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    zynexcorrespondence_71608.htm

    July 16,
2008

    Mr. David
Burton

    Staff
Accountant

    U.S.
Securities and Exchange Commission

    100 F
Street, N.E., Mail Stop 6010

    Washington,
DC  20549

    Re:      Zynex
Medical Holdings, Inc.

    Form 10-KSB for the year ended December 31,
2007

    Filed
April 16, 2008

    File
No. 33-26787-A

    Dear Mr.
Burton:

    This
letter responds to the comments of the staff of the Securities and Exchange
Commission in its letter dated July 1, 2008 with respect to the Form 10-KSB
Report listed above.  The text of the staff’s comments is set forth
below in bold followed in each case by the response.

    Form 10-KS B for the Year
Ended December 31, 2007

    Management’s Discussion and
Analysis or Plan of Operation, page 14

    Results of Operations, page
14

              1.

              We
      note from page 10 that 65% of your revenue
      is derived from rental income and 35% of your revenue is derived from net
      sales.  We further note that the increase in net sales and
      rental income from 2006 to 2007 was 215%.  In order to enhance
      investor’s understanding of your results of operations, please revise your
      discussion of your revenue in future filings to separately describe the
      impact of changes in rental income and net sales on your total
      revenue.  In this regard, discuss any trends with respect to the
      different revenue streams.  For example, if rental income is
      increasing while net sales of products are remaining constant, that fact
      should be disclosed.

    The
Company will follow the Staff’s recommendations to enhance our Management’s
Discussion and Analysis in future filings. This will include discussion of the
impact of changes in rental income and net sales on total revenue and discussion
of any trends with respect to the different revenue streams.

    Mr. David
Burton

    July 16,
2008

    Page
2

    Item
8A(T).  Controls and Procedures, page 25

    Management’s Report on
Internal Control over Financial Reporting, page 25

              2.

              You
      state here that management concluded that the Company has a material
      weakness in its ability to produce financial statements free from material
      misstatements.  Please tell us and revise future filings as
      necessary to discuss how you have compensated for the material weakness in
      order to ensure that the financial statements presented here in the Form
      10-KSB are free from material
misstatement.

    The
material weakness that we identified and disclosed in our Form 10-KSB was
determined to exist at December 31, 2007. In order to compensate for the
material weakness and to ensure that our December 31, 2007 financial statements
were free from material misstatement, the Company hired 2 additional accounting
staff in the first quarter of 2008. These additional accounting staff
strengthened our internal control over financial reporting by providing our
accounting department with additional resources to prepare and verify financial
information included in our 2007 Form 10-KSB. They also provided better
segregation of duties, which enhanced our policies and procedures over review of
financial information.

    Other
remedial steps being taken are indicated in the Company’s Form 10-Q for the
first quarter of 2008.

    Consolidated Statements of
Operations, page F-3

              3.

              We
      note your disclosure on page 15 that depreciation on your rental equipment
      is not included in cost of goods sold.  Please tell us why you
      believe it is appropriate to exclude the depreciation on the devices
      generating rental income from your cost of goods sold.  In this
      regard, please also tell us how your current presentation of cost of sales
      and rentals and gross profit excluding depreciation complies with SAB
      Topic 11B.

    Mr. David
Burton

    July 16,
2008

    Page
3

    The
Company has historically excluded depreciation on devices generating rental
income from cost of sales and rentals, since it considers the presentation of a
non-cash expense as a separate line item meaningful, and it believes this amount
has not been significant If depreciation expense on rental
equipment had been included in the calculation of gross margins, the
year-over-year change in gross margins as a percentage of revenue for the year
ended December 31, 2007 versus 2006 would have been 0.6%. The gross margin for
2007 would have been 89.5% versus 90.9% and the gross margin for 2006 would have
been 86% versus 88%. As the Company’s MD&A discussion focuses on significant
year-over-year changes, the inclusion of depreciation expense in the calculation
of gross margins would not have changed the discussion or analysis of the
performance of the Company. In accordance with SAB Topic 11B, to avoid
placing undue emphasis on “cash flow,” depreciation was not
positioned in the income statement in a manner which resulted in reporting a
figure for income before depreciation.

    The
Company recognizes, however, that including depreciation expense on rental
equipment in cost of sales and rentals would impact gross margin dollars and
percentages. Accordingly, in future filings, the Company will include
depreciation expense for rental equipment in “cost of sales and rentals” and
other depreciation in “general and administrative expenses” as opposed to
reporting depreciation expense as a separate line item below gross margin on the
Statement of Operations. The presentation of depreciation expense in financial
statements from prior periods included in future filings for comparative
purposes will be revised to also present depreciation expense as described
above.

    Consolidated Statements of
Cash Flows, page F-4

              4.

              We
      note that you present a reconciling item for provision for losses in
      accounts receivable of $4.8 million for 2007.  It appears that
      this primarily relates to reserves recorded on gross accounts receivable
      relating to negotiated rates with insurance companies and government
      agencies and not the actual amount of charges recorded on the statements
      of operations for provisions for losses in accounts
      receivable.  Please tell us why you believe your current
      presentation is meaningful to the financial statement
      users.  Revise future filings to separately present amounts
      representing charges recorded to the statements of operations for losses
      in accounts receivable.

    Mr. David
Burton

    July 16,
2008

    Page
4

    The
Company believes that presenting charges for adjustments related to negotiated
rates with insurance companies and charges for bad debt expense in one line in
our statements of cash flows is meaningful to the financial statement users, as
the combined charges represent the total provision for losses in accounts
receivable.   Often the Company has no negotiated rates with
payment providers; however, certain providers discount the charges submitted by
the Company.  The Company may not know the amount of the discount, and
has historically provided a combined estimate of possible discounts and bad
debts.

    However,
in order to clarify such charges in our statements of cash flows, the Company
will revise future filings to separately present in its statements of cash flows
its estimate of payment provider discounts and estimated bad debts recorded in
the statements of operations for estimated losses in accounts
receivable.

    Note 2 - Summary of
Significant Accounting Policies, page F-7

              5.

              We
      note from your statements of stockholders’ equity and from Note 3 that you
      have issued warrants to non-employees.  Please revise this
      footnote in future filings to disclose your accounting policy for stock
      issued to non-employees.  Refer to SFAS 123R and EITF
      96-18.

    The
Company will comply with the Staff’s comment by revising the description of our
accounting policy for stock issued to non-employees in future filings as
follows:

    “For
stock warrants or options granted to non-employees, the Company measures fair
value of the equity instruments utilizing the Black-Scholes method if that
valuation method results in a more reliable measurement than the fair value of
the consideration or the services received. For stock granted to non-employees,
the Company measures fair value of the shares issued utilizing the market price
of the shares on the date the transaction takes place. The Company amortizes
such costs over the related period of service.”

    Mr. David
Burton

    July 16,
2008

    Page
5

    Revenue recognition, page
F-7

              6.

              We
      note that you generate revenue from two distinct revenue streams - sales
      of products and rental of products.  Please tell us and revise
      future filings to separately
      disclose your revenue recognition policies for sales of products and
      rentals of products, identifying those events that would indicate that
      each criterion outlined in SAB Topic 13A has been
  met.

    Our
policy for revenue recognition for the rental of products is to recognize
revenue ratably over the products’ rental period. Rental revenue is shown net of
the estimated discounts, which will be taken by healthcare payment
providers.

    Our
policy for revenue recognition for the sale of products is to recognize revenue
when the product has been shipped and, when applicable, a claim prepared by the
Company has been filed with the patient's insurance provider. Sales revenue is
shown net of the estimated discounts, which will be taken by healthcare payment
providers.

    Revenue
is recognized under rental agreements and product shipments only after the
following criteria are met: (i) there exists adequate evidence of the
transactions; (ii) delivery of goods has occurred or services have been
rendered; and (iii) the price is not contingent on future activity and
collectability is reasonably assured.

    The
Company will revise its future filings to separately disclose its revenue
recognition policies regarding these revenue streams, as discussed
above.

    Mr. David
Burton

    July 16,
2008

    Page
6

    We
acknowledge that:

              ·

              Our
      company is responsible for the adequacy and accuracy of the disclosure in
      the filing;

              ·

              Staff
      comments or changes to disclosure in response to staff comments do not
      foreclose the Commission from taking any action with respect to the
      filing; and

              ·

              Our
      company may not assert staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.

    If you
have any questions or comments regarding the foregoing, please contact Mark R.
Levy (303-290-1083) or Amy Bowler (303-290-1086) at Holland & Hart LLP, our
attorneys.  Thank you.

                Very truly yours,

                ZYNEX, INC.

                By:

              /s/ Fritz Allison

                Fritz
      Allison

                Chief
      Financial Officer