repurchases. Issuer Purchases of Equity Securities ​ 26 ​ Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ In Thousands ​ ​ ​ ​ ​ ​ ​ Shares ​ Maximum Value ​ ​ ​ ​ Purchased as of Shares That ​ ​ Total ​ Average ​ Part of a ​ May Yet Be ​ ​ Number of ​ Price ​ Publicly ​ Purchased ​ ​ Shares ​ Paid Per ​ Announced ​ Under the Period ​ Purchased ​ Share ​ Plan ​ Plan January 1 - January 31, 2023 ​ ​ ​ Share repurchase program (1) 116,000 ​ $ 15.66 611,138 ​ 1,536 ​ ​ ​ ​ ​ ​ ​ ​ February 1 - February 28, 2023 ​ ​ ​ ​ Share repurchase program (1) ​ 116,698 ​ $ 13.16 ​ 727,836 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 1 - March 31, 2023 ​ ​ ​ ​ Share repurchase program (1) ​ — ​ $ — ​ 727,836 ​ — Quarter Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share repurchase program (1) ​ 232,698 ​ $ 14.41 ​ 727,836 ​ — (1) Shares were purchased through the Company’s publicly announced share repurchase program approved by the Company’s Board of Directors on October 31, 2022. The program was fully utilized during the Company’s first quarter. ​ ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ​ ITEM 4. MINE SAFETY DISCLOSURES N/A ​ ITEM 5. OTHER INFORMATION None ​ 27 ​ Table of Contents ITEM 6.   EXHIBITS ​ Exhibit Number Description 31.1* Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. ​ ​ ​ 31.2* Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. ​ ​ ​ 32.1** Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ​ ​ ​ 32.2** Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. ​ ​ ​ 101.INS* XBRL Instance Document. ​ ​ ​ 101.SCH* XBRL Taxonomy Extension Schema Document. ​ ​ ​ 101.CAL* XBRL Taxonomy Calculation Linkbase Document. ​ ​ ​ 101.LAB * XBRL Taxonomy Label Linkbase Document. ​ ​ ​ 101.PRE * XBRL Presentation Linkbase Document. ​ ​ ​ 101.DEF * XBRL Taxonomy Extension Definition Linkbase Document. ​ ​ ​ 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith ** Furnished herewith ​ ​ 28 ​ Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ​ ZYNEX, INC. ​ ​ ​ ​ /s/ Daniel J. Moorhead Dat April 27, 2023 ​ Daniel J. Moorhead ​ Chief Financial Officer ​ (Principal Financial and Accounting Officer) ​ ​ 29

​ ​ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ​ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the quarterly period end June 30, 2023 ​ OR ​ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the transition period from                      to ​ Commission file number 001-38804 ​ Zynex, Inc. (Exact name of registrant as specified in its charter) ​ ​ NEVADA 90-0275169 (State or other jurisdiction of ​ (IRS Employer incorporation or organization) ​ Identification No.) ​ 9655 Maroon Cir . ​ ​ Englewood , CO ​ 80112 (Address of principal executive offices) ​ (Zip Code) ​ ( 303 ) 703-4906 (Registrant’s telephone number, including area code) ​ (Former name, former address and former fiscal year, if changed since last report) ​ Securities registered pursuant to Section 12(b) of the Ac ​ Title of each class Trading Symbol Name of each exchange on which registered Common Stock, par value $0.001 per share ​ ZYXI ​ NASDAQ Stock Market LLC ​ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ ​ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ ​ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ​ Large accelerated filer ☐ Accelerated filer ☒ ​ ​ ​ ​ Non-accelerated filer ☐ Smaller reporting company ☒ ​ ​ ​ ​ Emerging growth company ☐ ​ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ ​ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐ No ☒ ​ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. ​ ​ ​ Class Shares Outstanding as of July 26, 2023 Common Stock, par value $0.001 ​ 35,925,522 ​ ​ ​ ​ ​ ​ ​ Table of Contents ZYNEX, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q ​ Page PART I—FINANCIAL INFORMATION 3 ​ ​ ​ ​ Item 1. ​ Financial Statements 3 ​ ​ ​ Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022 3 ​ ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 4 ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 5 ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 6 ​ ​ ​ ​ Unaudited Notes to Condensed Consolidated Financial Statements 7 ​ ​ Item 2. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 ​ Item 3. ​ Quantitative and Qualitative Disclosures About Market Risk 26 ​ Item 4. ​ Controls and Procedures 26 ​ ​ PART II—OTHER INFORMATION 28 ​ ​ ​ ​ Item 1. ​ Legal Proceedings 28 ​ Item 1A. ​ Risk Factors 28 ​ Item 2. ​ Unregistered Sales of Equity Securities And Use of Proceeds 28 ​ Item 3. ​ Defaults Upon Senior Securities 28 ​ Item 4. ​ Mine Safety Disclosures 28 ​ Item 5. ​ Other Information 28 ​ Item 6. ​ Exhibits 29 ​ ​ SIGNATURES 30 ​ ​ ​ 2 ​ Table of Contents PART I. FINANCIAL INFORMATION ​ ITEM 1. FINANCIAL STATEMENTS ZYNEX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ December 31, ​ (unaudited) 2022 ASSETS ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash ​ $ 58,749 ​ $ 20,144 Accounts receivable, net ​ 32,957 ​ 35,063 Inventory, net ​ 14,325 ​ 13,484 Prepaid expenses and other ​ 1,529 ​ 868 Total current assets ​ 107,560 ​ 69,559 ​ ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 2,373 ​ 2,175 Operating lease asset ​ ​ 10,923 ​ ​ 12,841 Finance lease asset ​ ​ 211 ​ ​ 270 Deposits ​ 683 ​ 591 Intangible assets, net of accumulated amortization ​ ​ 8,616 ​ ​ 9,067 Goodwill ​ ​ 20,401 ​ ​ 20,401 Deferred income taxes ​ 1,802 ​ 1,562 Total assets ​ $ 152,569 ​ $ 116,466 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ Current liabiliti ​ ​ Accounts payable and accrued expenses ​ ​ 5,930 ​ ​ 5,601 Cash dividends payable ​ ​ 14 ​ ​ 16 Operating lease liability ​ 1,921 ​ 2,476 Finance lease liability ​ 122 ​ 128 Income taxes payable ​ — ​ 1,995 Current portion of debt ​ ​ — ​ ​ 5,333 Accrued payroll and related taxes ​ 6,108 ​ 5,537 Total current liabilities ​ 14,095 ​ 21,086 Long-term liabiliti ​ ​ ​ Long-term portion of debt, less issuance costs ​ ​ — ​ ​ 5,293 Convertible senior notes, less issuance costs ​ ​ 57,155 ​ ​ — Contingent consideration ​ ​ 6,900 ​ ​ 10,000 Operating lease liability ​ 12,020 ​ 13,541 Finance lease liability ​ ​ 132 ​ ​ 188 Total liabilities ​ 90,302 ​ 50,108 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ Stockholders’ equity: ​ ​ Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2023 and December 31, 2022 ​ — ​ — Common stock, $ 0.001 par value; 100,000,000 shares authorized; 41,639,575 issued and 36,014,243 outstanding as of June 30, 2023 41,658,132 issued and 36,825,081 outstanding as of December 31, 2022 ​ 36 ​ 39 Additional paid-in capital ​ 82,888 ​ 82,431 Treasury stock of 5,151,913 and 4,253,015 shares at June 30, 2023 and December 31, 2022, respectively, at cost ​ ( 42,628 ) ​ ( 33,160 ) Retained earnings ​ 21,971 ​ 17,048 Total stockholders’ equity ​ 62,267 ​ 66,358 Total liabilities and stockholders’ equity ​ $ 152,569 ​ $ 116,466 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 3 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended June 30, ​ For the Six Months Ended June 30, ​ 2023 2022 2023 2022 NET REVENUE ​ ​ ​ ​ ​ Devices ​ $ 13,743 ​ $ 9,505 ​ $ 25,687 ​ $ 16,230 Supplies ​ 31,209 ​ 27,254 ​ 61,435 ​ 51,612 Total net revenue ​ 44,952 ​ 36,759 ​ 87,122 ​ 67,842 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ COSTS OF REVENUE AND OPERATING EXPENSES ​ ​ ​ ​ ​ ​ Costs of revenue - devices and supplies ​ 9,272 ​ 7,305 ​ 18,541 ​ 14,226 Sales and marketing ​ 21,609 ​ 16,314 ​ 42,836 ​ 30,738 General and administrative ​ ​ 11,358 ​ ​ 8,776 ​ ​ 22,748 ​ ​ 16,608 Total costs of revenue and operating expenses ​ 42,239 ​ 32,395 ​ 84,125 ​ 61,572 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 2,713 ​ 4,364 ​ 2,997 ​ 6,270 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ Gain on sale of fixed assets ​ ​ — ​ ​ — ​ ​ 2 ​ ​ — Gain (loss) on change in fair value of contingent consideration ​ ​ 1,700 ​ ​ ( 100 ) ​ ​ 3,100 ​ ​ 100 Interest expense, net ​ ( 317 ) ​ ( 115 ) ​ ( 401 ) ​ ( 239 ) Other income (expense), net ​ 1,383 ​ ( 215 ) ​ 2,701 ​ ( 139 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations before income taxes ​ 4,096 ​ 4,149 ​ 5,698 ​ 6,131 Income tax expense ​ 742 ​ 803 ​ 775 ​ 1,408 Net income ​ $ 3,354 ​ $ 3,346 ​ $ 4,923 ​ $ 4,723 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per sh ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.09 ​ $ 0.09 ​ $ 0.13 ​ $ 0.12 Diluted ​ $ 0.09 ​ $ 0.08 ​ $ 0.13 ​ $ 0.12 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average basic shares outstanding ​ 36,435 ​ 38,851 ​ 36,564 ​ 39,305 Weighted average diluted shares outstanding ​ 37,061 ​ 39,893 ​ 37,249 ​ 40,367 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 4 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Six Months Ended June 30, ​ 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ Net income ​ $ 4,923 ​ $ 4,723 Adjustments to reconcile net income to net cash provided by operating activiti ​ ​ ​ Depreciation ​ ​ 1,311 ​ ​ 1,025 Amortization ​ 620 ​ 461 Non-cash reserve charges ​ ​ ( 91 ) ​ ​ ( 9 ) Stock-based compensation ​ 967 ​ 1,124 Non-cash lease expense ​ ( 158 ) ​ 237 Benefit for deferred income taxes ​ ​ ( 240 ) ​ ​ ( 392 ) Gain on change in fair value of contingent consideration ​ ​ ( 3,100 ) ​ ​ ( 100 ) Gain on sale of fixed assets ​ ​ ( 2 ) ​ ​ — Change in operating assets and liabiliti ​ ​ ​ ​ Accounts receivable ​ 2,106 ​ 808 Prepaid and other assets ​ ( 661 ) ​ ( 669 ) Accounts payable and other accrued expenses ​ ( 1,172 ) ​ ( 1,020 ) Inventory ​ ( 1,736 ) ​ ( 4,604 ) Deposits ​ ( 92 ) ​ ( 6 ) Net cash provided by operating activities ​ 2,675 ​ 1,578 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Purchase of property and equipment ​ ​ ( 394 ) ​ ​ ( 212 ) Proceeds on sale of fixed assets ​ ​ 10 ​ ​ — Net cash used in investing activities ​ ( 384 ) ​ ( 212 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ Payments on finance lease obligations ​ ( 62 ) ​ ( 58 ) Cash dividends paid ​ ( 1 ) ​ ( 3,613 ) Purchase of treasury stock ​ ( 9,468 ) ​ ( 10,655 ) Proceeds from issuance of convertible senior notes, net of issuance costs ​ ​ 57,026 ​ ​ — Proceeds from the issuance of common stock on stock-based awards ​ ​ 32 ​ ​ 14 Principal payments on long-term debt ​ ​ ( 10,667 ) ​ ​ ( 2,667 ) Taxes withheld and paid on employees’ equity awards ​ ​ ( 546 ) ​ ​ ( 122 ) Net cash provided by (used in) financing activities ​ 36,314 ​ ( 17,101 ) Net increase (decrease) in cash ​ 38,605 ​ ( 15,735 ) Cash at beginning of period ​ 20,144 ​ 42,612 Cash at end of period ​ $ 58,749 ​ $ 26,877 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow informati ​ ​ Cash paid on interest, net ​ $ ( 260 ) ​ $ ( 208 ) Cash paid for rent ​ $ ( 2,378 ) ​ $ ( 1,965 ) Cash paid for income taxes ​ $ ( 2,985 ) ​ ​ ( 3,926 ) Supplemental disclosure of non-cash investing and financing activiti ​ ​ ​ ​ Right-of-use assets obtained in exchange for new operating lease liabilities ​ $ — ​ $ 211 Vesting of restricted stock awards ​ $ ( 3 ) ​ $ — Inventory transferred to property and equipment under lease ​ $ 894 ​ $ 788 Capital expenditures not yet paid ​ $ 78 ​ $ 48 Non-cash dividend adjustment ​ $ ( 1 ) ​ $ — ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 5 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Retained ​ Stockholders’ ​ Shares Amount Capital Stock Earnings Equity Balance at December 31, 2021 ​ 39,737,890 ​ ​ 41 ​ ​ 80,397 ​ ​ ( 6,513 ) ​ ​ — ​ ​ 73,925 Exercised and vested stock-based awards ​ 38,355 ​ ​ — ​ ​ 3 ​ ​ — ​ ​ — ​ ​ 3 Stock-based compensation expense ​ — ​ — ​ 589 ​ — ​ — ​ 589 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 10,873 ) ​ ​ — ​ ​ ( 76 ) ​ ​ — ​ ​ — ​ ​ ( 76 ) Stock dividend adjustments ​ 11,444 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net income ​ — ​ — ​ — ​ — ​ 1,377 ​ 1,377 Balance at March 31, 2022 ​ 39,776,816 ​ $ 41 ​ ​ 80,913 ​ $ ( 6,513 ) ​ $ 1,377 ​ $ 75,818 Exercised and vested stock-based awards ​ 178,727 ​ ​ 1 ​ ​ 11 ​ ​ — ​ ​ — ​ ​ 12 Stock-based compensation expense ​ — ​ ​ — ​ ​ 535 ​ ​ — ​ ​ — ​ ​ 535 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 47,603 ) ​ ​ — ​ ​ ( 47 ) ​ ​ — ​ ​ — ​ ​ ( 47 ) Purchase of treasury stock ​ ( 1,504,374 ) ​ ​ ( 2 ) ​ ​ — ​ ​ ( 10,653 ) ​ ​ — ​ ​ ( 10,655 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,346 ​ ​ 3,346 Balance at June 30, 2022 ​ 38,403,566 ​ $ 40 ​ $ 81,412 ​ $ ( 17,166 ) ​ $ 4,723 ​ $ 69,009 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Retained ​ Stockholders’ ​ Shares Amount Capital Stock Earnings Equity Balance at December 31, 2022 ​ 36,825,081 ​ ​ 39 ​ ​ 82,431 ​ ​ ( 33,160 ) ​ ​ 17,048 ​ ​ 66,358 Exercised and vested stock-based awards ​ 66,045 ​ — ​ 27 ​ — ​ — ​ 27 Stock-based compensation expense ​ — ​ — ​ 307 ​ — ​ — ​ 307 Warrants exercised ​ 10,000 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 22,387 ) ​ ​ — ​ ​ ( 422 ) ​ ​ — ​ ​ — ​ ​ ( 422 ) Purchase of treasury stock ​ ( 232,698 ) ​ ​ — ​ ​ — ​ ​ ( 3,353 ) ​ ​ — ​ ​ ( 3,353 ) Net income ​ — ​ — ​ — ​ — ​ 1,569 ​ 1,569 Balance at March 31, 2023 ​ 36,646,041 ​ $ 39 ​ $ 82,343 ​ $ ( 36,513 ) ​ $ 18,617 ​ $ 64,486 Exercised and vested stock-based awards ​ 45,626 ​ — ​ ​ 9 ​ ​ — ​ ​ — ​ ​ 9 Stock-based compensation expense ​ — ​ — ​ 660 ​ — ​ — ​ ​ 660 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 11,224 ) ​ ​ ( 3 ) ​ ​ ( 124 ) ​ ​ — ​ ​ — ​ ​ ( 127 ) Purchase of treasury stock ​ ( 666,200 ) ​ ​ — ​ ​ — ​ ​ ( 6,115 ) ​ ​ — ​ ​ ( 6,115 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,354 ​ ​ 3,354 Balance at June 30, 2023 ​ 36,014,243 ​ $ 36 ​ $ 82,888 ​ $ ( 42,628 ) ​ $ 21,971 ​ $ 62,267 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ ​ 6 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION Organization Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. The term “the Company” refers to Zynex, Inc. and its active and inactive subsidiaries. The Company operates in one primary business segment, medical devices which include electrotherapy and pain management products. As of June 30, 2023, the Company’s only active subsidiaries are Zynex Medical, Inc. (“ZMI,” a wholly-owned Colorado corporation) through which the Company conducts most of its operations, and Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation). ZMS has developed a fluid monitoring system which received approval by the U.S. Food and Drug Administration (“FDA”) during 2020 and is still awaiting CE Marking in Europe. ZMS has achieved no revenues to date. The Company’s inactive subsidiaries include Zynex Europe, Zynex NeuroDiagnostics, Inc. (“ZND,” a wholly-owned Colorado corporation) and Pharmazy, Inc. (“Pharmazy”, a wholly-owned Colorado Corporation). The Company’s compounding pharmacy operated as a division of ZMI dba as Pharmazy through January 2016. In December 2021, the Company acquired 100 % of Kestrel Labs, Inc. (“Kestrel”), a laser-based, noninvasive patient monitoring technology company. Kestrel’s laser-based products include the NiCO TM CO-Oximeter, a multi-parameter pulse oximeter, and HemeOx TM , a total hemoglobin oximeter that enables continuous arterial blood monitoring. Both NiCO and HemeOx are yet to be presented to the FDA for market clearance. All activities related to Kestrel flow through the ZMS subsidiary. 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 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 the Company’s medical devices are designed to be patient friendly and designed for home use. The devices are small, portable, battery operated and include an electrical pulse generator which is connected to the body via electrodes. All of the medical devices are marketed in the U.S. and are subject to FDA regulation and approval. All of the products require a physician’s prescription before they can be dispensed in the U.S. The Company’s primary product is the NexWave device. The NexWave is marketed to physicians and therapists by the Company’s 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 six months ended June 30, 2023 and 2022, the Company generated all of its revenue in North America from sales and supplies of its devices to patients and healthcare providers. 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, 2022. Amounts as of December 31, 2022, 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, 2022. 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 June 30, 2023 and the results of its operations and its cash flows for the periods presented. The results of operations for the six months ended June 30, 2023 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. ​ 7 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Zynex, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying condensed 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, assumptions related to the valuation of contingent consideration, and valuation of long-lived assets and realizability of deferred tax assets. Accounts Receivable, Net The Company’s accounts receivable represent unconditional rights to consideration and are generated when a patient receives one of the Company’s devices, related supplies or complementary products. In conjunction with fulfilling the Company’s obligation to deliver a product, the Company invoices the patient’s third-party payer and/or the patient. Billing adjustments represent the difference between the list price and the reimbursement rates set by third-party payers, including Medicare, commercial payers and amounts billed directly to the patient. Specific amounts, if uncollected over a period of time, may be written-off after several appeals, which in some cases may take longer than twelve months. Substantially all of the Company’s receivables are due from patients with commercial or government health plans and workers compensation claims with a smaller portion related to private pay individuals, attorney, and auto claims. The Company maintains a constraint for third-party payer refund requests, deductions and adjustments. See Note 15 – Concentrations for discussion of significant customer accounts receivable balances. Inventory, Net Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard costs, which approximates actual costs on an average cost basis. The Company monitors inventory for turnover and obsolescence and records losses for excess and obsolete inventory, as appropriate. The Company provides reserves for estimated excess and obsolete inventories based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. Long-lived Assets The Company records intangible assets based on estimated fair value on the date of acquisition. Long-lived assets consist of net property and equipment and intangible assets. The finite-lived intangible assets are patents and are amortized on a straight-line basis over the estimated lives of the assets. The Company assesses impairment of long-lived assets when events or changes in circumstances indicates that their carrying value amount may not be recoverable. Circumstances which could trigger a review include, but are not limited t (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or, expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. Useful lives of finite-lived intangible assets by each asset category are summarized be ​ 8 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ ​ ​ ​ ​ Estimated ​ ​ Useful Lives ​ in years Patents 11 ​ Goodwill Goodwill is recorded as the difference between the fair value of the purchase consideration and the estimated fair value of the net identifiable tangible and intangible assets acquired. Goodwill is not subject to amortization but is subject to impairment testing in the future. The Company utilized the simplified test for goodwill impairment. The amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value. The valuation methods used in the quantitative fair value assessment was a discounted cash flow method and required management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units. The Company tests more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others, declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. The Company assesses goodwill for impairment at the reporting unit level. The estimates of fair value and the determination of reporting units requires management judgment. Revenue Recognition Revenue is derived from sales and leases of the Company’s electrotherapy devices and sales of related supplies and complementary products. Device sales can be in the form of a purchase or a lease. Supplies needed for the device can be set up as a recurring shipment or ordered through the customer support team or online store as needed. The Company recognizes revenue when the performance obligation has been met and the product has been transferred to the patient, in the amount that reflects the consideration the Company expects to receive. In general, revenue from sales of devices and supplies is recognized once the product is delivered to the patient, which is when the performance obligation has been met and the product has been transferred to the patient. Sales of devices and supplies are primarily shipped directly to the patient, with a small amount of revenue generated from sales to distributors. In the healthcare industry there is often a third party involved that will pay on the patients’ behalf for purchased or leased devices and supplies. The terms of the separate arrangement impact certain aspects of the contracts, with patients covered by third party payers, such as contract type, performance obligations and transaction price, but for purposes of revenue recognition the contract with the customer refers to the arrangement between the Company and the patient. The Company does not have any material deferred revenue in the normal course of business as each performance obligation is met upon delivery of goods to the patient. There are no substantial costs incurred through support or warranty obligations. The following table provides a breakdown of disaggregated net revenues for the three and six months ended June 30, 2023 and 2022 related to devices accounted for as purchases subject to Accounting Standards Codification (“ASC”) 606 – “Revenue from Contracts with Customers” (“ASC 606”), leases subject to ASC 842 – “Leases” (“ASC 842”), and supplies (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended June 30, ​ For the Six Months Ended June 30, ​ 2023 2022 2023 2022 Device revenue ​ ​ ​ ​ ​ Purchased ​ $ 4,781 ​ $ 2,268 ​ $ 9,422 ​ $ 4,457 Leased ​ 8,962 ​ 7,237 ​ 16,265 ​ 11,773 Total device revenue ​ $ 13,743 ​ $ 9,505 ​ $ 25,687 ​ $ 16,230 Supplies revenue ​ ​ 31,209 ​ ​ 27,254 ​ ​ 61,435 ​ ​ 51,612 Total revenue ​ $ 44,952 ​ $ 36,759 ​ $ 87,122 ​ $ 67,842 ​ Revenues are estimated using the portfolio approach by third-party payer type based upon historical rates of collection, aging of receivables, trends in historical reimbursement rates by third-party payer types, and current relationships and experience with the third-party payers, which includes estimated constraints for third-party payer refund requests, deductions and adjustments. Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. Specifically, the complexity of third-party payer billing arrangements and the uncertainty of reimbursement amounts for certain products from third-party payers or unanticipated requirements to refund payments previously received may result in adjustments to 9 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS amounts originally recorded. Settlements with third-party payers for retroactive revenue adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price using the expected amount method. These adjustments to transaction price are estimated based on the terms of the payment agreement with the payer, correspondence from the payer and historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Due to continuing changes in the healthcare industry and third-party payer reimbursement, it is possible the Company’s forecasting model to estimate collections could change, which could have an impact on the Company’s results of operations and cash flows. Any differences between estimated and actual collectability are reflected in the period in which received. Historically these differences have been immaterial, and the Company has not had a significant reversal of revenue from prior periods. The Company monitors the variability and uncertain timing over third-party payer types in the portfolios. If there is a change in the Company’s third-party payer mix over time, it could affect net revenue and related receivables. The Company believes it has a sufficient history of collection experience to estimate the net collectible amounts by third-party payer type. However, changes to constraints related to billing adjustments and refund requests have historically fluctuated and may continue to fluctuate significantly from quarter to quarter and year to year. Leases The Company determines if an arrangement is a lease at inception or modification of a contract. The Company recognizes finance and operating lease right-of-use assets and liabilities at the lease commencement date based on the estimated present value of the remaining lease payments over the lease term. For the finance leases, the Company uses the implicit rate to determine the present value of future lease payments. For operating leases that do not provide an implicit rate, the Company uses incremental borrowing rates to determine the present value of future lease payments. The Company includes options to extend or terminate a lease in the lease term when it is reasonably certain to exercise such options. The Company recognizes leases with an initial term of 12 months or less as lease expense over the lease term and those leases are not recorded on the Company’s condensed consolidated balance sheets. For additional information on the leases where the Company is the lessee, see Note 13- Leases. A significant portion of device revenue is derived from patients who obtain devices under month-to-month lease arrangements where the Company is the lessor. Revenue related to devices on lease is recognized in accordance with ASC 842. Using the guidance in ASC 842, the Company concluded the transactions should be accounted for as operating leases based on the following criteria be ● The lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term. ● The lease does not grant the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. ● The lease term is month to month, which does not meet the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. ● There is no residual value guaranteed and the present value of the sum of the lease payments does not equal or exceed substantially all of the fair value of the underlying asset ● The underlying asset is expected to have alternative uses to the lessor at the end of the lease term. Lease commencement occurs upon delivery of the device to the patient. The Company retains title to the leased device and those devices are classified as property and equipment on the balance sheet. Since the leases are month-to-month and can be returned by the patient at any time, revenue is recognized monthly for the duration of the period in which the patient retains the device. Debt Issuance Costs Debt issuance costs are costs incurred to obtain new debt financing. Debt issuance costs are presented in the accompanying condensed consolidated balance sheets as a reduction in the carrying value of the debt and are accreted to interest expense using the effective interest method. 10 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Stock-based Compensation The Company accounts for stock-based compensation through recognition of the cost of employee services received in exchange for an award of equity instruments, which is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. The stock-based compensation expenses are recognized over the period during which an employee is required to provide service in exchange for the award (the requisite service period, which in the Company’s case is the same as the vesting period). For awards subject to the achievement of performance metrics, stock-based compensation expense is recognized when it becomes probable that the performance conditions will be achieved over the respective performance period. Segment Information The Company defines operating segments as components of the business enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. The Company has identified our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer as our Chief Operating Decision-Makers (“CODM”). The Company currently operates business as one operating segment which includes two revenue typ Devices and Supplies. Income Taxes The Company records deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying condensed consolidated balance sheets, as well as operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured 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. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized. Tax benefits are recognized from uncertain tax positions if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The Inflation Reduction Act (“IRA”) was enacted into law on August 16, 2022. Included in the IRA was a provision to implement a 15% corporate alternative minimum tax on corporations whose average annual adjusted financial statement income during the most recently completed three year period exceeds $1 billion. This provision is effective for tax years beginning after December 31, 2022. We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA will have a material impact on our reported results, cash flows or financial position when it becomes effective. Recent Accounting Pronouncements Management has evaluated 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. ​ 11 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (3) INVENTORY The components of inventory are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 December 31, 2022 Raw materials ​ $ 3,998 ​ $ 3,506 Work-in-process ​ 785 ​ 1,205 Finished goods ​ ​ 7,724 ​ ​ 7,750 Inventory in transit ​ 2,086 ​ 1,291 ​ ​ $ 14,593 ​ $ 13,752 L reserve ​ ​ ( 268 ) ​ ​ ( 268 ) ​ ​ $ 14,325 ​ $ 13,484 ​ ​ (4) PROPERTY AND EQUIPMENT The components of property and equipment are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 December 31, 2022 Property and equipment ​ ​ ​ Office furniture and equipment ​ $ 3,105 ​ $ 2,819 Assembly equipment ​ 141 ​ 110 Vehicles ​ 203 ​ 203 Leasehold improvements ​ 1,173 ​ 1,173 Leased devices ​ ​ 1,289 ​ ​ 1,162 Capital projects ​ 137 ​ — ​ ​ $ 6,048 ​ $ 5,467 Less accumulated depreciation ​ ( 3,675 ) ​ ( 3,292 ) ​ ​ $ 2,373 ​ $ 2,175 ​ Total depreciation expense related to our property and equipment was $ 0.2 million for the three months ended June 30, 2023 and 2022. Depreciation expense for the six month periods ended June 30, 2023 and 2022 was $ 0.4 million. Total depreciation expense related to devices out on lease was $ 0.5 million and $ 0.4 million for the three months ended June 30, 2023 and 2022, respectively. Depreciation expense related to devices out on lease was $ 0.9 million and $ 0.7 million for the six months ended June 30, 2023 and 2022, respectively. Depreciation on leased units is reflected on the income statement as cost of revenue. The Company monitors devices out on lease for potential loss and places an estimated reserve on the net book value based on an analysis of the number of units which are still with patients for which the Company cannot determine the current status. ​ (5) BUSINESS COMBINATIONS On December 22, 2021, the Company and its wholly-owned subsidiary Zynex Monitoring Solutions, Inc., entered into a Stock Purchase Agreement (the “Agreement”) with Kestrel and each of the shareholders of Kestrel (collectively, the “Selling Shareholders”). Under the Agreement, the Selling Shareholders agreed to sell all of the outstanding common stock of Kestrel (the “Kestrel Shares”) to the Company. The consideration for the Kestrel Shares consisted of $ 16.1 million cash and 1,467,785 shares of the Company’s common stock (the “Zynex Shares”). All of the Zynex Shares were subject to a lockup agreement for a period of one year from the closing date under the Agreement (the “Closing Date”). The Agreement provides the Selling Shareholders with piggyback registration rights. 978,524 of the Zynex Shares were deposited in escrow (the “Escrow Shares”). The number of Escrow Shares were subject to adjustment on the one-year anniversary of the Closing Date (or in connection with any Liquidation Event (as defined in the Agreement) that occurs prior to such anniversary date) based on the number of shares equal to $ 10.0 million divided by a 30-day volume weighted average closing price of the Company’s common stock. The Escrow Shares were adjusted on the anniversary date, which resulted in the cancellation of 156,673 Escrow Shares. Half of the Escrow Shares will be released on submission of a dossier on a laser-based photoplethysmographic device (the “Device”) to the FDA for permission to market and sell 12 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS the Device in the United States. The other half of the Escrow Shares will be released upon determination by the FDA that the Device can be marketed and sold in the United States. The amount of escrow shares were recalculated at June 30, 2022, and are included in the calculation of diluted earnings per share for June 30, 2022. No additional calculation was required for the Escrow Shares at June 30, 2023, as the Escrow Share number was finalized on the anniversary date, and the shares are included in the Company’s calculation of basic earnings per share. The maximum amount of Zynex Shares that may be released are limited to 19.9 % of the total number of common shares and total voting power of common shares of the Company (see Note 14 - Fair Value Measurements for more information regarding this liability). The acquisition of Kestrel has been accounted for as a business combination under ASC 805 – “Business Combinations” (“ASC 805”). Under ASC 805, assets acquired, and liabilities assumed in a business combination must be recorded at their fair values as of the acquisition date. ​ (6) GOODWILL AND OTHER INTANGIBLE ASSETS During the year ended December 31, 2021 the Company completed the acquisition of Kestrel, which resulted in goodwill of $ 20.4 million (see Note 5 – Business Combinations). As of June 30, 2023, there was no change in the carrying amount of goodwill, and there were no impairment indicators of the Company’s net asset value. The following table provides the summary of the Company’s intangible assets as of June 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Gross ​ ​ ​ ​ ​ ​ Remaining ​ Carrying Accumulated Net Carrying Life (in ​ Amount Amortization Amount years) Acquired patents at December 31, 2022 ​ $ 10,000 ​ $ ( 933 ) ​ $ 9,067 ​ 10.00 Amortization expense ​ ​ ​ ​ ​ ( 451 ) ​ ​ ( 451 ) ​ ​ Acquired patents at June 30, 2023 ​ $ 10,000 ​ $ ( 1,384 ) ​ $ 8,616 9.48 ​ The following table summarizes the estimated future amortization expense to be recognized over the remainder of 2023, next five fiscal years, and periods thereaf ​ ​ ​ ​ ​ ​ (In thousands) July 1, 2023 through December 31, 2023 ​ ​ 458 2024 ​ 911 2025 ​ 908 2026 ​ 908 2027 ​ 908 Thereafter ​ 4,523 Total future amortization expense ​ $ 8,616 ​ ​ (7) 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. Dilution resulting from stock-based compensation plans is determined using the treasury stock method and dilution resulting from the 2023 Convertible Senior Notes is determined using the if-converted method. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential common shares outstanding would be anti-dilutive. 13 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The calculation of basic and diluted earnings per share for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended June 30, ​ For the Six Months Ended June 30, ​ 2023 2022 2023 2022 Basic earnings per share ​ ​ ​ ​ Net income ​ $ 3,354 ​ $ 3,346 ​ $ 4,923 ​ $ 4,723 Basic weighted average shares outstanding ​ 36,435 ​ 38,851 ​ 36,564 ​ 39,305 Basic earnings per share ​ $ 0.09 ​ ​ 0.09 ​ ​ 0.13 ​ ​ 0.12 Diluted earnings per share ​ ​ ​ ​ Net income ​ $ 3,354 ​ ​ 3,346 ​ ​ 4,923 ​ ​ 4,723 Weighted average shares outstanding ​ 36,435 ​ 38,851 ​ 36,564 ​ 39,305 Effect of dilutive securities - options and restricted stock ​ 626 ​ 1,042 ​ 685 ​ 1,062 Diluted weighted-average shares outstanding ​ 37,061 ​ 39,893 ​ 37,249 ​ 40,367 Diluted earnings per share ​ $ 0.09 ​ ​ 0.08 ​ $ 0.13 ​ $ 0.12 ​ For the three and six months ended June 30, 2023, equity grants of 39,000 and 21,000 shares of common stock, respectively, were excluded from the dilutive stock calculation because their effect would have been anti-dilutive. ​ For the three and six months ended June 30, 2022, equity grants of 293,000 and 341,000 shares of common stock, respectively, were excluded from the dilutive stock calculation because their effect would have been anti-dilutive. For three and six months ended June 30, 2023, conversion options to purchase 3.2 million and 1.6 million shares, respectively, resulting from the 2023 Convertible Senior Notes, were excluded from the dilutive stock calculation because their effect would have been anti-dilutive (see Note 9 – Convertible Senior Notes). ​ (8) NOTES PAYABLE The Company entered into a loan agreement (the “Loan Agreement”) with Bank of America, N.A. (the “Bank”) in December 2021. Under this Loan Agreement, the Bank extended two facilities to the Company. Specified assets were pledged as collateral. One facility was a line of credit in the amount of $ 4.0 million available until December 1, 2024 (the “Facility 1”). Interest on Facility 1 was due on the first day of each month beginning January 1, 2022. The interest rate was an annual rate equal to the sum of (i) the greater of the BSBY Daily Floating Rate or (ii) the Index Floor (as defined in the Loan Agreement), plus 2.00 % . The Company did not utilize the facility during the three and six months ended June 30, 2023 and June 30, 2022. During May 2023, the facility was terminated. The other facility extended by the Bank to the Company was a fixed rate term loan in the amount of up to $ 16.0 million (the “Facility 2”). Facility 2 was entered into and funded in conjunction with the purchase of Kestrel Labs at an interest rate equal to 2.8 % per year. The Company had to pay interest on the first day of each month which began January 1, 2022 and the Company also repaid the principal amount in equal installments of $ 444,444 per month. All unpaid interest and principal on Facility 2 was fully paid off and the Facility was terminated during May 2023. ​ (9) CONVERTIBLE SENIOR NOTES In May 2023, the Company issued $ 52.5 million aggregate principal amount of 5.00 % Convertible Senior Notes due May 15, 2026 (the “2023 Convertible Senior Notes”). In May 2023, the Company issued an additional $ 7.5 million aggregate principal amount of the 2023 Convertible Senior Notes upon the exercise by the initial purchasers of their over-allotment option. Interest on the 2023 Convertible Senior Notes is payable semiannually in arrears, beginning November 15, 2023. The 2023 Convertible Senior Notes will mature on May 15, 2026, unless earlier converted or repurchased, and are redeemable at the option of the Company on or after May 20, 2025. The 2023 Convertible Senior Notes are direct, unsecured, and unsubordinated obligations of the Company, ranking equally with all of the Company’s other unsecured and unsubordinated indebtedness from time to time outstanding, and are effectively subordinated to all secured indebtedness of the Company. 14 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Holders may convert their 2023 Convertible Senior Notes at their option prior to the close of business on the business day preceding September 30, 2023, but only under the following circumstanc during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least twenty trading days (whether or not consecutive) during the period of thirty consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day as determined by the Company; during the five business day period after any ten consecutive trading day period (the “Measurement Period”) in which the trading price per $ 1,000 principal amount of 2023 Convertible Senior Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or upon the occurrence of certain corporate events specified in the indenture governing the 2023 Convertible Senior Notes. On or after February 15, 2026, a holder may convert all or any portion of its 2023 Convertible Senior Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. The Company will settle conversions of the 2023 Convertible Senior Notes by paying cash up to the aggregate principal amount of the 2023 Convertible Senior Notes to be converted and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the 2023 Convertible Senior Notes being converted. The 2023 Convertible Senior Notes are initially convertible at a rate of 92.8031 shares of common stock per $ 1,000 principal amount converted, which is approximately equal to $ 10.78 per share of common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change, which includes certain change in control transactions, the approval by Zynex’s stockholders of any plan or proposal for the liquidation or dissolution of Zynex and certain de-listing events with respect to Zynex’s common stock, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock for conversions in connection with the make-whole fundamental change. Upon the occurrence of a fundamental change, holders of the 2023 Convertible Senior Notes may require the Company to purchase all or a portion of their 2023 Convertible Senior Notes, in principal amounts equal to $ 1,000 or an integral multiple thereof, for cash at a price equal to 100 % of the principal amount of the 2023 Convertible Senior Notes to be purchased plus any accrued and unpaid interest. The following table summarizes the minimum interest payments over the remainder of 2023 and next three fiscal years until maturity in May 2026. ​ ​ ​ ​ ​ ​ (In thousands) July 1, 2023 through December 31, 2023 ​ $ 1,592 2024 ​ 3,050 2025 ​ 3,042 2026 ​ 1,508 ​ ​ (10) STOCK-BASED COMPENSATION PLANS In June 2017, our stockholders approved the 2017 Stock Incentive Plan (the “2017 Stock Plan”) with a maximum of 5,500,000 shares reserved for issuance. Awards permitted under the 2017 Stock Plan inclu 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 grant and are not included in outstanding shares until such vesting and issuance occurs. 15 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS During the three and six months ended June 30, 2023, no stock option awards were granted under the 2017 Stock Plan. During the three and six months ended June 30, 2022, 200,000 stock option awards were granted under the 2017 Stock Plan. At June 30, 2023, the company had 0.6 million stock options outstanding and 0.6 million exercisable under the following pla ​ ​ ​ ​ ​ ​ ​ Outstanding Exercisable ​ ​ Number of Options ​ Number of Options ​ ​ (in thousands) ​ (in thousands) Plan Category 2005 Stock Option Plan 211 ​ 211 2017 Stock Option Plan 351 ​ 350 Total 562 ​ 561 ​ During the three and six months ended June 30, 2023, 72,000 and 134,000 shares of restricted stock were granted under the 2017 Stock Plan, respectively. During the three and six months ended June 30, 2022, 45,000 and 93,000 shares of restricted stock were granted to the Board of Directors and management under the 2017 Stock Plan, respectively. 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 restricted stock awards typically occur quarterly over three years for the Board of Directors and quarterly or annually over two to four years for management. ​ The following summarizes stock-based compensation expenses recorded in the condensed consolidated statements of income (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended June 30, For the Six Months Ended June 30, ​ 2023 2022 2023 2022 Cost of Revenue ​ $ 7 ​ $ 12 ​ $ 15 ​ $ 27 Sales and marketing expense ​ 69 ​ 55 ​ 130 ​ 114 General, and administrative ​ ​ 584 ​ ​ 468 ​ ​ 822 ​ ​ 983 Total stock based compensation expense ​ $ 660 ​ $ 535 ​ $ 967 ​ $ 1,124 ​ The Company received proceeds of $ 0.1 million related to option exercises during the three and six months ended June 30, 2023. The Company received proceeds of $ 0.1 million related to option exercises during each of the three and six months ended June 30, 2022. No stock option awards were granted by the Company during the three and six months ended June 30, 2023. A summary of stock option activity under all equity compensation plans for the six months ended June 30, 2023, is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Average ​ Aggregate ​ ​ Number of ​ Average ​ Remaining ​ Intrinsic ​ ​ Shares ​ Exercise ​ Contractual ​ Value ​ (in thousands) Price Term (Years) (in thousands) Outstanding at December 31, 2022 793 ​ $ 2.67 ​ 5.03 ​ $ 8,908 Granted — ​ $ — ​ ​ ​ ​ Forfeited ( 206 ) ​ $ 6.30 ​ ​ ​ ​ Exercised ​ ( 25 ) ​ $ 5.38 ​ ​ ​ ​ ​ Outstanding at June 30, 2023 562 ​ $ 1.23 ​ 3.05 ​ $ 4,701 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at June 30, 2023 561 ​ $ 1.21 ​ 3.04 ​ $ 4,699 ​ 16 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A summary of restricted stock award activity under all equity compensation plans for the six months ended June 30, 2023, is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ Shares Weighted Average ​ (in thousands) Grant Date Fair Value Granted but not vested at December 31, 2022 431 ​ $ 11.92 Granted 134 ​ ​ 10.81 Forfeited ( 4 ) ​ ​ 12.65 Vested ( 88 ) ​ ​ 12.14 Granted but not vested at June 30, 2023 473 ​ $ 11.56 ​ As of June 30, 2023, the Company had approximately $ 4.5 million of unrecognized compensation expense related to stock options and restricted stock awards that will be recognized over a weighted average period of approximately 2.3 years. (11) STOCKHOLDERS’ EQUITY Treasury Stock On April 11, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of its common stock at prevailing market prices either in the open market or through privately negotiated transactions through April 11, 2023. From the inception of the plan through May 31, 2022 the Company purchased 1,419,874 shares of its common stock for $ 10.0 million or an average price of $ 7.04 per share which completed this program. On June 9, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through June 9, 2023. From the inception of the plan through October 4, 2022, the Company purchased 1,091,604 shares of its common stock for $ 10.0 million for an average price of $ 9.06 per share which completed this program. On October 31, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through October 31, 2023. From the inception of the plan through December 31, 2022, the Company purchased 495,138 shares of its common stock for $ 6.6 million or an average price of $ 13.43 per share. From the inception of the plan through March 31, 2023, the Company purchased 727,836 shares of its common stock for $ 10 million or an average price of $ 13.74 per share which completed this program. On May 10, 2023, the disinterested members of the Board of Directors and Audit Committee approved the purchase of 300,000 shares of the Company’s common stock from Thomas Sandgaard, Chairman, President, Chief Executive Officer and Principal Executive Officer, at the closing market price on May 10, 2023 of $ 9.61 per share for $ 2.9 million. See Note 17 - Related Parties for additional information. On June 13, 2023, the disinterested members of the Board of Directors and Audit Committee approved the purchase of 300,000 shares of the Company’s common stock from Thomas Sandgaard, Chairman, President, Chief Executive Officer and Principal Executive Officer, at the closing market price on June 13, 2023, of $ 8.62 per share for $ 2.6 million. See Note 17 - Related Parties for additional information. On June 13, 2023, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through June 13, 2024. From the inception of the plan through June 30 2023, the Company purchased 66,200 shares of its common stock for $ 0.6 million or an average price of $ 9.76 per share. 17 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Warrants A summary of stock warrant activity for the six months ended June 30, 2023 is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Weighted ​ Average ​ Aggregate ​ ​ Number of ​ Average ​ Remaining ​ Intrinsic ​ ​ Warrants ​ Exercise ​ Contractual ​ Value ​ (in thousands) Price Life (Years) (in thousands) Outstanding and exercisable at December 31, 2022 99 ​ $ 2.39 ​ 1.76 ​ $ 1,140 Granted — ​ $ — ​ ​ ​ ​ ​ Exercised ( 8 ) ​ $ 2.27 ​ ​ ​ ​ ​ Forfeited ( 2 ) ​ $ — ​ ​ ​ ​ Outstanding and exercisable at June 30, 2023 89 ​ $ 2.41 ​ 1.27 ​ $ 639 ​ ​ (12) INCOME TAXES The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to excess tax benefits from stock option exercises and the tax impact of the change in fair value of contingent consideration. For the three months ended June 30, 2023 and 2022 discrete items adjusted were ($ 1.6 ) million and ($ 0.9 ) million, respectively. For the six months ended June 30, 2023 and 2022 discrete items adjusted were ($ 3.1 ) million and ($ 0.4 ) million, respectively. At June 30, 2023 and 2022, the Company is estimating an annual effective tax rate of approximately 27 % and 25 %, respectively. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to various factors. The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 14 % and 23 % for the six months ended June 30, 2023 and 2022, respectively. The decrease in the Company’s effective income tax rate for the six months ended June 30, 2023 compared to the same period in 2022, primarily relate to the tax impact of discrete items, in particular the change in fair value of contingent consideration recorded during the current quarter which is not expected to be taxable. The Company recorded income tax expense of $ 0.7 million and $ 0.8 million for the three and six months ended June 30, 2023, respectively, and income tax expense of $ 0.8 million and $ 1.4 million for the three and six months ended June 30, 2022, respectively. Taxes of $ 3.0 million and $ 3.9 million were paid during the six months ended June 30, 2023 and 2022, respectively. (13) LEASES The Company categorizes leases at their inception as either operating or financing leases. Leases include various office and warehouse facilities which have been categorized as operating leases while certain equipment is leased under financing leases. During February 2023, the Company entered into a lease agreement for approximately 41,427 square feet of office space for the operations of ZMS in Englewood, CO. The lease commences on July 1, 2023 and runs through December 31, 2028. At the expiration of the lease term the Company has the option to renew the lease for one additional five year period. The Company is entitled to rent abatements for the first six months of the lease and tenant improvement allowances. Payments based on the initial rate of $ 24.75 per square foot begin in January 2024. The price per square foot increases by an additional $ 0.50 during each subsequent twelve-month period of the lease after the abatement period. The Company anticipates the recognition of a lease liability of $ 4.2 million related to the lease during the Company’s third quarter of 2023, which is excluded from the future minimum lease payments table below. The Company’s operating leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s weighted average borrowing rate was determined to be 3.99 % for its operating lease liabilities. The Company’s equipment lease agreements have a weighted average rate of 9.40 % which was used to measure its finance lease liability. The weighted average remaining lease term was 4.55 years and 2.23 years for operating and finance leases, respectively, as of June 30, 2023. 18 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ As of June 30, 2023, the maturities of the Company’s future minimum lease payments were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Lease Liability Finance Lease Liability July 1, 2023 through December 31, 2023 $ 677 $ 76 2024 ​ 3,571 ​ 116 2025 ​ 3,586 ​ 76 2026 ​ 3,362 ​ 15 2027 ​ 3,150 ​ — 2028 ​ ​ 1,064 ​ ​ — Total undiscounted future minimum lease payments ​ $ 15,410 ​ $ 283 L difference between undiscounted lease payments and discounted lease liabiliti ​ ( 1,469 ) ​ ( 29 ) Total lease liabilities ​ $ 13,941 ​ $ 254 ​ The components of lease expenses were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2023 2022 ​ 2023 ​ 2022 Lease ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total operating lease expense ​ $ 1,121 $ 1,113 $ 2,242 $ 2,219 Finance lease ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total amortization of leased assets ​ ​ 29 ​ ​ 29 ​ ​ 59 ​ ​ 59 Interest on lease liabilities ​ ​ 7 ​ ​ 9 ​ ​ 14 ​ ​ 19 Total net lease cost ​ $ 1,157 ​ $ 1,151 ​ $ 2,315 ​ $ 2,297 ​ For the three months ended June 30, 2023 and 2022, $ 0.1 million and $ 0.2 million, respectively, of operating lease costs were incurred at the Company’s manufacturing and warehouse facility and were included in cost of sales. For the three and six months ended June 30, 2023 and 2022, $ 1.0 million and $ 2.0 million, respectively, of operating lease costs were included in selling, general and administrative expenses on the condensed consolidated statement of income. ​ ​ (14) FAIR VALUE MEASUREMENTS The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company’s asset and liability classified financial instruments include cash, accounts receivable, accounts payable, accrued liabilities, and contingent consideration. The carrying amounts of financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The Company measures its long-term debt at book value which approximates fair value as the long-term debt bears market rates of interest. The fair value of acquisition-related contingent consideration is based on a Monte Carlo model. The valuation policies are determined by management, and the Company’s Board of Directors is informed of any policy change. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows: 19 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to Zynex for identical assets or liabilities; Level 2: Inputs include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and Level 3: Unobservable inputs that are supported by little or no market activity. The Company’s assets and liabilities which are measured at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The Company’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed below in all periods presented. The following table presents Company’s financial liabilities that were accounted for at fair value on a recurring basis as of June 30, 2023, by level within the fair value hierarc ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at June 30, 2023 ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Priced in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Active ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Markets Significant ​ ​ ​ ​ ​ ​ ​ for Other Significant ​ Fair Value at Identical Observable Unobservable ​ June 30, Assets Inputs Inputs ​ 2023 (Level 1) (Level 2) (Level 3) ​ (In thousands) Contingent consideration ​ $ 6,900 ​ $ — ​ $ — ​ $ 6,900 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 6,900 ​ $ — ​ $ — ​ $ 6,900 ​ The following table sets forth a summary of changes in the contingent consideration for the three months ended June 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ Contingent Consideration Balance as of December 31, 2022 ​ $ 10,000 Change in fair value of contingent consideration ​ ( 3,100 ) Balance as of June 30, 2023 $ 6,900 ​ ​ (15) CONCENTRATIONS For the three months ended June 30, 2023, the Company sourced approximately 24 % of the supplies for its electrotherapy products from two significant vendors. For the same period in 2022, the Company sourced approximately 58 % of the supplies for its electrotherapy products from four significant vendors. For the six months ended June 30, 2023, the Company sourced approximately 26 % of supplies for its electrotherapy products from two significant vendors. For the same period in 2022, the Company sourced approximately 53 % of supplies for its electrotherapy products from four significant vendors. At June 30, 2023, the Company had no receivables from any third-party payers that made up over 10 % of the net accounts receivable balance. At December 31, 2022, the Company had receivables from one third-party payer which made up approximately 14 % of the net accounts receivable balance. (16) COMMITMENTS AND CONTINGENCIES See Note 13 for details regarding commitments under the Company’s long-term leases. 20 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. On occasion, the Company engages outside counsel related to a broad range of topics including employment law, third-party payer matters, intellectual property and regulatory and compliance matters. The Company is currently not a party to any material pending legal proceedings that would give rise to potential loss contingencies. ​ (17) RELATED PARTIES On May 10, 2023, the disinterested Board and Audit Committee approved the purchase of 300,000 common shares of ZYXI from Mr. Sandgaard, Chairman, President, Chief Executive Officer and Principal Executive Officer, at the closing market price on May 10, 2023 of $ 9.61 per share, resulting in a total transactional value of $ 2,883,000 . On June 13, 2023, the disinterested Board and Audit Committee approved the purchase of 300,000 common shares of ZYXI from Mr. Sandgaard at the closing market price on June 13, 2023, of $ 8.62 per share, resulting in a total transactional value of $ 2,586,000 . At the time of each aforementioned transactions, the disinterested Board and Audit Committee Members deemed it to be in the best interest of The Company to purchase the shares as they believe the current market price for the Company’s stock is undervalued and the Company’s cash position is such that the purchase of shares from Mr. Sandgaard is a good use of the Company’s funds at the time of each transaction. For each transaction, the following impacts were discussed before approval of the s (i) the Company’s cash position and capital needs for its continuing operations; (ii) the alternative uses for the cash used to purchase the Sandgaard Shares, including repayment of outstanding indebtedness; (iii) the possible effect on earnings per share and book value per share; (iv) and the potential effect of the trading of the Company’s shares, if Mr. Sandgaard were to sell the shares in the open market. ​ (18) SUBSEQUENT EVENTS No subsequent events identified through July 27, 2023. ​ ​ ​ 21 ​ Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Notice Regarding Forward-Looking Statements This quarterly report contains statements that are forward-looking, such as statements relating to plans for future organic growth and other business development activities, as well as the impact of reimbursement trends, other capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks include the ability to engage effective sales representatives, the need to obtain U.S. Food and Drug Administration (“FDA”) clearance and Certificate European (“CE”) marking of new products, the acceptance of new products as well as existing products by doctors and hospitals, our dependence on the reimbursement from insurance companies for products sold or leased to our customers, acceptance of our products by health insurance providers for reimbursement, larger competitors with greater financial resources, the need to keep pace with technological changes, our dependence on third-party manufacturers to produce key components of our products on time and to our specifications, implementation of our sales strategy including a strong direct sales force, the impact of COVID-19 on our business, and other risks described herein and in our Annual Report on Form 10-K for the year ended December 31, 2022. These interim financial statements and the information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the annual audited consolidated financial statements, and notes to consolidated financial statements, included in the Company’s 2022 Annual Report on Form 10-K and subsequently filed reports, which have previously been filed with the Securities and Exchange Commission. General Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. We operate in one primary business segment, medical devices which include electrotherapy and pain management products. As of June 30, 2022, the Company’s only active subsidiaries are Zynex Medical, Inc. (“ZMI,” a wholly-owned Colorado corporation) through which the Company conducts most of its operations, and Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation). The Company’s inactive subsidiaries include Zynex Europe, Zynex NeuroDiagnostics, Inc. (“ZND,” a wholly-owned Colorado corporation) and Pharmazy, Inc. (“Pharmazy”, a wholly-owned Colorado Corporation), which were incorporated in June 2015. The Company’s compounding pharmacy operated as a division of ZMI dba as Pharmazy through January 2016. In December 2021, the Company acquired 100% of Kestrel Labs, Inc. (“Kestrel”), a laser-based, noninvasive patient monitoring technology company. Kestrel’s laser-based products include the NiCO TM CO-Oximeter, a multi-parameter pulse oximeter, and HemeOx TM , a total hemoglobin oximeter that enables continuous arterial blood monitoring. Both NiCO and HemeOx are yet to be presented to the U.S. FDA for market clearance. All activities related to Kestrel flow through our ZMS subsidiary. The term “the Company” refers to Zynex, Inc. and its active and inactive subsidiaries. On June 15, 2023, Zynex, Inc entered into an investor relations consulting agreement with MZHCI, LLC. RESULTS OF OPERATIONS Summary Net revenue was $45.0 million and $36.8 million for the three months ended June 30, 2023 and 2022, respectively, and $87.1 million and $67.8 million for the six months ended June 30, 2023 and 2022, respectively. Net revenue increased 22% and 28% for the three and six-month periods ended June 30, 2023, respectively. Net income was $3.4 million for the three months ended June 30, 2023 compared with $3.3 million during the same period in 2022. Net income was $4.9 million for the six months ended June 30, 2023 compared with $4.7 million during the same period in 2022. Cash provided by operating activities was $2.7 million during the six months ended June 30, 2023 compared with $1.6 million during the same period in 2022. Working capital was $93.5 million and $48.5 million as of June 30, 2023 and December 31, 2022, respectively. 22 Table of Contents Net Revenue Net revenues are comprised of device and supply sales, constrained by estimated third-party payer reimbursement deductions. The reserve for billing allowance adjustments and allowance for uncollectible accounts are adjusted on an ongoing basis in conjunction with the processing of third-party payer insurance claims and other customer collection history. Product device revenue is primarily comprised of sales and rentals of our electrotherapy products and also includes complementary products such as our cervical traction, lumbar support and hot/cold therapy products. Supplies revenue is primarily comprised of sales of our consumable supplies to patients using our electrotherapy products, consisting primarily of surface electrodes and batteries. Revenue related to both devices and supplies is reported net, after adjustments for estimated third-party payer reimbursement deductions and estimated allowance for uncollectible accounts. The deductions are known throughout the healthcare industry as billing adjustments whereby the healthcare insurers unilaterally reduce the amount they reimburse for our products as compared to the sales prices charged by us. The deductions from gross revenue also take into account the estimated denials, net of resubmitted billings of claims for products placed with patients which may affect collectability. See our Significant Accounting Policies in Note 2 to the condensed financial statements for a more complete explanation of our revenue recognition policies. We occasionally receive, and expect to continue to receive, refund requests from insurance providers relating to specific patients and dates of service. Billing and reimbursement disputes are very common in our industry. These requests are sometimes related to a few patients and other times include a significant number of refund claims in a single request. We review and evaluate these requests and determine if any refund is appropriate. We also review claims that have been resubmitted or where we are pursuing additional reimbursement from that insurance provider. We frequently have significant offsets against such refund requests which may result in amounts that are due to us in excess of the amounts of refunds requested by the insurance providers. Therefore, at the time of receipt of such refund requests we are generally unable to determine if a refund request is valid. Net revenue increased $8.2 million or 22% to $45.0 million for the three months ended June 30, 2023, from $36.8 million for the same period in 2022. Net revenue increased $19.3 million or 28% to $87.1 million for the six months ended June 30, 2023, from $67.8 million for the same period in 2022. For both the three and six-month periods ended June 30, 2023, the growth in net revenue from the same periods in 2022 is primarily related to a 51% and 55% growth in device orders, respectively, which resulted from a larger customer base and led to increased sales of consumable supplies. Device Revenue Device revenue is related to the sale or lease of our products. Device revenue increased $4.2 million or 45% to $13.7 million for the three months ended June 30, 2023, from $9.5 million for the same period in 2022. Device revenue increased $9.5 million or 58% to $25.7 million for the six months ended June 30, 2023, from $16.2 million for the same period in 2022. For both the three and six-month periods ended June 30, 2023, the growth in net revenue from the same periods in 2022 is primarily related to a 51% and 55% growth in device orders, respectively. Supplies Revenue Supplies revenue is related to the sale of supplies, primarily electrodes and batteries, for our electrotherapy products. Supplies revenue increased $3.9 million or 15% to $31.2 million for the three months ended June 30, 2023, from $27.3 million for the same period in 2022. Supplies revenue increased $9.8 million or 19% to $61.4 million for the six months ended June 30, 2023, from $51.6 million for the same period in 2022. The increase in supplies revenue is primarily related to an increased customer base from increased device sales in 2022 and 2023. 23 ​ Table of Contents Operating Expenses Cost of Revenue – Devices and Supplies Cost of Revenue – devices and supplies consist primarily of device and supply costs, facilities, operations labor and overhead, shipping and depreciation. Cost of revenue for the three months ended June 30, 2023 increased 27% to $9.3 million from $7.3 million from the same period in 2022. As a percentage of revenue, cost of revenue – devices and supplies increased to 21% from 20% for the three months ended June 30, 2023 and 2022, respectively. Cost of revenue for the six months ended June 30, 2023 increased 30% to $18.5 million from $14.2 million for the same period in 2022. As a percentage of revenue, cost of revenue – device and supply remained flat at 21% for the six months ended June 30, 2023 and 2022. The increase in cost of revenue – devices and supplies, in the three and six month periods ending June 30, 2023, is due to increased volumes related to higher revenue. Sales and Marketing Expense Sales and marketing expenses primarily consist of employee-related costs, including commissions and other direct costs associated with these personnel including travel expenses and marketing campaign and related expenses. Sales and marketing expense for the three months ended June 30, 2023 increased 32% to $21.6 million from $16.3 million for the same period in 2022. The increase in sales and marketing expense is primarily due to increased commission and incentive pay from increased orders, increased headcount of our sales force, and rising wages in the U.S. due to a very competitive job market. As a percentage of revenue, sales and marketing expense increased to 48% from 44% for the three months ended June 30, 2023 and 2022, respectively, primarily due to the aforementioned expenses, offset by increased revenue. Sales and marketing expense for the six months ended June 30, 2023 increased 39% to $42.8 million from $30.7 million for the same period in 2022. The increase in sales and marketing expense is primarily due to increased commission and incentive pay from increased orders, and inflation and rising wages in the U.S. due to a very competitive job market. As a percentage of revenue, sales and marketing expense increased to 49% from 45% for the six months ended June 30, 2023 and 2022, respectively. The increase as a percentage of revenue is primarily due to the additional expenses noted above, slightly offset by the increase in revenue during the period. General and Administrative Expense General and administrative expenses primarily consist of employee-related costs, and other direct costs associated with these personnel including facilities and travel expenses and professional fees, depreciation and amortization. General and administrative expense for the three months ended June 30, 2023 increased 29% to $11.4 million from $8.8 million for the same period in 2022. The increase in general and administrative expense for the three months is primarily due to increased compensation and benefit expense related to headcount growth, and professional fees due to additional external resources and additional compliance fees related to Section 404(b) of the Sarbanes-Oxley Act of 2002. As a percentage of revenue, general and administrative expense increased to 25% for the three months ended June 30, 2023 from 24% for the same period in 2022. The increase as a percentage of revenue is primarily due to the items noted above, partially offset by the increase in revenue during the period. General and administrative expense for the six months ended June 30, 2023 increased 37% to $22.7 million from $16.6 million for the same period in 2022. The increase in general and administrative expense for the six months is primarily due to increased compensation and benefit expense related to headcount growth, increased professional and legal service expenses. As a percentage of revenue, general and administrative expense increased to 26% for the six months ended June 30, 2023 from 24% for the same period in 2022. The increase as a percentage of revenue is primarily due to the aforementioned expenses, partially offset by the increase in revenue during the period. Income Taxes The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 18% and 14% for the three and six months ended June 30, 2023, respectively. Discrete items, primarily related to the tax impact of the change in fair value of contingent consideration, of ($1.6) million and ($3.1) million for the three and six months ended June 30, 2023, respectively, are 24 ​ Table of Contents recognized as a benefit against income tax expense. For the three and six months ended June 30, 2023 the Company recorded an income tax expense of approximately $0.7 million and $0.8 million, respectively. The Company recorded income tax expense of $0.8 million and $1.4 million for the three and six months ended June 30, 2022, respectively. LIQUIDITY AND CAPITAL RESOURCES We have historically financed operations through cash flows from operations, debt and equity transactions. At June 30, 2023, our principal source of liquidity was $58.7 million in cash and $33.0 million in accounts receivable. Net cash provided by operating activities for the six months ended June 30, 2023 was $2.7 million compared with net cash provided by operating activities of $1.6 million for the six months ended June 30, 2022. The increase in cash provided by operating activities for the six months ended June 30, 2023 was primarily due to an increase in net income as well as a decrease in the receivables balance. The increase was partially offset by the change in fair value of contingent consideration. Net cash used in investing activities for the six months ended June 30, 2023 and 2022 was $0.4 million and $0.2 million, respectively. Cash used in investing activities for the six months ended June 30, 2023 was primarily related to the build out of our facility for the operations of ZMS, and the purchase of computer equipment. Cash used in investing activities for the six months ended June 30, 2022 was primarily related to the purchase of leasehold improvements for the operations of the ZMS Boulder location and the purchase of computer equipment. Net cash provided by financing activities for the six months ended June 30, 2023 was $36.3 million compared with net cash used in financing activities of $17.1 million for the same period in 2022. Net cash provided by financing activities for the six months ended June 30, 2023 was primarily due to the proceeds from the issuance of the 2023 Convertible Senior Notes, offset by purchases of treasury stock, and principal payments and termination of long-term debt. Net cash used in financing activities for the six months ended June 30, 2022 was primarily due to purchases of treasury stock, payment of cash dividends in January 2022, and principal payments on long-term debt. We believe our cash and cash equivalents, together with anticipated cash flow from operations will be sufficient to meet our working capital, and capital expenditure requirements for at least the next twelve months. In making this assessment, we considered the followin ● Our cash balance at June 30, 2023 of $58.7 million; ● Our working capital balance of $93.5 million; ● Our projected income and cash flows for the next 12 months. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 2 to the consolidated financial statements located within our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 14, 2023. COVID-19 UPDATE In December 2019, a novel strain of coronavirus (“COVID-19”) emerged and spread to other countries, including the United States. In March 2020, the World Health Organization declared COVID-19 as a pandemic (the “COVID-19 pandemic”). The COVID-19 pandemic, including multiple variants, resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business interruptions and other measures. Although the World Health Organization declared an end to the COVID-19 pandemic on May 5, 2023, we continue to actively monitor the impact of COVID-19. While the Company did not incur significant disruptions to its operations during the three months ended June 30, 2023 from COVID-19, the full extent of COVID-19 on our operations and the markets we serve remains uncertain and will depend largely on future developments related to COVID-19, including infection rates increasing or returning in various 25 ​ Table of Contents geographic areas, variations of COVID-19, actions by government authorities to contain the outbreak or treat its impact, such as reimposing previously lifted measures or putting in place additional restrictions, and the widespread distribution and acceptance of an effective vaccine, among other things. Future developments regarding COVID-19 and its effects cannot be accurately predicted. ​ ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK N/A. ​ ITEM 4.  CONTROLS AND PROCEDURES Disclosure Controls and Procedures Evaluation of disclosure controls and procedures Our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as amended, or the Exchange Act, as of June 30, 2023. Based on management’s review, with participation of our Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended June 30, 2023, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting as described below. Material Weakness in Internal Control We identified a material weakness related to Information Technology General Controls (ITGCs) that were not designed and operating effectively to ensure (i) appropriate segregation of duties was in place to perform program changes and (ii) the activities of individuals with access to modify data and make program changes were appropriately monitored. Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. The material weakness identified above did not result in any material misstatements in our financial statements or disclosures, and there were no changes to previously released financial results. Our management concluded that the consolidated financial statements included in the Annual Report on Form 10-K, present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by Marcum LLP as stated in their report, which is included in Item 8 of the Annual Report on Form 10-K. Remediation Plan Our management is committed to maintaining a strong internal control environment. In response to the identified material weakness above, management will take comprehensive actions to remediate the material weakness in internal control over financial reporting. We are in the process of developing and implementing remediation plans to address the material weakness described above. Changes in Internal Control over Financial Reporting Except for the items referred to above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Inherent Limitation on the Effectiveness of Internal Control Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with 26 ​ Table of Contents policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. ​ 27 ​ Table of Contents PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not a party to any material pending legal proceedings. ​ ITEM 1A. RISK FACTORS There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 14, 2023 and our Quarterly Report on Form 10-Q for the period ended March 31, 2023 filed with the SEC on April 27, 2023. ​ ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Items 2(a) and 2(b) are not applicable. (c) Stock Repurchases. Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ In Thousands ​ ​ ​ ​ ​ ​ ​ Shares ​ Maximum Value ​ ​ ​ ​ Purchased as of Shares That ​ ​ Total ​ Average ​ Part of a ​ May Yet Be ​ ​ Number of ​ Price ​ Publicly ​ Purchased ​ ​ Shares ​ Paid Per ​ Announced ​ Under the Period ​ Purchased ​ Share ​ Plan ​ Plan April 1 - May 31, 2023 ​ ​ ​ Share repurchase program (1) 300,000 ​ $ 9.61 300,000 ​ — ​ ​ ​ ​ ​ ​ ​ ​ June 1 - June 30, 2023 ​ ​ ​ ​ Share repurchase program (2) ​ 300,000 ​ $ 8.62 ​ 300,000 ​ — Share repurchase program (3) ​ 66,200 ​ $ 9.76 ​ 66,200 ​ 9,354 Quarter Total ​ ​ ​ ​ ​ Share repurchase program (1) ​ 300,000 ​ $ 9.61 ​ 300,000 ​ — Share repurchase program (2) ​ 300,000 ​ $ 8.62 ​ 300,000 ​ — Share repurchase program (3) ​ 66,200 ​ $ 9.76 ​ 66,200 ​ 9,354 (1) On May 10, 2023, the disinterested Board and Audit Committee approved the purchase of 300,000 shares of the Company’s common stock from Thomas Sandgaard, Chief Executive Officer, at the closing market price on May 10, 2023 of $9.61 per share. (2) On June 13, 2023, the disinterested Board and Audit Committee approved the purchase of 300,000 shares of the Company’s common stock from Thomas Sandgaard, Chief Executive Officer, at the closing market price on June 13, 2023, of $8.62 per share. (3) Shares were purchased through the Company’s publicly announced share repurchase program dated June 13, 2023. The program expires on June 13, 2024. ​ ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ​ ITEM 4. MINE SAFETY DISCLOSURES N/A ​ ITEM 5. OTHER INFORMATION N o n e . ​ 28 ​ Table of Contents ITEM 6.   EXHIBITS ​ Exhibit Number Description 4.1 Indenture, dated as of May 9, 2023, between Zynex, Inc. and U.S. Bank Trust Company, National Association, as trustee. (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on May 9, 2023) ​ ​ ​ 4.2 ​ Form of certificate representing the 5.00% Convertible Senior Notes due 2023 (included as Exhibit A to Exhibit 4.1) ​ ​ ​ 31.1* Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 ​ ​ ​ 31.2* Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 ​ ​ ​ 32.1** Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ​ ​ ​ 32.2** Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 ​ ​ ​ 101.INS* XBRL Instance Document ​ ​ ​ 101.SCH* XBRL Taxonomy Extension Schema Document ​ ​ ​ 101.CAL* XBRL Taxonomy Calculation Linkbase Document ​ ​ ​ 101.LAB * XBRL Taxonomy Label Linkbase Document ​ ​ ​ 101.PRE * XBRL Presentation Linkbase Document ​ ​ ​ 101.DEF * XBRL Taxonomy Extension Definition Linkbase Document ​ ​ ​ 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith ** Furnished herewith ​ ​ 29 ​ Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ​ ZYNEX, INC. ​ ​ ​ ​ /s/ Daniel J. Moorhead Dat July 27, 2023 ​ Daniel J. Moorhead ​ Chief Financial Officer ​ (Principal Financial and Accounting Officer) ​ ​ 30

​ ​ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ​ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the quarterly period end September 30, 2023 ​ OR ​ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the transition period from                      to ​ Commission file number 001-38804 ​ Zynex, Inc. (Exact name of registrant as specified in its charter) ​ ​ NEVADA 90-0275169 (State or other jurisdiction of ​ (IRS Employer incorporation or organization) ​ Identification No.) ​ 9655 Maroon Cir . ​ ​ Englewood , CO ​ 80112 (Address of principal executive offices) ​ (Zip Code) ​ ( 303 ) 703-4906 (Registrant’s telephone number, including area code) ​ (Former name, former address and former fiscal year, if changed since last report) ​ Securities registered pursuant to Section 12(b) of the Ac ​ Title of each class Trading Symbol Name of each exchange on which registered Common Stock, par value $0.001 per share ​ ZYXI ​ NASDAQ Stock Market LLC ​ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ ​ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ ​ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ​ Large accelerated filer ☐ Accelerated filer ☒ ​ ​ ​ ​ Non-accelerated filer ☐ Smaller reporting company ☒ ​ ​ ​ ​ Emerging growth company ☐ ​ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ ​ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐ No ☒ ​ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. ​ ​ ​ Class Shares Outstanding as of October 26, 2023 Common Stock, par value $0.001 ​ 33,903,777 ​ ​ ​ ​ ​ ​ ​ Table of Contents ZYNEX, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q ​ Page PART I—FINANCIAL INFORMATION 3 ​ ​ ​ ​ Item 1. ​ Financial Statements 3 ​ ​ ​ Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 3 ​ ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022 4 ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 5 ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 6 ​ ​ ​ ​ Unaudited Notes to Condensed Consolidated Financial Statements 7 ​ ​ Item 2. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations 23 ​ Item 3. ​ Quantitative and Qualitative Disclosures About Market Risk 27 ​ Item 4. ​ Controls and Procedures 27 ​ ​ PART II—OTHER INFORMATION 28 ​ ​ ​ ​ Item 1. ​ Legal Proceedings 28 ​ Item 1A. ​ Risk Factors 28 ​ Item 2. ​ Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 28 ​ Item 3. ​ Defaults Upon Senior Securities 28 ​ Item 4. ​ Mine Safety Disclosures 28 ​ Item 5. ​ Other Information 28 ​ Item 6. ​ Exhibits 29 ​ ​ SIGNATURES 30 ​ ​ ​ 2 ​ Table of Contents PART I. FINANCIAL INFORMATION ​ ITEM 1. FINANCIAL STATEMENTS ZYNEX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ December 31, ​ ​ (unaudited) 2022 ASSETS ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 42,517 ​ $ 20,144 ​ Short-term investments, net ​ ​ 9,924 ​ ​ — ​ Accounts receivable, net ​ 33,288 ​ 35,063 ​ Inventory, net ​ 14,186 ​ 13,484 ​ Prepaid expenses and other ​ 3,008 ​ 868 ​ Total current assets ​ 102,923 ​ 69,559 ​ ​ ​ ​ ​ ​ ​ ​ ​ Property and equipment, net ​ ​ 2,468 ​ 2,175 ​ Operating lease asset ​ ​ 13,168 ​ ​ 12,841 ​ Finance lease asset ​ ​ 637 ​ ​ 270 ​ Deposits ​ ​ 409 ​ 591 ​ Intangible assets, net of accumulated amortization ​ ​ 8,387 ​ ​ 9,067 ​ Goodwill ​ ​ 20,401 ​ ​ 20,401 ​ Deferred income taxes ​ ​ 3,036 ​ 1,562 ​ Total assets ​ $ 151,429 ​ $ 116,466 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ Current liabiliti ​ ​ ​ Accounts payable and accrued expenses ​ ​ 8,050 ​ ​ 5,617 ​ Operating lease liability ​ ​ 3,072 ​ 2,476 ​ Finance lease liability ​ ​ 210 ​ 128 ​ Income taxes payable ​ ​ 1,996 ​ 1,995 ​ Current portion of debt ​ ​ — ​ ​ 5,333 ​ Accrued payroll and related taxes ​ ​ 6,515 ​ 5,537 ​ Total current liabilities ​ ​ 19,843 ​ ​ 21,086 ​ Long-term liabiliti ​ ​ ​ ​ ​ Long-term portion of debt, less issuance costs ​ ​ — ​ ​ 5,293 ​ Convertible senior notes, less issuance costs ​ ​ 57,375 ​ ​ — ​ Contingent consideration ​ ​ — ​ ​ 10,000 ​ Operating lease liability ​ ​ 15,154 ​ 13,541 ​ Finance lease liability ​ ​ 475 ​ ​ 188 ​ Total liabilities ​ ​ 92,847 ​ 50,108 ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2023 and December 31, 2022 ​ — ​ — ​ Common stock, $ 0.001 par value; 100,000,000 shares authorized; 41,702,560 issued and 34,220,824 outstanding as of September 30, 2023 41,658,132 issued and 36,825,081 outstanding as of December 31, 2022 ​ 34 ​ 39 ​ Additional paid-in capital ​ 90,543 ​ 82,431 ​ Treasury stock of 6,996,129 and 4,253,015 shares at September 30, 2023 and December 31, 2022, respectively, at cost ​ ( 57,560 ) ​ ( 33,160 ) ​ Retained earnings ​ 25,565 ​ 17,048 ​ Total stockholders’ equity ​ 58,582 ​ 66,358 ​ Total liabilities and stockholders’ equity ​ $ 151,429 ​ $ 116,466 ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 3 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, ​ For the Nine Months Ended September 30, ​ ​ 2023 2022 2023 2022 NET REVENUE ​ ​ ​ ​ ​ ​ Devices ​ $ 16,855 ​ $ 11,349 ​ $ 42,542 ​ $ 27,579 ​ Supplies ​ 33,060 ​ 30,171 ​ 94,495 ​ 81,783 ​ Total net revenue ​ 49,915 ​ 41,520 ​ 137,037 ​ 109,362 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ COSTS OF REVENUE AND OPERATING EXPENSES ​ ​ ​ ​ ​ ​ ​ Costs of revenue - devices and supplies ​ 9,553 ​ 8,391 ​ 28,094 ​ 22,617 ​ Sales and marketing ​ 22,146 ​ 17,212 ​ 64,982 ​ 47,950 ​ General and administrative ​ ​ 12,731 ​ ​ 9,359 ​ ​ 35,479 ​ ​ 25,967 ​ Total costs of revenue and operating expenses ​ 44,430 ​ 34,962 ​ 128,555 ​ 96,534 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 5,485 ​ 6,558 ​ 8,482 ​ 12,828 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ ​ Gain on sale of fixed assets ​ ​ 37 ​ ​ — ​ ​ 39 ​ ​ — ​ Gain (loss) on change in fair value of contingent consideration ​ ​ ( 245 ) ​ ​ ( 100 ) ​ ​ 2,855 ​ ​ — ​ Interest expense, net ​ ( 327 ) ​ ( 106 ) ​ ( 728 ) ​ ( 345 ) ​ Other income (expense), net ​ ( 535 ) ​ ( 206 ) ​ 2,166 ​ ( 345 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations before income taxes ​ 4,950 ​ 6,352 ​ 10,648 ​ 12,483 ​ Income tax expense ​ 1,356 ​ 1,479 ​ 2,131 ​ 2,887 ​ Net income ​ $ 3,594 ​ $ 4,873 ​ $ 8,517 ​ $ 9,596 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per sh ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.10 ​ $ 0.13 ​ $ 0.24 ​ $ 0.25 ​ Diluted ​ $ 0.10 ​ $ 0.13 ​ $ 0.23 ​ $ 0.24 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average basic shares outstanding ​ 35,531 ​ 38,046 ​ 36,216 ​ 38,881 ​ Weighted average diluted shares outstanding ​ 36,103 ​ 38,865 ​ 36,866 ​ 39,729 ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 4 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ ​ 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ Net income ​ $ 8,517 ​ $ 9,596 ​ Adjustments to reconcile net income to net cash provided by operating activiti ​ ​ ​ ​ Depreciation ​ ​ 1,984 ​ ​ 1,590 ​ Amortization ​ 1,078 ​ 695 ​ Non-cash reserve charges ​ ​ ( 91 ) ​ ​ 65 ​ Stock-based compensation ​ 1,621 ​ 1,702 ​ Non-cash lease expense ​ 568 ​ 720 ​ Benefit for deferred income taxes ​ ​ ( 1,473 ) ​ ​ ( 772 ) ​ Gain on change in fair value of contingent consideration ​ ​ ( 2,855 ) ​ ​ — ​ Gain on sale of fixed assets ​ ​ ( 39 ) ​ ​ — ​ Change in operating assets and liabiliti ​ ​ ​ ​ ​ Short-term investments ​ ​ ( 114 ) ​ ​ — ​ Accounts receivable ​ 1,775 ​ 282 ​ Prepaid and other assets ​ ( 826 ) ​ ( 446 ) ​ Accounts payable and other accrued expenses ​ 3,312 ​ 364 ​ Inventory ​ ( 2,071 ) ​ ( 4,801 ) ​ Deposits ​ 182 ​ ( 6 ) ​ Net cash provided by operating activities ​ 11,568 ​ 8,989 ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ Purchase of property and equipment ​ ​ ( 630 ) ​ ​ ( 332 ) ​ Purchase of short-term investments ​ ( 9,810 ) ​ — ​ Proceeds on sale of fixed assets ​ ​ 50 ​ ​ — ​ Net cash used in investing activities ​ ( 10,390 ) ​ ( 332 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Payments on finance lease obligations ​ ( 95 ) ​ ( 87 ) ​ Cash dividends paid ​ ( 1 ) ​ ( 3,613 ) ​ Purchase of treasury stock ​ ( 24,402 ) ​ ( 19,811 ) ​ Proceeds from issuance of convertible senior notes, net of issuance costs ​ ​ 57,018 ​ ​ — ​ Proceeds from the issuance of common stock on stock-based awards ​ ​ 33 ​ ​ 27 ​ Principal payments on long-term debt ​ ​ ( 10,667 ) ​ ​ ( 4,000 ) ​ Taxes withheld and paid on employees’ equity awards ​ ​ ( 691 ) ​ ​ ( 253 ) ​ Net cash provided by (used in) financing activities ​ 21,195 ​ ( 27,737 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash ​ 22,373 ​ ( 19,080 ) ​ Cash at beginning of period ​ 20,144 ​ 42,612 ​ Cash at end of period ​ $ 42,517 ​ $ 23,532 ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow informati ​ ​ ​ Cash received (paid) on interest, net ​ $ 452 ​ $ ( 317 ) ​ Cash paid for rent ​ $ ( 2,522 ) ​ $ ( 2,592 ) ​ Cash paid for income taxes ​ $ ( 3,541 ) ​ $ ( 5,028 ) ​ Supplemental disclosure of non-cash investing and financing activiti ​ ​ ​ ​ ​ Right-of-use assets obtained in exchange for new operating lease liabilities ​ $ 4,214 ​ $ 211 ​ Right-of-use assets obtained in exchange for new finance lease liabilities ​ $ 464 ​ $ — ​ Lease incentive ​ $ 1,400 ​ $ — ​ Vesting of restricted stock awards ​ $ ( 3 ) ​ $ — ​ Inventory transferred to property and equipment under lease ​ $ 1,369 ​ $ 1,191 ​ Capital expenditures not yet paid ​ $ 101 ​ $ 56 ​ Non-cash dividend adjustment ​ $ ( 1 ) ​ $ — ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 5 ​ Table of Contents ZYNEX, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Retained ​ Stockholders’ ​ Shares Amount Capital Stock Earnings Equity Balance at December 31, 2021 ​ 39,737,890 ​ ​ 41 ​ ​ 80,397 ​ ​ ( 6,513 ) ​ ​ — ​ ​ 73,925 Exercised and vested stock-based awards ​ 38,355 ​ — ​ 3 ​ — ​ — ​ 3 Stock-based compensation expense ​ — ​ — ​ 589 ​ — ​ — ​ 589 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 10,873 ) ​ ​ — ​ ​ ( 76 ) ​ ​ — ​ ​ — ​ ​ ( 76 ) Stock dividend adjustments ​ 11,444 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net income ​ — ​ — ​ — ​ — ​ 1,377 ​ 1,377 Balance at March 31, 2022 ​ 39,776,816 ​ $ 41 ​ $ 80,913 ​ $ ( 6,513 ) ​ $ 1,377 ​ $ 75,818 Exercised and vested stock-based awards ​ 178,727 ​ ​ 1 ​ ​ 11 ​ ​ — ​ ​ — ​ ​ 12 Stock-based compensation expense ​ — ​ ​ — ​ ​ 535 ​ ​ — ​ ​ — ​ ​ 535 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 47,603 ) ​ ​ — ​ ​ ( 47 ) ​ ​ — ​ ​ — ​ ​ ( 47 ) Purchase of treasury stock ​ ( 1,504,374 ) ​ ​ ( 2 ) ​ ​ — ​ ​ ( 10,653 ) ​ ​ — ​ ​ ( 10,655 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,346 ​ ​ 3,346 Balance at June 30, 2022 ​ 38,403,566 ​ $ 40 ​ $ 81,412 ​ $ ( 17,166 ) ​ $ 4,723 ​ $ 69,009 Exercised and vested stock-based awards, net of tax ​ 68,060 ​ ​ — ​ $ 13 ​ $ — ​ $ — ​ ​ 13 Stock-based compensation expense ​ — ​ ​ — ​ ​ 578 ​ ​ — ​ ​ — ​ ​ 578 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 16,681 ) ​ ​ — ​ ​ ( 130 ) ​ ​ — ​ ​ — ​ ​ ( 130 ) Purchase of treasury stock ​ ( 987,451 ) ​ ​ ( 1 ) ​ ​ — ​ ​ ( 9,155 ) ​ ​ — ​ ​ ( 9,156 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,873 ​ ​ 4,873 Balance at September 30, 2022 ​ 37,467,494 ​ $ 39 ​ $ 81,873 ​ $ ( 26,321 ) ​ $ 9,596 ​ $ 65,187 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Retained ​ Stockholders’ ​ Shares Amount Capital Stock Earnings Equity Balance at December 31, 2022 ​ 36,825,081 ​ ​ 39 ​ ​ 82,431 ​ ​ ( 33,160 ) ​ ​ 17,048 ​ ​ 66,358 Exercised and vested stock-based awards ​ 66,045 ​ ​ — ​ ​ 27 ​ ​ — ​ ​ — ​ ​ 27 Stock-based compensation expense ​ — ​ — ​ 307 ​ — ​ — ​ 307 Warrants exercised ​ 10,000 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 22,387 ) ​ ​ — ​ ​ ( 422 ) ​ ​ — ​ ​ — ​ ​ ( 422 ) Purchase of treasury stock ​ ( 232,698 ) ​ ​ — ​ ​ — ​ ​ ( 3,353 ) ​ ​ — ​ ​ ( 3,353 ) Net income ​ — ​ — ​ — ​ — ​ 1,569 ​ 1,569 Balance at March 31, 2023 ​ 36,646,041 ​ $ 39 ​ $ 82,343 ​ $ ( 36,513 ) ​ $ 18,617 ​ $ 64,486 Exercised and vested stock-based awards ​ 45,626 ​ ​ — ​ ​ 9 ​ ​ — ​ ​ — ​ ​ 9 Stock-based compensation expense ​ — ​ ​ — ​ ​ 660 ​ ​ — ​ ​ — ​ ​ 660 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 11,224 ) ​ ​ ( 3 ) ​ ​ ( 124 ) ​ ​ — ​ ​ — ​ ​ ( 127 ) Purchase of treasury stock ​ ( 666,200 ) ​ ​ — ​ ​ — ​ ​ ( 6,115 ) ​ ​ — ​ ​ ( 6,115 ) Net income ​ — ​ — ​ — ​ — ​ 3,354 ​ 3,354 Balance at June 30, 2023 ​ 36,014,243 ​ $ 36 ​ $ 82,888 ​ $ ( 42,628 ) ​ $ 21,971 ​ $ 62,267 Exercised and vested stock-based awards ​ 69,915 ​ ​ — ​ ​ 1 ​ ​ — ​ ​ — ​ ​ 1 Stock-based compensation expense ​ — ​ ​ — ​ ​ 654 ​ ​ — ​ ​ — ​ ​ 654 Shares of common stock withheld to pay taxes on employees’ equity awards ​ ( 19,118 ) ​ ​ — ​ ​ ( 145 ) ​ ​ — ​ ​ — ​ ​ ( 145 ) Purchase of treasury stock ​ ( 1,844,216 ) ​ ​ ( 2 ) ​ ​ — ​ ​ ( 14,932 ) ​ ​ — ​ ​ ( 14,934 ) Escrow share lock-up adjustment ​ — ​ ​ — ​ ​ 7,145 ​ ​ — ​ ​ — ​ ​ 7,145 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,594 ​ ​ 3,594 Balance at September 30, 2023 ​ 34,220,824 ​ $ 34 ​ ​ 90,543 ​ $ ( 57,560 ) ​ $ 25,565 ​ $ 58,582 ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 6 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION Organization Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. The term “the Company” refers to Zynex, Inc. and its active and inactive subsidiaries. The Company operates in one primary business segment, medical devices which include electrotherapy and pain management products. As of September 30, 2023, the Company’s only active subsidiaries are Zynex Medical, Inc. (“ZMI,” a wholly-owned Colorado corporation) through which the Company conducts most of its operations, and Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation). ZMS has developed a fluid monitoring system which received approval by the U.S. Food and Drug Administration (“FDA”) during 2020 and is still awaiting CE Marking in Europe. ZMS has achieved no revenues to date. The Company’s inactive subsidiaries include Zynex Europe, Zynex NeuroDiagnostics, Inc. (“ZND,” a wholly-owned Colorado corporation) and Pharmazy, Inc. (“Pharmazy”, a wholly-owned Colorado Corporation). The Company’s compounding pharmacy operated as a division of ZMI dba as Pharmazy through January 2016. In December 2021, the Company acquired 100 % of Kestrel Labs, Inc. (“Kestrel”), a laser-based, noninvasive patient monitoring technology company. Kestrel’s laser-based products include the NiCO TM CO-Oximeter, a multi-parameter pulse oximeter, and HemeOx TM , a total hemoglobin oximeter that enables continuous arterial blood monitoring. Both NiCO and HemeOx are yet to be presented to the FDA for market clearance. All activities related to Kestrel flow through the ZMS subsidiary. 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 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 the Company’s medical devices are designed to be patient friendly and designed for home use. The devices are small, portable, battery operated and include an electrical pulse generator which is connected to the body via electrodes. All of the medical devices are marketed in the U.S. and are subject to FDA regulation and approval. All of the products require a physician’s prescription before they can be dispensed in the U.S. The Company’s primary product is the NexWave device. The NexWave is marketed to physicians and therapists by the Company’s 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 nine months ended September 30, 2023 and 2022, the Company generated all of its revenue in North America from sales and supplies of its devices to patients and healthcare providers. 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, 2022. Amounts as of December 31, 2022, 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, 2022. 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, 2023 and the results of its operations and its cash flows for the periods presented. The results of operations for the nine months ended September 30, 2023 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. ​ 7 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Zynex, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying condensed 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, assumptions related to the valuation of contingent consideration, and valuation of long-lived assets and realizability of deferred tax assets. Cash, Cash Equivalents, and Short-Term Investments Cash equivalents consist of highly liquid investments with remaining maturities of three months or less at the date of purchase. We classify investments with maturities of greater than three months but less than one year as short-term investments. Short-term investments are classified as held-to-maturity as the Company has the positive intent and ability to hold the investments until maturity. Held-to-maturity investments are carried at amortized cost. Due to the short-term nature, the carrying amounts reported in the consolidated balance sheet approximate fair value. Accounts Receivable, Net The Company’s accounts receivable represent unconditional rights to consideration and are generated when a patient receives one of the Company’s devices, related supplies or complementary products. In conjunction with fulfilling the Company’s obligation to deliver a product, the Company invoices the patient’s third-party payer and/or the patient. Billing adjustments represent the difference between the list price and the reimbursement rates set by third-party payers, including Medicare, commercial payers and amounts billed directly to the patient. Specific amounts, if uncollected over a period of time, may be written-off after several appeals, which in some cases may take longer than twelve months. Substantially all of the Company’s receivables are due from patients with commercial or government health plans and workers compensation claims with a smaller portion related to private pay individuals, attorney, and auto claims. The Company maintains a constraint for third-party payer refund requests, deductions and adjustments. See Note 15 – Concentrations for discussion of significant customer accounts receivable balances. Inventory, Net Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard costs, which approximates actual costs on an average cost basis. The Company monitors inventory for turnover and obsolescence and records losses for excess and obsolete inventory, as appropriate. The Company provides reserves for estimated excess and obsolete inventories based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. Long-lived Assets The Company records intangible assets based on estimated fair value on the date of acquisition. Long-lived assets consist of net property and equipment and intangible assets. The finite-lived intangible assets are patents and are amortized on a straight-line basis over the estimated lives of the assets. The Company assesses impairment of long-lived assets when events or changes in circumstances indicates that their carrying value amount may not be recoverable. Circumstances which could trigger a review include, but are not limited t (i) significant decreases in 8 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or, expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. Useful lives of finite-lived intangible assets by each asset category are summarized be ​ ​ ​ ​ ​ ​ Estimated ​ ​ Useful Lives ​ in years Patents 11 ​ Goodwill Goodwill is recorded as the difference between the fair value of the purchase consideration and the estimated fair value of the net identifiable tangible and intangible assets acquired. Goodwill is not subject to amortization but is subject to impairment testing. The Company utilizes the simplified test for goodwill impairment. The amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value. The valuation methods used in the quantitative fair value assessment was a discounted cash flow method and required management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units. The Company tests more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others, declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. The Company assesses goodwill for impairment at the reporting unit level. The estimates of fair value and the determination of reporting units requires management judgment. Revenue Recognition Revenue is derived from sales and leases of the Company’s electrotherapy devices and sales of related supplies and complementary products. Device sales can be in the form of a purchase or a lease. Supplies needed for the device can be set up as a recurring shipment or ordered through the customer support team or online store as needed. The Company recognizes revenue when the performance obligation has been met and the product has been transferred to the patient, in the amount that reflects the consideration the Company expects to receive. In general, revenue from sales of devices and supplies is recognized once the product is delivered to the patient, which is when the performance obligation has been met and the product has been transferred to the patient. Sales of devices and supplies are primarily shipped directly to the patient, with a small amount of revenue generated from sales to distributors. In the healthcare industry there is often a third party involved that will pay on the patients’ behalf for purchased or leased devices and supplies. The terms of the separate arrangement impact certain aspects of the contracts, with patients covered by third party payers, such as contract type, performance obligations and transaction price, but for purposes of revenue recognition the contract with the customer refers to the arrangement between the Company and the patient. The Company does not have any material deferred revenue in the normal course of business as each performance obligation is met upon delivery of goods to the patient. There are no substantial costs incurred through support or warranty obligations. 9 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table provides a breakdown of disaggregated net revenues for the three and nine months ended September 30, 2023 and 2022 related to devices accounted for as purchases subject to Accounting Standards Codification (“ASC”) 606 – “Revenue from Contracts with Customers” (“ASC 606”), leases subject to ASC 842 – “Leases” (“ASC 842”), and supplies (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, ​ For the Nine Months Ended September 30, ​ ​ 2023 2022 2023 2022 Device revenue ​ ​ ​ ​ ​ ​ Purchased ​ $ 7,022 ​ $ 2,900 ​ $ 16,444 ​ $ 7,357 ​ Leased ​ 9,833 ​ 8,449 ​ 26,098 ​ 20,222 ​ Total device revenue ​ $ 16,855 ​ $ 11,349 ​ $ 42,542 ​ $ 27,579 ​ Supplies revenue ​ ​ 33,060 ​ ​ 30,171 ​ ​ 94,495 ​ ​ 81,783 ​ Total revenue ​ $ 49,915 ​ $ 41,520 ​ $ 137,037 ​ $ 109,362 ​ ​ Revenues are estimated using the portfolio approach by third-party payer type based upon historical rates of collection, aging of receivables, trends in historical reimbursement rates by third-party payer types, and current relationships and experience with the third-party payers, which includes estimated constraints for third-party payer refund requests, deductions and adjustments. Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. Specifically, the complexity of third-party payer billing arrangements and the uncertainty of reimbursement amounts for certain products from third-party payers or unanticipated requirements to refund payments previously received may result in adjustments to amounts originally recorded. Settlements with third-party payers for retroactive revenue adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price using the expected amount method. These adjustments to transaction price are estimated based on the terms of the payment agreement with the payer, correspondence from the payer and historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Due to continuing changes in the healthcare industry and third-party payer reimbursement, it is possible the Company’s forecasting model to estimate collections could change, which could have an impact on the Company’s results of operations and cash flows. Any differences between estimated and actual collectability are reflected in the period in which received. Historically these differences have been immaterial, and the Company has not had a significant reversal of revenue from prior periods. The Company monitors the variability and uncertain timing over third-party payer types in the portfolios. If there is a change in the Company’s third-party payer mix over time, it could affect net revenue and related receivables. The Company believes it has a sufficient history of collection experience to estimate the net collectible amounts by third-party payer type. However, changes to constraints related to billing adjustments and refund requests have historically fluctuated and may continue to fluctuate significantly from quarter to quarter and year to year. Leases The Company determines if an arrangement is a lease at inception or modification of a contract. The Company recognizes finance and operating lease right-of-use assets and liabilities at the lease commencement date based on the estimated present value of the remaining lease payments over the lease term. For the finance leases, the Company uses the implicit rate to determine the present value of future lease payments. For operating leases that do not provide an implicit rate, the Company uses incremental borrowing rates to determine the present value of future lease payments. The Company includes options to extend or terminate a lease in the lease term when it is reasonably certain to exercise such options. The Company recognizes leases with an initial term of 12 months or less as lease expense over the lease term and those leases are not recorded on the Company’s condensed consolidated balance sheets. For additional information on the leases where the Company is the lessee, see Note 14 - Leases. 10 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A significant portion of device revenue is derived from patients who obtain devices under month-to-month lease arrangements where the Company is the lessor. Revenue related to devices on lease is recognized in accordance with ASC 842. Using the guidance in ASC 842, the Company concluded the transactions should be accounted for as operating leases based on the following criteria be ● The lease does not transfer ownership of the underlying asset to the lessee by the end of the lease term. ● The lease does not grant the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. ● The lease term is month to month, which does not meet the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. ● There is no residual value guaranteed and the present value of the sum of the lease payments does not equal or exceed substantially all of the fair value of the underlying asset ● The underlying asset is expected to have alternative uses to the lessor at the end of the lease term. Lease commencement occurs upon delivery of the device to the patient. The Company retains title to the leased device and those devices are classified as property and equipment on the balance sheet. Since the leases are month-to-month and can be returned by the patient at any time, revenue is recognized monthly for the duration of the period in which the patient retains the device. Debt Issuance Costs Debt issuance costs are costs incurred to obtain new debt financing. Debt issuance costs are presented in the accompanying condensed consolidated balance sheets as a reduction in the carrying value of the debt and are accreted to interest expense using the effective interest method. Stock-based Compensation The Company accounts for stock-based compensation through recognition of the cost of employee services received in exchange for an award of equity instruments, which is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. The stock-based compensation expenses are recognized over the period during which an employee is required to provide service in exchange for the award (the requisite service period, which in the Company’s case is the same as the vesting period). For awards subject to the achievement of performance metrics, stock-based compensation expense is recognized when it becomes probable that the performance conditions will be achieved over the respective performance period. Segment Information The Company defines operating segments as components of the business enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. The Company has identified our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer as our Chief Operating Decision-Makers (“CODM”). The Company currently operates business as one operating segment which includes two revenue typ Devices and Supplies. Income Taxes The Company records deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying condensed consolidated balance sheets, as well as operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured 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. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized. Tax benefits are recognized from uncertain tax positions if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. 11 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The Inflation Reduction Act (“IRA”) was enacted into law on August 16, 2022. Included in the IRA was a provision to implement a 15% corporate alternative minimum tax on corporations whose average annual adjusted financial statement income during the most recently completed three year period exceeds $1 billion. This provision is effective for tax years beginning after December 31, 2022. We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA will have a material impact on our reported results, cash flows or financial position when it becomes effective. Recent Accounting Pronouncements On October 9, 2023, the Financial Accounting Standards Board (“FASB”) issued ASU (“Accounting Standards Update”) 2023-06 which amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The amendments in ASU 2023-06 modify the disclosure or presentation requirements of a variety of Topics in the ASC. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. Management is evaluating the impacts of the recently issued ASU. Management does not believe that any other recently issued accounting pronouncements will have a material impact on the Company’s consolidated financial statements. ​ (3) FAIR VALUE OF FINANCIAL INSTRUMENTS ASC 820, Fair Value Measurements (“ASC 820”) states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised o (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value. ​ The Company’s asset and liability classified financial instruments include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, accrued liabilities, and contingent consideration. The carrying amounts of financial instruments, including cash and equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The Company measures its long-term debt at book value which approximates fair value as the long-term debt bears market rates of interest. The valuation policies are determined by management, and the Company’s Board of Directors is informed of any policy change. ​ During the year ended December 31, 2022 the Company did not have any cash equivalents or short-term investments. The following table shows the Company’s cash, cash equivalents and short-term investments by significant investment category as of September 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and ​ Short ​ ​ ​ ​ ​ ​ Investment ​ Fair ​ Cash ​ Term ​ ​ ​ ​ Cost ​ Gains ​ Value ​ Equivalents ​ Investments Cash (1) ​ ​ ​ 12,579 ​ - ​ 12,579 ​ 12,579 ​ - U.S. Treasury Securities (2) ​ ​ ​ 39,446 ​ 416 ​ 39,862 ​ 29,938 ​ 9,924 ​ ​ Total ​ 52,025 ​ 416 ​ 52,441 ​ 42,517 ​ 9,924 12 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ (1) Level I fair value estimates are based on observable inputs such as quoted prices in active markets. (2) Level II fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities . The fair value of acquisition-related contingent consideration was based on a Monte Carlo model prior to September 30, 2023 which was included in Level III of the fair value hierarchy. See Note 6 - Business Combinations for additional details on the removal of contingent consideration during the quarter ended September 30, 2023. The following table sets forth a summary of changes in the contingent consideration for the nine months ended September 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ Contingent Consideration Balance as of December 31, 2022 ​ $ 10,000 Change in fair value of contingent consideration ​ ( 2,855 ) Escrow share adjustment ​ ​ ( 7,145 ) Balance as of September 30, 2023 $ — ​ ​ ​ (4) INVENTORY The components of inventory are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 December 31, 2022 Raw materials ​ $ 3,408 ​ $ 3,506 Work-in-process ​ 1,419 ​ 1,205 Finished goods ​ ​ 8,573 ​ ​ 7,750 Inventory in transit ​ 1,054 ​ 1,291 ​ ​ $ 14,454 ​ $ 13,752 L reserve ​ ​ ( 268 ) ​ ​ ( 268 ) ​ ​ $ 14,186 ​ $ 13,484 ​ ​ (5) PROPERTY AND EQUIPMENT The components of property and equipment are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 December 31, 2022 Property and equipment ​ ​ ​ Office furniture and equipment ​ $ 3,190 ​ $ 2,819 Assembly equipment ​ 212 ​ 110 Vehicles ​ 151 ​ 203 Leasehold improvements ​ 1,173 ​ 1,173 Leased devices ​ ​ 1,332 ​ ​ 1,162 Capital projects ​ 234 ​ — ​ ​ $ 6,292 ​ $ 5,467 Less accumulated depreciation ​ ( 3,824 ) ​ ( 3,292 ) ​ ​ $ 2,468 ​ $ 2,175 ​ Total depreciation expense related to our property and equipment was $ 0.2 million and $ 0.1 million for the three months ended September 30, 2023 and 2022, respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022, was $ 0.6 million and $ 0.5 million, respectively. 13 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Total depreciation expense related to devices out on lease was $ 0.5 million and $ 0.3 million for the three months ended September 30, 2023 and 2022, respectively. Depreciation expense related to devices out on lease was $ 1.4 million and $ 1.0 million for the nine months ended September 30, 2023 and 2022, respectively. Depreciation on leased units is reflected on the income statement as cost of revenue. The Company monitors devices out on lease for potential loss and places an estimated reserve on the net book value based on an analysis of the number of units which are still with patients for which the Company cannot determine the current status. ​ (6) BUSINESS COMBINATIONS On December 22, 2021, the Company and its wholly-owned subsidiary Zynex Monitoring Solutions, Inc., entered into a Stock Purchase Agreement (the “Agreement”) with Kestrel and each of the shareholders of Kestrel (collectively, the “Selling Shareholders”). Under the Agreement, the Selling Shareholders agreed to sell all of the outstanding common stock of Kestrel (the “Kestrel Shares”) to the Company. The consideration for the Kestrel Shares consisted of $ 16.1 million cash and 1,467,785 shares of the Company’s common stock (the “Zynex Shares”). All of the Zynex Shares were subject to a lock-up agreement for a period of one year from the closing date under the Agreement (the “Closing Date”). The Agreement provides the Selling Shareholders with piggyback registration rights. 978,524 of the Zynex Shares were deposited in escrow (the “Escrow Shares”). The number of Escrow Shares were subject to adjustment on the one-year anniversary of the Closing Date (or in connection with any Liquidation Event (as defined in the Agreement) that occurs prior to such anniversary date) based on the number of shares equal to $ 10.0 million divided by a 30-day volume weighted average closing price of the Company’s common stock. The Escrow Shares were adjusted on the anniversary date, which resulted in the cancellation of 156,673 Escrow Shares. Half of the Escrow Shares were to be released on submission of a dossier on a laser-based photoplethysmographic device (the “Device”) to the FDA for permission to market and sell the Device in the United States. The other half of the Escrow Shares were to be released upon determination by the FDA that the Device can be marketed and sold in the United States. On July 27, 2023, the Company, ZMS, Kestrel, and the Selling Shareholders, entered into an amendment to the Stock Purchase Agreement (the “Amendment”). The parties entered into the Amendment to modify certain terms of the Agreement related to the conditions to be satisfied for the release of the Escrow Shares to the Selling Shareholders. The Escrow Shares were released from escrow, simultaneously, the selling stockholders entered into a lock-up agreement. The lock-up agreement includes two lock-up periods which release certain restrictions on the Selling Shareholders on December 31, 2023 and June 30, 2024, respectively. The amount of Escrow Shares were recalculated at September 30, 2022, and are included in the calculation of diluted earnings per share for September 30, 2022. No additional calculation was required at September 30, 2023, as the Escrow Shares were released from escrow, and the shares are included in the Company’s calculation of basic earnings per share. The acquisition of Kestrel has been accounted for as a business combination under ASC 805 – “Business Combinations” (“ASC 805”). Under ASC 805, assets acquired, and liabilities assumed in a business combination must be recorded at their fair values as of the acquisition date. ​ (7) GOODWILL AND OTHER INTANGIBLE ASSETS During the year ended December 31, 2021 the Company completed the acquisition of Kestrel, which resulted in Goodwill of $ 20.4 million (see Note 6 – Business Combinations). As of September 30, 2023, there was no change in the carrying amount of goodwill, and there were no impairment indicators of the Company’s net asset value. 14 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table provides the summary of the Company’s intangible assets as of September 30, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Gross ​ ​ ​ ​ ​ ​ Remaining ​ Carrying Accumulated Net Carrying Life (in ​ Amount Amortization Amount years) Acquired patents at December 31, 2022 ​ $ 10,000 ​ $ ( 933 ) ​ $ 9,067 ​ 10.00 Amortization expense ​ ​ ​ ​ ​ ( 680 ) ​ ​ ( 680 ) ​ ​ Acquired patents at September 30, 2023 ​ $ 10,000 ​ $ ( 1,613 ) ​ $ 8,387 9.23 ​ The following table summarizes the estimated future amortization expense to be recognized over the remainder of 2023, next five fiscal years, and periods thereaf ​ ​ ​ ​ ​ ​ December 31, ​ (In thousands) October 1, 2023 through December 31, 2023 ​ ​ 229 2024 ​ 911 2025 ​ 908 2026 ​ 908 2027 ​ 908 Thereafter ​ 4,523 Total future amortization expense ​ $ 8,387 ​ ​ (8) 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. Dilution resulting from stock-based compensation plans is determined using the treasury stock method and dilution resulting from the 2023 Convertible Senior Notes is determined using the if-converted method. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential common shares outstanding would be anti-dilutive. The calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 are as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, ​ For the Nine Months Ended September 30, ​ ​ 2023 2022 2023 2022 Basic earnings per share ​ ​ ​ ​ Net income ​ $ 3,594 ​ $ 4,873 ​ $ 8,517 ​ $ 9,596 ​ Basic weighted average shares outstanding ​ 35,531 ​ 38,046 ​ 36,216 ​ 38,881 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per share ​ $ 0.10 ​ ​ 0.13 ​ ​ 0.24 ​ ​ 0.25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per share ​ ​ ​ ​ ​ Net income ​ $ 3,594 ​ ​ 4,873 ​ ​ 8,517 ​ ​ 9,596 ​ Weighted average shares outstanding ​ 35,531 ​ 38,046 ​ 36,216 ​ 38,881 ​ Effect of dilutive securities - options and restricted stock ​ 572 ​ 819 ​ 650 ​ 848 ​ Diluted weighted-average shares outstanding ​ 36,103 ​ 38,865 ​ 36,866 ​ 39,729 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per share ​ $ 0.10 ​ ​ 0.13 ​ $ 0.23 ​ $ 0.24 ​ ​ 15 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended September 30, 2023, equity grants of 92,000 and 34,000 shares of common stock, respectively, were excluded from the dilutive stock calculation because their effect would have been anti-dilutive. ​ For the three and nine months ended September 30, 2022, equity grants of 6,000 and 22,000 shares of common stock, respectively, were excluded from the dilutive stock calculation because their effect would have been anti-dilutive. For the three and nine months ended September 30, 2023, conversion options to purchase 5.6 million and 3.0 million shares, respectively, resulting from the 2023 Convertible Senior Notes, were excluded from the dilutive stock calculation because their effect would have been anti-dilutive (see Note 10 – Convertible Senior Notes). ​ (9) NOTES PAYABLE The Company entered into a loan agreement (the “Loan Agreement”) with Bank of America, N.A. (the “Bank”) in December 2021. Under this Loan Agreement, the Bank extended two facilities to the Company. Specified assets were pledged as collateral. One facility was a line of credit in the amount of $ 4.0 million available until December 1, 2024 (the “Facility 1”). Interest on Facility 1 was due on the first day of each month beginning January 1, 2022. The interest rate was an annual rate equal to the sum of (i) the greater of the BSBY Daily Floating Rate or (ii) the Index Floor (as defined in the Loan Agreement), plus 2.00 % . The Company did not utilize the facility during the three and nine months ended September 30, 2023 and September 30, 2022. During May 2023, the facility was terminated. The other facility extended by the Bank to the Company was a fixed rate term loan in the amount of up to $ 16.0 million (the “Facility 2”). Facility 2 was entered into and funded in conjunction with the purchase of Kestrel Labs at an interest rate equal to 2.8 % per year. The Company had to pay interest on the first day of each month which began January 1, 2022 and the Company also repaid the principal amount in equal installments of $ 444,444 per month. All unpaid interest and principal on Facility 2 was fully paid off and the Facility was terminated during May 2023. ​ (10) CONVERTIBLE SENIOR NOTES In May 2023, the Company issued $ 52.5 million aggregate principal amount of 5.00 % Convertible Senior Notes due May 15, 2026 (the “2023 Convertible Senior Notes”). In May 2023, the Company issued an additional $ 7.5 million aggregate principal amount of the 2023 Convertible Senior Notes upon the exercise by the initial purchasers of their over-allotment option. Interest on the 2023 Convertible Senior Notes is payable semiannually in arrears, beginning November 15, 2023. The 2023 Convertible Senior Notes will mature on May 15, 2026, unless earlier converted or repurchased, and are redeemable at the option of the Company on or after May 20, 2025. The 2023 Convertible Senior Notes are direct, unsecured, and unsubordinated obligations of the Company, ranking equally with all of the Company’s other unsecured and unsubordinated indebtedness from time to time outstanding, and are effectively subordinated to all secured indebtedness of the Company. Holders may convert their 2023 Convertible Senior Notes at their option prior to the close of business on the business day preceding September 30, 2023, but only under the following circumstanc during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least twenty trading days (whether or not consecutive) during the period of thirty consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day as determined by the Company; during the five business day period after any ten consecutive trading day period (the “Measurement Period”) in which the trading price per $ 1,000 principal amount of 2023 Convertible Senior Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or upon the occurrence of certain corporate events specified in the indenture governing the 2023 Convertible Senior Notes. On or after February 15, 2026, a holder may convert all or any portion of its 2023 Convertible Senior Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. The Company will settle conversions of the 2023 Convertible Senior Notes by paying cash up to the aggregate principal amount of the 2023 Convertible Senior Notes to be converted and paying or delivering, as the case may be, cash, shares of common stock or a 16 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS combination of cash and shares of common stock, at the Company’s election, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the 2023 Convertible Senior Notes being converted. The 2023 Convertible Senior Notes are initially convertible at a rate of 92.8031 shares of common stock per $ 1,000 principal amount converted, which is approximately equal to $ 10.78 per share of common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change, which includes certain change in control transactions, the approval by Zynex’s stockholders of any plan or proposal for the liquidation or dissolution of Zynex and certain de-listing events with respect to Zynex’s common stock, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock for conversions in connection with the make-whole fundamental change. Upon the occurrence of a fundamental change, holders of the 2023 Convertible Senior Notes may require the Company to purchase all or a portion of their 2023 Convertible Senior Notes, in principal amounts equal to $ 1,000 or an integral multiple thereof, for cash at a price equal to 100 % of the principal amount of the 2023 Convertible Senior Notes to be purchased plus any accrued and unpaid interest. The following table summarizes the minimum interest payments over the remainder of 2023 and next three fiscal years until maturity in May 2026. ​ ​ ​ ​ ​ ​ (In thousands) October 1, 2023 through December 31, 2023 ​ $ 1,592 2024 ​ 3,050 2025 ​ 3,042 2026 ​ 1,508 ​ ​ (11) STOCK-BASED COMPENSATION PLANS In June 2017, our stockholders approved the 2017 Stock Incentive Plan (the “2017 Stock Plan”) with a maximum of 5,500,000 shares reserved for issuance. Awards permitted under the 2017 Stock Plan inclu 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 grant and are not included in outstanding shares until such vesting and issuance occurs. During the three and nine months ended September 30, 2023, no stock option awards were granted under the 2017 Stock Plan. During the three months ended September 30, 2022 no stock option awards were granted under the 2017 Stock Plan. During the nine months ended September 30, 2022, 200,000 stock option awards were granted under the 2017 Stock Plan. At September 30, 2023, the Company had 0.6 million stock options outstanding and 0.6 million exercisable under the following pla ​ ​ ​ ​ ​ ​ ​ Outstanding Exercisable ​ ​ Number of Options ​ Number of Options ​ ​ Outstanding Number of Options ​ Exercisable Number of Options ​ ​ (in thousands) ​ (in thousands) Plan Category 2005 Stock Option Plan 211 ​ 211 2017 Stock Option Plan 351 ​ 351 Total 562 ​ 562 ​ During the three and nine months ended September 30, 2023, 86,000 and 223,000 shares of restricted stock were granted under the 2017 Stock Plan, respectively. During the three and nine months ended September 30, 2022, 50,000 and 143,000 shares of restricted stock were granted to the Board of Directors and management under the 2017 Stock Plan, respectively. 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 restricted stock awards typically occur quarterly over three years for the Board of Directors and quarterly or annually over two to four years for management. ​ 17 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following summarizes stock-based compensation expenses recorded in the condensed consolidated statements of income (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, For the Nine Months Ended September 30, ​ 2023 2022 2023 2022 Cost of Revenue ​ $ 10 ​ $ 13 ​ $ 26 ​ $ 40 ​ Sales and marketing expense ​ 53 ​ 16 ​ 182 ​ 130 ​ General, and administrative ​ ​ 591 ​ ​ 549 ​ ​ 1,413 ​ ​ 1,532 ​ Total stock based compensation expense ​ $ 654 ​ $ 578 ​ $ 1,621 ​ $ 1,702 ​ ​ The Company received proceeds of $ 0.1 million related to option exercises during the three and nine months ended September 30, 2023. The Company received proceeds of $ 0.1 million related to option exercises during each of the three and nine months ended September 30, 2022. No stock option awards were granted by the Company during the three and nine months ended September 30, 2023. A summary of stock option activity under all equity compensation plans for the nine months ended September 30, 2023, is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Average ​ Aggregate ​ ​ Number of ​ Average ​ Remaining ​ Intrinsic ​ ​ Shares ​ Exercise ​ Contractual ​ Value ​ (in thousands) Price Term (Years) (in thousands) Outstanding at December 31, 2022 793 ​ $ 2.67 ​ 5.03 ​ $ 8,908 Granted — ​ $ — ​ ​ ​ ​ Forfeited ​ ( 206 ) ​ $ 6.30 ​ ​ ​ ​ ​ Exercised ( 25 ) ​ $ 5.36 ​ ​ ​ ​ Outstanding at September 30, 2023 562 ​ $ 1.22 ​ 2.80 ​ $ 3,807 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at September 30, 2023 562 ​ $ 1.22 ​ 2.80 ​ $ 3,807 ​ A summary of restricted stock award activity under all equity compensation plans for the nine months ended September 30, 2023, is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ Shares Weighted Average ​ (in thousands) Grant Date Fair Value Granted but not vested at December 31, 2022 ​ 431 ​ $ 11.92 Granted ​ 223 ​ ​ 9.88 Forfeited ​ ( 11 ) ​ ​ 11.71 Vested ​ ( 157 ) ​ ​ 11.90 Granted but not vested at September 30, 2023 486 ​ $ 11.82 ​ As of September 30, 2023, the Company had approximately $ 4.5 million of unrecognized compensation expense related to stock options and restricted stock awards that will be recognized over a weighted average period of approximately 2.4 years. (12) STOCKHOLDERS’ EQUITY Treasury Stock On April 11, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of its common stock at prevailing market prices either in the open market or through privately negotiated transactions through April 11, 2023. From the inception of the plan through May 31, 2022 the Company purchased 1,419,874 shares of its common stock for $ 10.0 million or an average price of $ 7.04 per share which completed this program. 18 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On June 9, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through June 9, 2023. From the inception of the plan through October 4, 2022, the Company purchased 1,091,604 shares of its common stock for $ 10.0 million for an average price of $ 9.06 per share which completed this program. On October 31, 2022, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through October 31, 2023. From the inception of the plan through December 31, 2022, the Company purchased 495,138 shares of its common stock for $ 6.6 million or an average price of $ 13.43 per share. From the inception of the plan through March 31, 2023, the Company purchased 727,836 shares of its common stock for $ 10 million or an average price of $ 13.74 per share which completed this program. On May 10, 2023, the disinterested members of the Board of Directors and Audit Committee approved the purchase of 300,000 shares of the Company’s common stock from Thomas Sandgaard, Chairman, President, Chief Executive Officer and Principal Executive Officer, at the closing market price on May 10, 2023 of $ 9.61 per share for $ 2.9 million. See Note 17 - Related Parties for additional information. On June 13, 2023, the disinterested members of the Board of Directors and Audit Committee approved the purchase of 300,000 shares of the Company’s common stock from Thomas Sandgaard, Chairman, President, Chief Executive Officer and Principal Executive Officer, at the closing market price on June 13, 2023, of $ 8.62 per share for $ 2.6 million. See Note 17 - Related Parties for additional information. On June 13, 2023, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through June 13, 2024. From the inception of the plan through September 30 2023, the Company purchased 1,242,892 shares of its common stock for $ 10.0 million or an average price of $ 8.05 per share, which completed this program. On September 11, 2023, the Company’s Board of Directors approved a program to repurchase up to $ 10.0 million of the Company’s common stock at prevailing market prices either in the open market or through privately negotiated transactions through September 13, 2024. From the inception of the plan through September 30 2023, the Company purchased 667,524 shares of its common stock for $ 5.6 million or an average price of $ 8.36 per share. ​ Warrants A summary of stock warrant activity for the nine months ended September 30, 2023 is presented be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Weighted ​ Average ​ Aggregate ​ ​ Number of ​ Average ​ Remaining ​ Intrinsic ​ ​ Warrants ​ Exercise ​ Contractual ​ Value ​ (in thousands) Price Life (Years) (in thousands) Outstanding and exercisable at December 31, 2022 99 ​ $ 2.39 ​ 1.76 ​ $ 1,140 Granted — ​ $ — ​ ​ ​ ​ ​ Exercised ( 8 ) ​ $ 2.27 ​ ​ ​ ​ ​ Forfeited ( 2 ) ​ $ — ​ ​ ​ ​ Outstanding and exercisable at September 30, 2023 89 ​ $ 2.41 ​ 1.02 ​ $ 497 ​ ​ (13) INCOME TAXES The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, primarily related to excess tax benefits or expense from stock option exercises, the tax impact of the change in fair value of contingent consideration, and true ups related to the filed tax return. For the three months ended September 30, 2023 and 2022 discrete items adjusted were $ 1.1 million and $ 0.2 million, respectively. For the nine months ended September 30, 2023 and 2022 discrete items adjusted were ($ 2.1 ) million and ($ 0.2 ) million, respectively. At September 30, 2023 and 2022, the Company is estimating an 19 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS annual effective tax rate of approximately 25 % and 23 %, respectively. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to various factors. The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 20 % and 23 % for the nine months ended September 30, 2023 and 2022, respectively. The decrease in the Company’s effective income tax rate for the nine months ended September 30, 2023 compared to the same period in 2022, is primarily related to the tax impact of discrete items, in particular the change in fair value of contingent consideration recorded during the year which is not expected to be taxable. The Company recorded income tax expense of $ 1.4 million and $ 2.1 million for the three and nine months ended September 30, 2023, respectively, and income tax expense of $ 1.5 million and $ 2.9 million for the three and nine months ended September 30, 2022, respectively. Taxes of $ 3.5 million and $ 5.0 million were paid during the nine months ended September 30, 2023 and 2022, respectively. (14) LEASES The Company categorizes leases at their inception as either operating or financing leases. Leases include various office and warehouse facilities which have been categorized as operating leases while certain equipment is leased under financing leases. During February 2023, the Company entered into a lease agreement for approximately 41,427 square feet of office space for the operations of ZMS in Englewood, CO. The lease commences on July 1, 2023 and runs through December 31, 2028. At the expiration of the lease term the Company has the option to renew the lease for one additional five year period. The Company is entitled to rent abatements for the first six months of the lease and tenant improvement allowances. Payments based on the initial rate of $ 24.75 per square foot begin in January 2024. The price per square foot increases by an additional $ 0.50 during each subsequent twelve-month period of the lease after the abatement period. Upon lease commencement, the Company recorded an operating lease liability of $ 4.2 million and a corresponding right-of-use asset for $ 2.8 million. The Company’s operating leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s weighted average borrowing rate was determined to be 4.75 % for its operating lease liabilities. The Company’s equipment lease agreements have a weighted average rate of 3.03 % which was used to measure its finance lease liability. The weighted average remaining lease term was 4.55 years and 4.09 years for operating and finance leases, respectively, as of September 30, 2023. ​ As of September 30, 2023, the maturities of the Company’s future minimum lease payments were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Lease Liability Finance Lease Liability October 1, 2023 through December 31, 2023 $ 533 $ 37 2024 ​ 4,511 ​ 209 2025 ​ 4,632 ​ 169 2026 ​ 4,428 ​ 108 2027 ​ 4,237 ​ 93 2028 ​ ​ 2,172 ​ ​ 93 Total undiscounted future minimum lease payments ​ $ 20,513 ​ $ 709 L difference between undiscounted lease payments and discounted lease liabiliti ​ ( 2,287 ) ​ ( 24 ) Total lease liabilities ​ $ 18,226 ​ $ 685 ​ 20 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The components of lease expenses were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2023 2022 ​ 2023 ​ 2022 Lease ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total operating lease expense ​ $ 889 $ 1,125 $ 3,131 $ 3,344 Finance lease ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total amortization of leased assets ​ ​ 37 ​ ​ 30 ​ ​ 96 ​ ​ 89 Interest on lease liabilities ​ ​ 5 ​ ​ 9 ​ ​ 19 ​ ​ 28 Total net lease cost ​ $ 931 ​ $ 1,164 ​ $ 3,246 ​ $ 3,461 ​ For the three months ended September 30, 2023 and 2022, $ 0.8 million and $ 1.0 million, respectively, of operating lease costs were included in selling, general and administrative expenses on the condensed consolidated statement of income. For the nine months ended September 30, 2023 and 2022, $ 2.9 million and $ 3.1 million, respectively, of operating lease costs were included in selling, general and administrative expenses on the condensed consolidated statement of income. All other operating lease costs were incurred at the Company’s manufacturing and warehouse facility and were included in cost of sales for the three and nine months ended September 30, 2023 and 2022. ​ ​ ​ ​ (15) CONCENTRATIONS For the three months ended September 30, 2023, the Company sourced approximately 57 % of the supplies for its electrotherapy products from four significant vendors. For the same period in 2022, the Company sourced approximately 39 % of the supplies for its electrotherapy products from two significant vendors. For the nine months ended September 30, 2023, the Company sourced approximately 47 % of supplies for its electrotherapy products from four significant vendors. For the same period in 2022, the Company sourced approximately 33 % of supplies for its electrotherapy products from two significant vendors. At September 30, 2023, the Company had no receivables from any third-party payers that made up over 10 % of the net accounts receivable balance. At December 31, 2022, the Company had receivables from one third-party payer which made up approximately 14 % of the net accounts receivable balance. (16) COMMITMENTS AND CONTINGENCIES See Note 14 for details regarding commitments under the Company’s long-term leases. 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. On occasion, the Company engages outside counsel related to a broad range of topics including employment law, third-party payer matters, intellectual property and regulatory and compliance matters. The Company is currently not a party to any material pending legal proceedings that would give rise to potential loss contingencies. ​ (17) RELATED PARTIES On May 10, 2023, the disinterested Board and Audit Committee approved the purchase of 300,000 common shares of ZYXI from Mr. Sandgaard, Chairman, President, Chief Executive Officer and Principal Executive Officer, at the closing market price on May 10, 2023 of $ 9.61 per share, resulting in a total transactional value of $ 2,883,000 . On June 13, 2023, the disinterested Board and Audit Committee approved the purchase of 300,000 common shares of ZYXI from Mr. Sandgaard at the closing market price on June 13, 2023, of $ 8.62 per share, resulting in a total transactional value of $ 2,586,000 . 21 ​ Table of Contents ZYNEX, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At the time of each aforementioned transactions, the disinterested Board and Audit Committee Members deemed it to be in the best interest of The Company to purchase the shares as they believe the current market price for the Company’s stock is undervalued and the Company’s cash position is such that the purchase of shares from Mr. Sandgaard is a good use of the Company’s funds at the time of each transaction. For each transaction, the following impacts were discussed before approval of the s (i) the Company’s cash position and capital needs for its continuing operations; (ii) the alternative uses for the cash used to purchase the Sandgaard Shares, including repayment of outstanding indebtedness; (iii) the possible effect on earnings per share and book value per share; (iv) and the potential effect of the trading of the Company’s shares, if Mr. Sandgaard were to sell the shares in the open market. ​ (18) SUBSEQUENT EVENTS There were no subsequent events identified through October 26, 2023. ​ ​ ​ 22 ​ Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Notice Regarding Forward-Looking Statements This quarterly report contains statements that are forward-looking, such as statements relating to plans for future organic growth and other business development activities, as well as the impact of reimbursement trends, other capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks include the ability to engage effective sales representatives, the need to obtain U.S. Food and Drug Administration (“FDA”) clearance and Certificate European (“CE”) marking of new products, the acceptance of new products as well as existing products by doctors and hospitals, our dependence on the reimbursement from insurance companies for products sold or leased to our customers, acceptance of our products by health insurance providers for reimbursement, larger competitors with greater financial resources, the need to keep pace with technological changes, our dependence on third-party manufacturers to produce key components of our products on time and to our specifications, implementation of our sales strategy including a strong direct sales force, the impact of COVID-19 on our business, and other risks described herein and in our Annual Report on Form 10-K for the year ended December 31, 2022. These interim financial statements and the information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the annual audited consolidated financial statements, and notes to consolidated financial statements, included in the Company’s 2022 Annual Report on Form 10-K and subsequently filed reports, which have previously been filed with the Securities and Exchange Commission. General Zynex, Inc. (a Nevada corporation) has its headquarters in Englewood, Colorado. We operate in one primary business segment, medical devices which include electrotherapy and pain management products. As of September 30, 2022, the Company’s only active subsidiaries are Zynex Medical, Inc. (“ZMI,” a wholly-owned Colorado corporation) through which the Company conducts most of its operations, and Zynex Monitoring Solutions, Inc. (“ZMS,” a wholly-owned Colorado corporation). The Company’s inactive subsidiaries include Zynex Europe, Zynex NeuroDiagnostics, Inc. (“ZND,” a wholly-owned Colorado corporation) and Pharmazy, Inc. (“Pharmazy”, a wholly-owned Colorado Corporation), which were incorporated in June 2015. The Company’s compounding pharmacy operated as a division of ZMI dba as Pharmazy through January 2016. In December 2021, the Company acquired 100% of Kestrel Labs, Inc. (“Kestrel”), a laser-based, noninvasive patient monitoring technology company. Kestrel’s laser-based products include the NiCO TM CO-Oximeter, a multi-parameter pulse oximeter, and HemeOx TM , a total hemoglobin oximeter that enables continuous arterial blood monitoring. Both NiCO and HemeOx are yet to be presented to the U.S. FDA for market clearance. All activities related to Kestrel flow through our ZMS subsidiary. The term “the Company” refers to Zynex, Inc. and its active and inactive subsidiaries. RESULTS OF OPERATIONS Summary Net revenue was $49.9 million and $41.5 million for the three months ended September 30, 2023 and 2022, respectively, and $137.0 million and $109.4 million for the nine months ended September 30, 2023 and 2022, respectively. Net revenue increased 20% and 25% for the three and nine months ended September 30, 2023, respectively. For both the three and nine months ended September 30, 2023, device orders increased 39% and 49%, respectively, from the same periods in 2022. Net income was $3.6 million for the three months ended September 30, 2023 compared with $4.9 million during the same period in 2022. Net income was $8.5 million for the nine months ended September 30, 2023 compared with $9.6 million during the same period in 2022. Cash provided by operating activities was $11.6 million during the nine months ended September 30, 2023 compared with $9.0 million during the same period in 2022. Working capital was $83.1 million and $48.5 million as of September 30, 2023 and December 31, 2022, respectively. 23 Table of Contents Net Revenue Net revenues are comprised of device and supply sales, constrained by estimated third-party payer reimbursement deductions. The reserve for billing allowance adjustments and allowance for uncollectible accounts are adjusted on an ongoing basis in conjunction with the processing of third-party payer insurance claims and other customer collection history. Product device revenue is primarily comprised of sales and rentals of our electrotherapy products and also includes complementary products such as our cervical traction, lumbar support and hot/cold therapy products. Supplies revenue is primarily comprised of sales of our consumable supplies to patients using our electrotherapy products, consisting primarily of surface electrodes and batteries. Revenue related to both devices and supplies is reported net, after adjustments for estimated third-party payer reimbursement deductions and estimated allowance for uncollectible accounts. The deductions are known throughout the healthcare industry as billing adjustments whereby the healthcare insurers unilaterally reduce the amount they reimburse for our products as compared to the sales prices charged by us. The deductions from gross revenue also take into account the estimated denials, net of resubmitted billings of claims for products placed with patients which may affect collectability. See our Significant Accounting Policies in Note 2 to the condensed financial statements for a more complete explanation of our revenue recognition policies. We occasionally receive, and expect to continue to receive, refund requests from insurance providers relating to specific patients and dates of service. Billing and reimbursement disputes are very common in our industry. These requests are sometimes related to a few patients and other times include a significant number of refund claims in a single request. We review and evaluate these requests and determine if any refund is appropriate. We also review claims that have been resubmitted or where we are pursuing additional reimbursement from that insurance provider. We frequently have significant offsets against such refund requests which may result in amounts that are due to us in excess of the amounts of refunds requested by the insurance providers. Therefore, at the time of receipt of such refund requests we are generally unable to determine if a refund request is valid. Net revenue increased $8.4 million or 20% to $49.9 million for the three months ended September 30, 2023, from $41.5 million for the same period in 2022. Net revenue increased $27.7 million or 25% to $137.0 million for the nine months ended September 30, 2023, from $109.4 million for the same period in 2022. For both the three and nine months ended September 30, 2023, the growth in net revenue from the same periods in 2022 is primarily related to a 39% and 49% growth in device orders, respectively, which resulted from a larger customer base and led to increased sales of consumable supplies. Device Revenue Device revenue is related to the sale or lease of our products. Device revenue increased $5.5 million or 49% to $16.9 million for the three months ended September 30, 2023, from $11.3 million for the same period in 2022. Device revenue increased $15.0 million or 54% to $42.5 million for the nine months ended September 30, 2023, from $27.6 million for the same period in 2022. For both the three and nine months ended September 30, 2023, the growth in net revenue from the same periods in 2022 is primarily related to a 39% and 49% growth in device orders, respectively. Supplies Revenue Supplies revenue is related to the sale of supplies, primarily electrodes and batteries, for our electrotherapy products. Supplies revenue increased $2.9 million or 10% to $33.1 million for the three months ended September 30, 2023, from $30.2 million for the same period in 2022. Supplies revenue increased $12.7 million or 16% to $94.5 million for the nine months ended September 30, 2023, from $81.8 million for the same period in 2022. The increase in supplies revenue is primarily related to an increased customer base from increased device orders in 2022 and 2023. 24 ​ Table of Contents Operating Expenses Cost of Revenue – Devices and Supplies Cost of Revenue – devices and supplies consist primarily of device and supply costs, facilities, operations labor and overhead, shipping and depreciation. Cost of revenue for the three months ended September 30, 2023 increased $1.2 million or 14% to $9.6 million from $8.4 million from the same period in 2022. As a percentage of revenue, cost of revenue – devices and supplies decreased to 19% from 20% for the three months ended September 30, 2023 and 2022, respectively. Cost of revenue for the nine months ended September 30, 2023 increased $5.5 million or 24% to $28.1 million from $22.6 million for the same period in 2022. As a percentage of revenue, cost of revenue – device and supply remained flat at 21% for the nine months ended September 30, 2023 and 2022. The increase in cost of revenue – devices and supplies, in the three and nine months ended September 30, 2023, is due to increased volumes related to higher revenue. Sales and Marketing Expense Sales and marketing expenses primarily consist of employee-related costs, including commissions and other direct costs associated with these personnel including travel expenses and marketing campaign and related expenses. Sales and marketing expense for the three months ended September 30, 2023 increased $4.9 million or 29% to $22.1 million from $17.2 million for the same period in 2022. The increase in sales and marketing expense is primarily due to increased commission and incentive pay from increased orders, increased headcount of our sales force, and rising wages in the U.S. due to a very competitive job market. As a percentage of revenue, sales and marketing expense increased to 44% from 41% for the three months ended September 30, 2023 and 2022, respectively, primarily due to the aforementioned expenses, offset by increased revenue. Sales and marketing expense for the nine months ended September 30, 2023 increased $17.0 million or 36% to $65.0 million from $48.0 million for the same period in 2022. The increase in sales and marketing expense is primarily due to increased commission and incentive pay from increased orders, and inflation and rising wages in the U.S. due to a very competitive job market. As a percentage of revenue, sales and marketing expense increased to 47% from 44% for the nine months ended September 30, 2023 and 2022, respectively. The increase as a percentage of revenue is primarily due to the additional expenses noted above, slightly offset by the increase in revenue during the period. General and Administrative Expense General and administrative expenses primarily consist of employee-related costs, and other direct costs associated with these personnel including facilities and travel expenses and professional fees, depreciation and amortization. General and administrative expense for the three months ended September 30, 2023 increased $3.4 million or 36% to $12.7 million from $9.4 million for the same period in 2022. The increase in general and administrative expense for the three months is primarily due to increased compensation and benefit expense related to headcount growth at ZMS and within the billing departments, and professional fees due to additional external resources and additional compliance fees related to Section 404(b) of the Sarbanes-Oxley Act of 2002. As a percentage of revenue, general and administrative expense increased to increased to 26% for the three months ended September 30, 2023 from 23% for the same period in 2022. The increase as a percentage of revenue is primarily due to the items noted above, partially offset by the increase in revenue during the period. General and administrative expense for the nine months ended September 30, 2023 increased $9.5 million or 37% to $35.5 million from $26.0 million for the same period in 2022. The increase in general and administrative expense for the nine months is primarily due to increased compensation and benefit expense related to headcount growth at ZMS and within the billing departments, and increased professional and legal service expenses. As a percentage of revenue, general and administrative expense increased to 26% for the nine months ended September 30, 2023 from 24% for the same period in 2022. The increase as a percentage of revenue is primarily due to the aforementioned expenses, partially offset by the increase in revenue during the period. Income Taxes The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 27% and 20% for the three and nine months ended September 30, 2023, respectively. Discrete items, primarily related to the tax impact of the change in fair 25 ​ Table of Contents value of contingent consideration, of $(0.2) million and $2.9 million for the three and nine months ended September 30, 2023, respectively, are recognized as a benefit against income tax expense. For the three and nine months ended September 30, 2023 the Company recorded an income tax expense of approximately $1.4 million and $2.1 million, respectively. The Company recorded income tax expense of $1.5 million and $2.9 million for the three and nine months ended September 30, 2022, respectively. LIQUIDITY AND CAPITAL RESOURCES We have historically financed operations through cash flows from operations, debt and equity transactions. At September 30, 2023, our principal source of liquidity was $42.5 million in cash and cash equivalents, $9.9 million in short-term investments and $33.3 million in accounts receivable. Net cash provided by operating activities for the nine months ended September 30, 2023 was $11.6 million compared with net cash provided by operating activities of $9.0 million for the nine months ended September 30, 2022. The increase in cash provided by operating activities for the nine months ended September 30, 2023 was primarily due to a decrease in the receivables balance and a decrease in inventory. The increase was partially offset by the change in fair value of contingent consideration. Net cash used in investing activities for the nine months ended September 30, 2023 and 2022 was $10.4 million and $0.3 million, respectively. Cash used in investing activities for the nine months ended September 30, 2023 was primarily related to the purchase of short-term investments, and purchases of property and equipment related to the build out of our facility for the operations of ZMS. Cash used in investing activities for the nine months ended September 30, 2022 was primarily related to the purchase of leasehold improvements for the operations of the ZMS Boulder location and the purchase of computer equipment. Net cash provided by financing activities for the nine months ended September 30, 2023 was $21.2 million compared with net cash used in financing activities of $27.7 million for the same period in 2022. Net cash provided by financing activities for the nine months ended September 30, 2023 was primarily due to $57.0 million in net proceeds from the issuance of the 2023 Convertible Senior Notes, offset by purchases of $24.4 million in treasury stock, and principal payments and termination payments on long-term debt totaling $10.7 million. Net cash used in financing activities for the nine months ended September 30, 2022 was primarily due to purchases of $19.8 million in treasury stock, payments of $3.6 million for cash dividends in January 2022, and principal payments on long-term debt totaling $4.0 million. We believe our cash and cash equivalents, together with anticipated cash flow from operations will be sufficient to meet our working capital, and capital expenditure requirements for at least the next twelve months. In making this assessment, we considered the followin ● Our cash and cash equivalents balance at September 30, 2023 of $42.5 million; ● Our working capital balance of $83.1 million; ● Our projected income and cash flows for the next 12 months. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 2 to the consolidated financial statements located within our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 14, 2023. COVID-19 UPDATE In December 2019, a novel strain of coronavirus (“COVID-19”) emerged and spread to other countries, including the United States. In March 2020, the World Health Organization declared COVID-19 as a pandemic (the “COVID-19 pandemic”). The COVID-19 pandemic, including multiple variants, resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business interruptions and other measures. 26 ​ Table of Contents Although the World Health Organization declared an end to the COVID-19 pandemic on May 5, 2023, we continue to actively monitor the impact of COVID-19. While the Company did not incur significant disruptions to its operations during the three and nine months ended September 30, 2023 from COVID-19, the full extent of COVID-19 on our operations and the markets we serve remains uncertain and will depend largely on future developments related to COVID-19, including infection rates increasing or returning in various geographic areas, variations of COVID-19, actions by government authorities to contain the outbreak or treat its impact, such as reimposing previously lifted measures or putting in place additional restrictions, and the widespread distribution and acceptance of an effective vaccine, among other things. Future developments regarding COVID-19 and its effects cannot be accurately predicted. ​ ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK N/A. ​ ITEM 4.  CONTROLS AND PROCEDURES Disclosure Controls and Procedures Evaluation of disclosure controls and procedures Our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as amended, or the Exchange Act, as of September 30, 2023. Based on management’s review, with participation of our Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended September 30, 2023, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting as described below. Material Weakness in Internal Control We identified a material weakness related to Information Technology General Controls (ITGCs) that were not designed and operating effectively to ensure (i) appropriate segregation of duties was in place to perform program changes and (ii) the activities of individuals with access to modify data and make program changes were appropriately monitored. Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. The material weakness identified above did not result in any material misstatements in our financial statements or disclosures, and there were no changes to previously released financial results. Our management concluded that the consolidated financial statements included in the Annual Report on Form 10-K, present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by Marcum LLP as stated in their report, which is included in Item 8 of the Annual Report on Form 10-K. Remediation Plan Our management is committed to maintaining a strong internal control environment. In response to the identified material weakness above, management will take comprehensive actions to remediate the material weakness in internal control over financial reporting. We are in the process of developing and implementing remediation plans to address the material weakness described above. Changes in Internal Control over Financial Reporting Except for the items referred to above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Inherent Limitation on the Effectiveness of Internal Control Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by 27 ​ Table of Contents management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. ​ PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not a party to any material pending legal proceedings. ​ ITEM 1A. RISK FACTORS There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 14, 2023. ​ ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS , AND ISSUER PURCHASES OF EQUITY SECURITIES Items 2(a) and 2(b) are not applicable. (c) Stock Repurchases. Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ In Thousands ​ ​ ​ ​ ​ ​ ​ Shares ​ Maximum Value ​ ​ ​ ​ Purchased as of Shares That ​ ​ Total ​ Average ​ Part of a ​ May Yet Be ​ ​ Number of ​ Price ​ Publicly ​ Purchased ​ ​ Shares ​ Paid Per ​ Announced ​ Under the Period ​ Purchased ​ Share ​ Plan ​ Plan July 1 - August 31, 2023 ​ ​ ​ Share repurchase program (1) 619,216 ​ $ 8.24 685,416 ​ 4,253 ​ ​ ​ ​ ​ ​ ​ ​ September 1 - September 30, 2023 ​ ​ ​ ​ Share repurchase program (1) ​ 557,476 ​ $ 8.62 ​ 1,242,892 ​ — Share repurchase program (2) ​ 667,524 ​ $ 8.36 ​ 667,524 ​ 4,420 Quarter Total ​ ​ ​ ​ ​ Share repurchase program (1) ​ 1,176,692 ​ $ 8.42 ​ 1,242,892 ​ — Share repurchase program (2) ​ 667,524 ​ $ 8.36 ​ 667,524 ​ 4,420 (1) Shares were purchased through the Company’s publicly announced share repurchase program dated June 13, 2023. The program was fully utilized during the Company's third quarter. (2) Shares were purchased through the Company’s publicly announced share repurchase program dated September 11, 2023. The program expires on September 13, 2024. ​ ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ​ ITEM 4. MINE SAFETY DISCLOSURES N/A ​ ITEM 5. OTHER INFORMATION N o n e . ​ 28 ​ Table of Contents ITEM 6.   EXHIBITS ​ Exhibit Number Description 10.1 ​ Amendment to Stock Purchase Agreement by and among Kestrel Labs, Inc., Zynex Monitoring Solutions Inc., Zynex, Inc. and Selling Shareholders named herein dated as of July 27, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 31, 2023) ​ ​ ​ 31.1* Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 ​ ​ ​ 31.2* Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 ​ ​ ​ 32.1** Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ​ ​ ​ 32.2** Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 ​ ​ ​ 101.INS* XBRL Instance Document ​ ​ ​ 101.SCH* XBRL Taxonomy Extension Schema Document ​ ​ ​ 101.CAL* XBRL Taxonomy Calculation Linkbase Document ​ ​ ​ 101.LAB * XBRL Taxonomy Label Linkbase Document ​ ​ ​ 101.PRE * XBRL Presentation Linkbase Document ​ ​ ​ 101.DEF * XBRL Taxonomy Extension Definition Linkbase Document ​ ​ ​ 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith ** Furnished herewith ​ ​ 29 ​ Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ​ ZYNEX, INC. ​ ​ ​ ​ /s/ Daniel J. Moorhead Dat October 26, 2023 ​ Daniel J. Moorhead ​ Chief Financial Officer ​ (Principal Financial and Accounting Officer) ​ ​ ​ 30