CORRESP Filing
ZYNEX INC
Date: June 5, 2025 · CIK: 0000846475 · Accession: 0001558370-25-008451
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-38804
Referenced dates: May 21, 2025
Letter
June 5, 2025 VIA EDGAR Division of Corporation Finance Office of Industrial Applications and Services Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Attn.: Al Pavot Terence O’Brien Juan Grana Katherine Bagley Re: ZYNEX, INC. Form 10-K filed March 11, 2025 File No. 001-38804 Ladies and Gentlemen: This letter is submitted by Zynex, Inc, a Nevada corporation (the “ Company ”), in response to comments received from the staff of the Division of Corporation Finance (the “ Staff ”) of the United States Securities and Exchange Commission in a letter dated May 21, 2025 (the “ Comment Letter ”) with respect to the Company’s Form 10-K for the fiscal year ended December 31, 2024 (the “ Form 10-K ”), filed with the Commission on March 11, 2025. For ease of reference, the Staff’s comments contained in the Comment Letter are reprinted below in bold, numbered to correspond with the paragraph number assigned in the Comment Letter, and is followed by the corresponding response of the Company. Form 10-K for Fiscal Year Ended December 31, 2024 We face periodic reviews and billing audits..., page 13 1. We note your disclosure that you are subject to reviews and audits from various parties; however, your risk factor does not indicate whether you have historically experienced a corresponding material adverse effect on your business, financial condition, results of operations, or cash flows. Also, the disclosure does not indicate whether you have historically lost your right to participate in the Medicare program, state programs, or one or more private payer networks. Please expand your disclosure to clarify the extent to which you have experienced any material adverse effects on your business or lost your right to participate in any government programs or private payor networks, so that investors may better assess the magnitude of these risks. In addition, please expand the succeeding risk factor about third-party payer reimbursements to disclose the extent to which you have been materially impacted. For example, we note your disclosure elsewhere that you were recently notified that TriCare, one of your government payers, was temporarily suspending payment as they review prior claims. Response : We have not experienced any material adverse effects on our business or lost our right to participate in any government program or private payer networks related to reviews and audits. We are currently involved in a review with Tricare. However, the extent and materiality of their review is currently unknown. We placed an allowance on all Tricare receivables as of December 31, 2024, and therefore have no balance sheet exposure as of that date. The Company intends to revise the risk factor included in the Form 10-K on page 13 as shown in the redline below. We face periodic reviews and billing audits from governmental and private payers, and these audits could have adverse results that may negatively impact our business . As a result of our participation in the Medicaid program and our registration in the Medicare program, we are subject to various governmental reviews and audits to verify our compliance with these programs and applicable laws and regulations. We also are subject to audits under various government programs in which third-party firms engaged by CMS conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare program. Private payers also reserve the right to conduct audits. If billing errors are identified in the sample of reviewed claims, the billing error can be extrapolated to all claims filed which could result in a larger overpayment than originally identified in the sample of reviewed claims. Our costs to respond to and defend reviews and audits may be significant and could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Moreover, an adverse review or audit could result in: · required refunding or retroactive adjustment of amounts we have been paid by governmental or private payers; · state or Federal agencies imposing fines, penalties, and other sanctions on us; · loss of our right to participate in the Medicare program, state programs, or one or more private payer networks; or · damage to our business and reputation in various markets. Any one of these results could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Historically, we have not experienced any material adverse effects on our business or lost our right to participate in any government program or private payer networks related to reviews and audits. We are currently involved in a temporary payment suspension with Tricare. Cash collections from Tricare were $48.8 million and $38.8 million during the years ended December 31, 2024 and 2023, respectively. If the Company were to be required to repay all or any portion of the cash collections from 2024, 2023 or prior periods, it could have a material adverse effect on the Company. Failure to secure and maintain adequate coverage and reimbursement from third-party payers could adversely affect acceptance of our products and reduce our revenues. The majority of our revenues come from third-party payers, primarily insurance companies. In the U.S., private payers cover the largest segment of the population, with the remainder either uninsured or covered by governmental payers. The majority of the third-party payers outside the U.S. are government agencies, government sponsored entities, or other payers operating under significant regulatory requirements from national or regional governments. 2 Third-party payers may decline to cover and reimburse certain procedures, supplies, or services. Additionally, some third-party payers may decline to cover and reimburse our products for a particular patient even if the payer has a favorable coverage policy addressing our products or previously approved reimbursement for our products. Furthermore, private and government payers may consider the cost of a treatment in approving coverage or in setting reimbursement for the treatment. Private and government payers are increasingly challenging the prices charged for medical products and services. Additionally, the containment of healthcare costs has become a priority of governments. Adoption of additional price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures could further limit our revenues and operating results. If third-party payers do not consider our products or the combination of our products with additional treatments to be cost-justified under a required cost-testing model, they may not cover our products for their populations or, if they do, the level of reimbursement may not be sufficient to allow us to sell our products on a profitable basis. Reimbursement for the treatment of patients with medical devices is governed by complex mechanisms. These mechanisms vary widely among countries, can be informal, somewhat unpredictable, and evolve constantly, reflecting the efforts of these countries to reduce public spending on healthcare. As a result, obtaining and maintaining reimbursement for the treatment of patients with medical devices has become more challenging. We cannot guarantee that the use of our products will receive reimbursement approvals and cannot guarantee that our existing reimbursement approvals will be maintained in any country. Our failure to secure or maintain adequate coverage or reimbursement for our products by third-party payers in the U.S. or in the other jurisdictions in which we market our products could have a material adverse effect on our business, revenues, and results of operations and cause our stock price to decline. We are currently involved in a temporary payment suspension with Tricare. Cash collections from Tricare were $48.8 million and $38.8 million during the years ended December 31, 2024 and 2023, respectively. If the Company were to be required to repay all or any portion of the cash collections from 2024, 2023 or prior periods, it could have a material adverse effect on the Company. Critical Accounting Estimates, page 41 2. Your risk factor on page 14 states that inaccurate accounting estimates could have a material adverse impact on your operating results. Please expand your critical accounting policy disclosures to include quantified information about how changes to critical estimates underlying revenue recognition and collection of receivables have impacted reported revenue and operating results. Refer to Item 303(b)(3) of Regulation S-K Response: In our discussion under Variable Consideration within our Critical Accounting Estimates disclosure we disclosed that any differences between estimated settlements and final determinations are reflected as an increase or a reduction in revenue in the period when such final determinations are known. Historically these differences have been immaterial, and the Company has not had to go back and reassess the adjustments of future periods for past billing adjustments. In response to the Staff’s comment the Company intends to enhance the current disclosure as redlined below. Variable Consideration A significant portion of the Company’s revenues are derived, and the related receivables are due, from patients with commercial or government health insurance plans. Revenues are estimated using the portfolio approach 3 by third party payer type based upon historical rates of collection, the aging of receivables, trends in the 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, allowance for uncollectible accounts, and billing allowance adjustments. Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. If initial estimates are updated these changes are accounted for as increases or decreases in the transaction price. Assuming the underlying performance obligation to which the change in price relates has already been satisfied, those changes in transaction price are immediately recognized as increases or decreases in revenue (not credit losses (bad debt expense)) in the period in which the estimate changes. Additionally, the complexity of third-party 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. Due to continuing changes in the healthcare industry and third-party payer reimbursement, it is possible our forecasting model to estimate collections could change, which could have an impact on our results of operations and cash flows. Any differences between estimated settlements and final determinations are reflected as an increase or a reduction in revenue in the period when such final determinations are known. Historically these differences have been immaterial, and the Company has not had to go back and reassess the adjustments of future periods for past billing adjustments. The Company monitors the variability and uncertain timing over third-party payer types in our portfolios. If there is a change in our third-party payer mix over time, it could affect our net revenue and related receivables. We believe we have a sufficient history of collection experience to estimate the net collectible amounts by 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. Our net revenue as a percentage of gross revenue for the years ended December 31, 2024 and 2023 were 11% and 12%, respectively. We collected 94% of our December 31, 2023 accounts receivable balance during 2024 and 98% through April 30, 2025. During the quarter ended December 31, 2023, the Company had a change in the estimate of uncollectable receivables. An allowance was placed on a group of older receivables from a single payer. We continue to work with this payer and current collections are in line with expectations. The result of this change in allowance was a reduction of $6.2 million to net revenue ($4.6 million net of tax) or $0.14 per basic and diluted share for the three months ended December 31, 2023, and $0.13 per basic and diluted share for the year ended December 31, 2023. Form 10-Q filed April 29, 2025 Recent Events, page 7 3. We note TriCare is suspending payments as they review prior claims. Please discuss the nature of the TriCare matter including known material facts and circumstances, such as the magnitude of claims potentially being reviewed by TriCare, the potential impact to your financial statements if you have to reimburse TriCare, and the underlying reasons for the dispute. Tell us your consideration of providing disclosure responsive to ASC 450-20-50 in your footnotes. Response: In response to the Staff’s comment, the Company proposes to revise the disclosure under Recent Events as shown below in the redline. 4 Recent Events - During the quarter ended March 31, 2025, the Company was notified that Tricare, one of our government payers, was temporarily suspending payments as they review prior claims. The suspension of Tricare payments is based on allegations of misrepresentation of supplies and equipment billed to the Tricare program; misrepresentation of diagnosis to justify a requirement for a TENS unit or lack of physician orders regarding the replenishment of supplies. We held a meeting with Tricare in April 2025 and believe we had good evidence to get payments reinstated, Tricare is expected to respond in June 2025. The suspension of Tricare claims processing and payment will continue while our response is being reviewed. Tricare historically represented approximately 20-25% of our annual revenue and cash collections from Tricare were $48.8 million and $38.8 million during the years ended December 31, 2024 and 2023, respectively . As directed by Tricare, we continue to support both existing patients and new patients as we receive their prescriptions. We recognized revenue of approximately $2.2 million for the quarter ended March 31, 2025 related to Tricare which equaled the cash received from Tricare during the period. All other fulfillments and related revenue during the first quarter have been fully reserved and we have no receivables related to Tricare as of March 31, 2025. Due to the temporary payment suspension and lack of clarity on the timing of a resolution, we restructured our staff to align with current revenue. During 2025 we decreased our overall staff by approximately 15%, which primarily affected employees in our corporate departments. This staff reduction along with other expense reductions made during the second half of 2024 and the first quarter of 2025 will result in savings of approximately $35 million annually. Results of Operations Net Revenue, page 22 4. We note sales of devices and supplies during the quarter ending March 31, 2025, decreased 15% and 55% over the comparable interim period ending March 31, 2024, and 20% and 53% over the prior quarter ending December 31, 2024. Please separately quantify the amount of the decrease from changes in volumes sold during the periods, constrained revenue from fulfilling new orders related to current period sales to TriCare patients, and adjustments to prior period revenue from changes in estimates relating to the TriCare investigation. Response: In response to the Staff’s comment, the Company proposes to r
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CORRESP 1 filename1.htm June 5, 2025 VIA EDGAR Division of Corporation Finance Office of Industrial Applications and Services Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Attn.: Al Pavot Terence O’Brien Juan Grana Katherine Bagley Re: ZYNEX, INC. Form 10-K filed March 11, 2025 File No. 001-38804 Ladies and Gentlemen: This letter is submitted by Zynex, Inc, a Nevada corporation (the “ Company ”), in response to comments received from the staff of the Division of Corporation Finance (the “ Staff ”) of the United States Securities and Exchange Commission in a letter dated May 21, 2025 (the “ Comment Letter ”) with respect to the Company’s Form 10-K for the fiscal year ended December 31, 2024 (the “ Form 10-K ”), filed with the Commission on March 11, 2025. For ease of reference, the Staff’s comments contained in the Comment Letter are reprinted below in bold, numbered to correspond with the paragraph number assigned in the Comment Letter, and is followed by the corresponding response of the Company. Form 10-K for Fiscal Year Ended December 31, 2024 We face periodic reviews and billing audits..., page 13 1. We note your disclosure that you are subject to reviews and audits from various parties; however, your risk factor does not indicate whether you have historically experienced a corresponding material adverse effect on your business, financial condition, results of operations, or cash flows. Also, the disclosure does not indicate whether you have historically lost your right to participate in the Medicare program, state programs, or one or more private payer networks. Please expand your disclosure to clarify the extent to which you have experienced any material adverse effects on your business or lost your right to participate in any government programs or private payor networks, so that investors may better assess the magnitude of these risks. In addition, please expand the succeeding risk factor about third-party payer reimbursements to disclose the extent to which you have been materially impacted. For example, we note your disclosure elsewhere that you were recently notified that TriCare, one of your government payers, was temporarily suspending payment as they review prior claims. Response : We have not experienced any material adverse effects on our business or lost our right to participate in any government program or private payer networks related to reviews and audits. We are currently involved in a review with Tricare. However, the extent and materiality of their review is currently unknown. We placed an allowance on all Tricare receivables as of December 31, 2024, and therefore have no balance sheet exposure as of that date. The Company intends to revise the risk factor included in the Form 10-K on page 13 as shown in the redline below. We face periodic reviews and billing audits from governmental and private payers, and these audits could have adverse results that may negatively impact our business . As a result of our participation in the Medicaid program and our registration in the Medicare program, we are subject to various governmental reviews and audits to verify our compliance with these programs and applicable laws and regulations. We also are subject to audits under various government programs in which third-party firms engaged by CMS conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare program. Private payers also reserve the right to conduct audits. If billing errors are identified in the sample of reviewed claims, the billing error can be extrapolated to all claims filed which could result in a larger overpayment than originally identified in the sample of reviewed claims. Our costs to respond to and defend reviews and audits may be significant and could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Moreover, an adverse review or audit could result in: · required refunding or retroactive adjustment of amounts we have been paid by governmental or private payers; · state or Federal agencies imposing fines, penalties, and other sanctions on us; · loss of our right to participate in the Medicare program, state programs, or one or more private payer networks; or · damage to our business and reputation in various markets. Any one of these results could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Historically, we have not experienced any material adverse effects on our business or lost our right to participate in any government program or private payer networks related to reviews and audits. We are currently involved in a temporary payment suspension with Tricare. Cash collections from Tricare were $48.8 million and $38.8 million during the years ended December 31, 2024 and 2023, respectively. If the Company were to be required to repay all or any portion of the cash collections from 2024, 2023 or prior periods, it could have a material adverse effect on the Company. Failure to secure and maintain adequate coverage and reimbursement from third-party payers could adversely affect acceptance of our products and reduce our revenues. The majority of our revenues come from third-party payers, primarily insurance companies. In the U.S., private payers cover the largest segment of the population, with the remainder either uninsured or covered by governmental payers. The majority of the third-party payers outside the U.S. are government agencies, government sponsored entities, or other payers operating under significant regulatory requirements from national or regional governments. 2 Third-party payers may decline to cover and reimburse certain procedures, supplies, or services. Additionally, some third-party payers may decline to cover and reimburse our products for a particular patient even if the payer has a favorable coverage policy addressing our products or previously approved reimbursement for our products. Furthermore, private and government payers may consider the cost of a treatment in approving coverage or in setting reimbursement for the treatment. Private and government payers are increasingly challenging the prices charged for medical products and services. Additionally, the containment of healthcare costs has become a priority of governments. Adoption of additional price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures could further limit our revenues and operating results. If third-party payers do not consider our products or the combination of our products with additional treatments to be cost-justified under a required cost-testing model, they may not cover our products for their populations or, if they do, the level of reimbursement may not be sufficient to allow us to sell our products on a profitable basis. Reimbursement for the treatment of patients with medical devices is governed by complex mechanisms. These mechanisms vary widely among countries, can be informal, somewhat unpredictable, and evolve constantly, reflecting the efforts of these countries to reduce public spending on healthcare. As a result, obtaining and maintaining reimbursement for the treatment of patients with medical devices has become more challenging. We cannot guarantee that the use of our products will receive reimbursement approvals and cannot guarantee that our existing reimbursement approvals will be maintained in any country. Our failure to secure or maintain adequate coverage or reimbursement for our products by third-party payers in the U.S. or in the other jurisdictions in which we market our products could have a material adverse effect on our business, revenues, and results of operations and cause our stock price to decline. We are currently involved in a temporary payment suspension with Tricare. Cash collections from Tricare were $48.8 million and $38.8 million during the years ended December 31, 2024 and 2023, respectively. If the Company were to be required to repay all or any portion of the cash collections from 2024, 2023 or prior periods, it could have a material adverse effect on the Company. Critical Accounting Estimates, page 41 2. Your risk factor on page 14 states that inaccurate accounting estimates could have a material adverse impact on your operating results. Please expand your critical accounting policy disclosures to include quantified information about how changes to critical estimates underlying revenue recognition and collection of receivables have impacted reported revenue and operating results. Refer to Item 303(b)(3) of Regulation S-K Response: In our discussion under Variable Consideration within our Critical Accounting Estimates disclosure we disclosed that any differences between estimated settlements and final determinations are reflected as an increase or a reduction in revenue in the period when such final determinations are known. Historically these differences have been immaterial, and the Company has not had to go back and reassess the adjustments of future periods for past billing adjustments. In response to the Staff’s comment the Company intends to enhance the current disclosure as redlined below. Variable Consideration A significant portion of the Company’s revenues are derived, and the related receivables are due, from patients with commercial or government health insurance plans. Revenues are estimated using the portfolio approach 3 by third party payer type based upon historical rates of collection, the aging of receivables, trends in the 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, allowance for uncollectible accounts, and billing allowance adjustments. Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. If initial estimates are updated these changes are accounted for as increases or decreases in the transaction price. Assuming the underlying performance obligation to which the change in price relates has already been satisfied, those changes in transaction price are immediately recognized as increases or decreases in revenue (not credit losses (bad debt expense)) in the period in which the estimate changes. Additionally, the complexity of third-party 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. Due to continuing changes in the healthcare industry and third-party payer reimbursement, it is possible our forecasting model to estimate collections could change, which could have an impact on our results of operations and cash flows. Any differences between estimated settlements and final determinations are reflected as an increase or a reduction in revenue in the period when such final determinations are known. Historically these differences have been immaterial, and the Company has not had to go back and reassess the adjustments of future periods for past billing adjustments. The Company monitors the variability and uncertain timing over third-party payer types in our portfolios. If there is a change in our third-party payer mix over time, it could affect our net revenue and related receivables. We believe we have a sufficient history of collection experience to estimate the net collectible amounts by 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. Our net revenue as a percentage of gross revenue for the years ended December 31, 2024 and 2023 were 11% and 12%, respectively. We collected 94% of our December 31, 2023 accounts receivable balance during 2024 and 98% through April 30, 2025. During the quarter ended December 31, 2023, the Company had a change in the estimate of uncollectable receivables. An allowance was placed on a group of older receivables from a single payer. We continue to work with this payer and current collections are in line with expectations. The result of this change in allowance was a reduction of $6.2 million to net revenue ($4.6 million net of tax) or $0.14 per basic and diluted share for the three months ended December 31, 2023, and $0.13 per basic and diluted share for the year ended December 31, 2023. Form 10-Q filed April 29, 2025 Recent Events, page 7 3. We note TriCare is suspending payments as they review prior claims. Please discuss the nature of the TriCare matter including known material facts and circumstances, such as the magnitude of claims potentially being reviewed by TriCare, the potential impact to your financial statements if you have to reimburse TriCare, and the underlying reasons for the dispute. Tell us your consideration of providing disclosure responsive to ASC 450-20-50 in your footnotes. Response: In response to the Staff’s comment, the Company proposes to revise the disclosure under Recent Events as shown below in the redline. 4 Recent Events - During the quarter ended March 31, 2025, the Company was notified that Tricare, one of our government payers, was temporarily suspending payments as they review prior claims. The suspension of Tricare payments is based on allegations of misrepresentation of supplies and equipment billed to the Tricare program; misrepresentation of diagnosis to justify a requirement for a TENS unit or lack of physician orders regarding the replenishment of supplies. We held a meeting with Tricare in April 2025 and believe we had good evidence to get payments reinstated, Tricare is expected to respond in June 2025. The suspension of Tricare claims processing and payment will continue while our response is being reviewed. Tricare historically represented approximately 20-25% of our annual revenue and cash collections from Tricare were $48.8 million and $38.8 million during the years ended December 31, 2024 and 2023, respectively . As directed by Tricare, we continue to support both existing patients and new patients as we receive their prescriptions. We recognized revenue of approximately $2.2 million for the quarter ended March 31, 2025 related to Tricare which equaled the cash received from Tricare during the period. All other fulfillments and related revenue during the first quarter have been fully reserved and we have no receivables related to Tricare as of March 31, 2025. Due to the temporary payment suspension and lack of clarity on the timing of a resolution, we restructured our staff to align with current revenue. During 2025 we decreased our overall staff by approximately 15%, which primarily affected employees in our corporate departments. This staff reduction along with other expense reductions made during the second half of 2024 and the first quarter of 2025 will result in savings of approximately $35 million annually. Results of Operations Net Revenue, page 22 4. We note sales of devices and supplies during the quarter ending March 31, 2025, decreased 15% and 55% over the comparable interim period ending March 31, 2024, and 20% and 53% over the prior quarter ending December 31, 2024. Please separately quantify the amount of the decrease from changes in volumes sold during the periods, constrained revenue from fulfilling new orders related to current period sales to TriCare patients, and adjustments to prior period revenue from changes in estimates relating to the TriCare investigation. Response: In response to the Staff’s comment, the Company proposes to r