Zynex 424B3 Prospectus supplement

Filed pursuant to Rule 424(b)(3)

Registration Statement No. 333-148906

PROSPECTUS SUPPLEMENT NO. 2

(To prospectus dated February 13, 2008)

Zynex Medical Holdings, Inc.

2,273,006 shares of

common stock

This prospectus supplement no. 2 supplements the prospectus dated February 13, 2008, relating to the resale by selling stockholders of 2,273,006 shares of common stock of Zynex Medical Holdings, Inc. (“we” or “our”) issuable upon exercise of outstanding warrants. This prospectus supplement should be read in conjunction with the prospectus dated February 13, 2008, which is to be delivered with this prospectus supplement, and this prospectus supplement is qualified by reference to the prospectus, except to the extent that the information in this prospectus supplement supersedes the information contained in the prospectus. This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the prospectus, including any supplements thereto.

Annual Report on Form 10-KSB

On April 16, 2008, we filed with the Securities and Exchange Commission our Annual Report for the year ended December 31, 2008 on Form 10-KSB (Amendment No. 1). The text of the 10-KSB/A is attached hereto.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

This prospectus supplement is dated April 23, 2008

Attachment

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB/A

Amendment No. 1

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

For the year ended December 31, 2007

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 33-26787-D

ZYNEX MEDICAL HOLDINGS, INC.

(Name of small business issuer in its charter)

Nevada	90-0214497
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

8022 Southpark Cir, Suite 100, Littleton, Colorado	80120
(Address of principal executive offices)	(Zip Code)

Issuer's telephone number: (303) 703-4906

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [X] No[ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The issuer's revenues for its most recent year were $8,048,253

The aggregate market value of the 10,698,195 common shares held by non-affiliates of the registrant was $14,549,545 computed by reference to the closing price of such stock as listed on the OTC Bulletin Board on April 11, 2008. This computation is based on the number of issued and outstanding shares held by persons other than officers, directors and shareholders of 5% or more of the registrant's common shares.

As of April 15, 2008, 28,943,695 shares of common stock are issued and outstanding.

Documents incorporated by reference: None.

Transitional Small Business Disclosure Form (check one): Yes [ ] No [X]

This Amendment No. 1 to Zynex Medical Holdings, Inc.’s Form 10-KSB for the year ended December 31, 2007 supersedes in its entirety the original Form 10-KSB Report filed on April 16, 2008. The original Report was unintentionally filed prior to certain changes being made. The Company's independent registered public accounting firm had not approved the release of their report in the previously filed Form 10-KSB. Management has examined the corrections, which were omitted from the previously filed report. The corrections do not affect the reported results of the Company's operations and management of the Company does not believe that they are material to the consolidated financial statements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this annual report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to the need to obtain additional capital in order to grow our business, larger competitors with greater financial resources, the need to keep pace with technological changes, our dependence on the reimbursement from insurance companies for products sold or rented to our customers, our dependence upon third party manufacturers to produce our goods on time and to our specifications, the acceptance of our products by hospitals and clinicians, implementation of our sales strategy including a strong direct sales force and other risks described in this Report. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this annual report in its entirety, including the risks described in "Risk Factors." We undertake no obligation to update any forward-looking statements to reflect any future events or developments. These forward-looking statements speak only as of the date of this Report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

When used in this annual report, the terms the "Company," "Zynex", "we," "us," "ours," and similar terms refer to Zynex Medical Holdings, Inc., a Nevada corporation, and its wholly-owned subsidiary, Zynex Medical, Inc.

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TABLE OF CONTENTS

FORM 10 KSB/A

(Amendment No. 1)

ANNUAL REPORT - FISCAL YEAR 2007

ZYNEX MEDICAL HOLDINGS, INC.

		PAGE

PART I

Item 1.	Description of Business	4
Item 2.	Description of Property	13
Item 3.	Legal Proceedings	13
Item 4.	Submission of Matters to a Vote of Security Holders	13

PART II

Item 5.	Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	13
Item 6.	Management's Discussion and Analysis or Plan of Operation	14
Item 7.	Financial Statements	25
Item 8.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	25
Item 8A.	Controls and Procedures	25
Item 8B.	Other Information	26

PART III

Item 9.	Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act	27
Item 10.	Executive Compensation	28
Item 11.	Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters	31
Item 12.	Certain Relationships and Related Transactions, and Director Independence	32
Item 13.	Exhibits	33
Item 14.	Principal Accountant Fees and Services	37

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ITEM 1. DESCRIPTION OF BUSINESS

History

Zynex Medical Holdings, Inc. (the "Company" or "Zynex"), formerly Fox River Holdings, Inc., was initially organized on December 26, 1991 as a Delaware corporation under the name of Life Medical Technologies, Inc. The Company engaged in the business of bringing new medical product technology to the health care market place. Between 1995 and 2003, the Company changed its corporate name and business several times. Zynex's corporate history prior to February 11, 2004 is detailed in the Company's December 31, 2004 10-KSB filed on April 15, 2005.

On February 11, 2004, Zynex Medical Holdings, Inc. acquired 100% of the common stock of Zynex Medical, Inc., a privately held Colorado corporation ("Zynex Medical"), pursuant to an acquisition agreement by issuing 19,500,000 shares of common stock to Thomas Sandgaard the sole shareholder of Zynex Medical. Immediately after the transaction, the former shareholder of Zynex Medical owned approximately 88.5 percent of the Company's common stock.

Zynex is the parent company of Zynex Medical. Zynex Medical designs, manufactures and markets FDA approved medical devices for the electrotherapy and stroke rehabilitation markets. The Company's headquarters are located in Littleton, Colorado.

Dan Med, Inc, (“DMI”) was incorporated by Mr. Sandgaard under the laws of the State of Colorado on October 31, 1996. Zynex Medical was incorporated by Mr. Sandgaard as Stroke Recovery Systems, Inc, ("SRSI") under the laws of the State of Colorado on March 3, 1998. On October 1, 2003, SRSI acquired by merger the assets and liabilities of DMI. Mr. Sandgaard operated SRSI as a privately-owned corporation from inception until the February 11, 2004 Zynex acquisition.

For accounting purposes, Zynex Medical is treated as the acquiring corporation, and financial statements for years prior to 2004 are those of Zynex Medical.

DMI's primary activity was importing and marketing European-made electrotherapy devices from its inception until 1999 when DMI began to develop, assemble and market its own line of electrotherapy products. Its own products constituted over 80% of DMI revenues at the time of its acquisition by SRSI.

Prior to acquiring DMI, SRSI's primary activities were to develop and market homecare electrotherapy devices for US stroke survivors suffering impaired mobility and loss of functionality. In early 2002, SRSI engaged its own sales force and began to market DMI's entire line of standard electrotherapy products. The DMI products accounted for over 75% of Zynex Medical's 2002 revenue.

Current Business

Zynex engineers, manufactures, markets and sells its own design of FDA cleared medical devices into two distinct markets (1) standard electrotherapy products for pain relief / pain management and (2) the NeuroMove(TM) for stroke and spinal cord injury ("SCI") rehabilitation.

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All Zynex products are intended to be patient friendly and designed for home use. The products are cost effective when compared to traditional physical therapy, and often result in better mobility, less pain and increased potential for a patient to return to work and a fuller life significantly earlier than with traditional therapies alone. The NeuroMove has been the subject of nine successfully completed clinical trials and is currently being evaluated in four additional trials

The U.S. Food and Drug Administration (the "FDA") has cleared all of our products for sale in the United States (the "U.S.") and our products require a physician's prescription, authorization or order before they can be dispensed in the U.S. Our primary business model considers the physician's prescription as an "order", and it is on this basis we provide the product to the patient and either bill the patient directly or the patient's private or government insurer (Medicare or Medicaid) for payment.

We believe our products assist in improving the quality of life for patients suffering with impaired mobility from stroke or SCI, and those suffering from debilitating and chronic pain.

Our Zynex produced electrotherapy products, the IF8000, IF8100, TruWave and E-Wave, are marketed through physicians and therapists primarily by our independent contractor sales representatives, some of whom receive additional compensation to serve as Regional Sales Managers. We also employ inside sales personnel. The NeuroMove is marketed directly to end-user patients and physicians who specialize in stroke and SCI rehabilitation.

To increase revenues, we added several experienced sales representatives in 2006 and in 2007 we engaged over 25 sales representatives. In 2008 we intend to hire or contract with additional sales representatives, and such additions are part of our 2008 business plan.

To expand our international sales we have obtained representation commitments from well established local medical device distributors and have engaged an internationally regarded consulting firm to assist us in preparing to apply for European Union CE Marking. See “Regulatory Approval and Process” below.

Our Products

We currently market and sell five Zynex produced products and resell seven products purchased from others, all as indicated below:

Product Name	Description
Our Products

IF 8000	Combination Interferential and Muscle Stimulation device.

IF 8100	An easier to use, fixed program version of the IF8000.

E-Wave	Dual Channel NMES Device

TruWave	Dual Channel TENS Device

NM 900	NeuroMove. EMG triggered Electrical Stimulation Device

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Resale Products

Elpha 3000	Dual Channel NMES device

Conti4000	Electrical Stimulation Device for Incontinence Treatment

ValuTENS	Dual Channel TENS Device

Elpha 1000	Dual Channel TENS Device

DCHT	Cervical Traction Device

LHT	Lumbar Traction Device

Electrodes	Supplies, re-usable for delivery of electrical current to the body

The Company received a majority of its revenue in 2007 from the sale and rental of transcutaneous electrical nerve stimulation (“TENS”), interferential and muscle stimulation devices as well as electrode supplies.

Pain Management

Standard electrotherapy is a clinically proven and medically accepted alternative modality to manage acute and chronic pain. Electrotherapy is not known to have any negative side effects, a significant advantage over most pain relief medications. The benefits of electrotherapy can include: pain relief, increased blood flow, reduced edema, prevention of venous thrombosis, increased range-of-motion, prevention of muscle disuse atrophy, and reduced urinary incontinence.

Electrotherapy introduces an electrical current applied through surface electrodes. The electrical current "distorts" a pain signal on its way to the central nervous system and the brain, thus reducing the pain. Additionally, by applying higher levels of electricity muscles contract and such contraction may assist in the treatments mentioned above.

Stroke and Spinal Cord Injury Rehabilitation

Our proprietary, patent pending NeuroMove is a Class II medical device that has been cleared by the FDA for stroke and spinal cord injury ("SCI") rehabilitation and is only dispensed with a physician's prescription. The NeuroMove was introduced to the market in late 2003. Stroke and SCI usually affect a survivor's mobility, functionality, speech, and memory, and the NeuroMove helps the survivor regain movement and functionality.

According to information published by the American Heart Association approximately 4 million, 73%, of the estimated 5.7 million U.S. stroke survivors, a population that is estimated to be growing about 9% or 400,000 new survivors a year, have mobility impairments following the acute stage of the stroke.

Because there has not been an overall SCI incidence study since the 1970s and many cases are unreported as such, definitive statistics are not available. However, the National Spinal Cord Injury Association reports that in 2006, living U.S. victims range between 227,000 and 300,000 and the SCI Injury Information Network estimate 11,000 new cases each year.

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In most cases, the survivors and their caregivers for both stroke and SCI victims believe they must live with the disability for the rest of their lives and this inability to move one or more extremities has, we believe, a substantial negative psychological impact on the survivor's recovery potential. By using the NeuroMove as recommended, we believe the patient has a viable opportunity to achieve improvement beyond their current physical plateau and that such positive results will be a major contributor to the recovery process. The NeuroMove has also been proven in clinical studies to show beneficial effects when combined with physical therapy.

By conscientiously using the NeuroMove for three to twelve months, the majority of Neuromove patients can reestablish the connection between the brain and impaired muscle and thus regain movement and functionality. When movement and functionality are restored, the patient may experience increased mobility, increased productivity, an improved outlook, and a reduced risk of accidents, and may be able to engage in activities they were precluded from before using the NeuroMove.

NeuroMove Clinical Review

The NeuroMove utilizes the relatively new science of "neuroplasticity", the process by which healthy parts of the brain learn to compensate and assume functions previously carried out by the damaged areas. To accomplish this task, the extraordinarily sensitive NeuroMove technology monitors muscle activity and detects brain signals that indicate-- even without any visible movement-- the brain's effort to move a specific muscle or area of the body. Once the effort is detected, the NeuroMove induces actual movement through electrical stimulation, thus providing effective feedback to initiate relearning in the healthy part of the brain.

We believe the NeuroMove is unique because its built-in microprocessor can recognize low-level attempts by muscles to contract and then "reward" such detection with electrical stimulation. We do not believe there are similar products in the stroke rehabilitation market.

Because the NeuroMove increases the likelihood and reduces the time required for noticeable physical improvement as compared to traditional therapies used without the NeuroMove, we believe it can have positive effect in reducing society's annual stroke and SCI victim cost. The American Heart Association estimated that in 2007 alone stroke costs would total more than $62 billion dollars. Similar data for SCI victims has not been compiled but the Spinal Cord Injury Network estimates lifetime per victim costs range from $. 0.5 million to $2.9 million depending on age and the type of injury. NeuroMove related cost savings will come from reduced physical therapy, less medication, fewer post stroke accidents, less hospitalization and rehabilitation, more motivated patients, less support personnel and equipment, and reduced productivity loss.

Several independent NeuroMove clinical studies have been published in peer-reviewed journals. Abstracts from the studies can be reviewed at www.NeuroMove.com and the full studies can be obtained directly from the Company.

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Pain Management and Control

Electrical stimulation has been shown to reduce most types of local pain, such as tennis elbow, neck or lower back pain, arthritis, and others. The devices used to accomplish this are commonly described as in the transcutaneous electrical nerve stimulation (“TENS”) family of devices.

Numerous clinical studies have been published over several decades showing the effectiveness of TENS for pain relief. Zynex has developed three products in the TENS category that have been cleared by the FDA: the TruWave, a digital TENS device, and the IF8000 and upgraded IF8100 interferential stimulators which provide deeper stimulation. The TruWave is a "traditional" TENS type unit that delivers pain-alleviating electrotherapy, whereas the IF8000 is a more sophisticated unit with deeper pain alleviating and neuromuscular training settings.

Muscle related problems.

Neuromuscular Electrical Stimulation ("NMES") increases the electrical intensity to cause muscle contraction and is otherwise applied in the same manner as with TENS units. We have developed the E-Wave, a specific digital device, for this application. Additionally, the IF8000 and IF8100 can be programmed for NMES applications. The FDA has cleared the IF8000, IF8100 and the E-Wave.

A built-in timer in our E-Wave and IF8000 products assures that the muscles do not fatigue too easily. Many pain relief and “NMES” devices for use in a patient's home can replace therapeutic treatments usually performed with regular physical therapy. Common applications can prevent disuse atrophy, increase strength, increase range-of-motion, and increase local blood circulation. NMES is commonly considered complementary treatment with physical therapy to improve overall patient outcomes.

Post-op recovery.

Electrical stimulation is also effective in preventing deep venous thrombosis immediately after orthopedic and others surgery, as well as for postoperative pain relief, to improve local blood circulation and for reducing edema. We believe the IF8000 is the most effective of our products for these applications.

Our Markets

Based on the latest public information, including filings with the Securities and Exchange Commission, of the largest product manufactures in our industry, we estimate the annual domestic market for standard electrotherapy products at approximately $450 - $500 million and growing an estimated 5% a year.

We plan to increase our penetration of the standard electrotherapy market by further expanding our sales organization and broadening our product offering. We currently produce gross margins of between 85% and 95% and expect those margins to continue in the future. The high margins are possible in part because the products use a common technology platform with different software configurations.

The domestic and international markets for stroke and SCI rehabilitation technology are in the initial stages of development. According to information of the American Stroke Association on January 27, 2007, with approximately 5.7 million stroke survivors, growing approximately 9% a year, and approximately 227,000- 300,000 SCI survivors, growing approximately 11,000 per year, in the U.S. alone there is a significant need for medically proven and effective stroke and SCI rehabilitative equipment. We believe these markets offer significant opportunity for profitable growth.

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Key characteristics of our markets are:

-	Often more than 100 days is required to collect initial payment from insurance carriers and considerably longer from many attorney, personal injury and worker's compensation cases. Such delayed payment impacts the Company's cash flow and can slow its growth

-	Prior to payment the third party payers often make significant payment "adjustments or discounts".

-	The stroke and SCI markets have demonstrated that many patients and their caregivers will privately pay for the NeuroMove.

Market Strategies

We plan to use our core technology to grow in the standard electrotherapy, stroke and SCI markets in the U.S. and to expand internationally.

In the U.S. we market our products through commissioned, independent sales representatives who call on doctors and therapists. We also market the NeuroMove directly to end users with advertisements and articles in relevant publications and on the Internet.

Product Assembly And Processing

Our product assembly strategy consists of the following elements:

-	At all times, comply with relevant regulatory requirements and regulations.

Use contract manufacturers as much as possible, thereby allowing us to quickly respond to changes in volume and avoid large capital investments for assembly and manufacturing equipment. Domestically and internationally, there is a large pool of highly qualified contract manufacturers for the type of devices we assemble.

-	Test all units 100% in a real-life, in-house environment to help ensure the highest possible quality, patient safety, and reduce the cost of warranty repairs.

Vendors located in the United States, Asia and Europe currently manufacture our products. We do not have contracts with these vendors for our standard electrotherapy products and utilize purchase orders for our ongoing needs. We are currently contracted with a vendor to manufacture the NeuroMove. We believe there are numerous suppliers that can manufacture our products and pricing, quality and service will continue to determine which manufacturers we use.

Our principal suppliers as of February 2008 are:

Axelgaurd Manufacturing Co., LTD, Fallbrook, CA, US

Byers Peak, Wheat Ridge, CO, US

Spectramed, Mount Vernon, OH, US

The Saunders Group (acquired by EMPI), Chaska, MN, US

Our employees develop the software used in our products.

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Revenue

Our products may be purchased or rented on a monthly basis. Renters and purchasers are primarily patients, health care providers and dealers. If the patient is covered by health insurance the third party payer typically determines whether the patient will rent or purchase a unit depending on the anticipated time period for its use. If a rental continues until an amount equal to the purchase price is paid, we transfer ownership of the product to the patient and cease rental charges. When a rental unit is returned, it is refurbished, tested and made available for additional rentals.

A majority of our revenue is derived from private health insurance carriers and HMOs on behalf of their insureds. We also receive revenues from Medicare and Medicaid, worker's compensation agencies, attorneys representing injured patients, hospitals, U.S. and international distributors.

A source of recurring revenue is the sale of surface electrodes sent to existing patients each month. The electrodes transmit the electrical charge from the device to the patient and are an essential component of the treatment modality.

For fiscal 2007 approximately 65 % of revenue was derived from rental (compared to 63% for 2006) and 35 % (compared to 37% for 2006) from sales, including electrode sales.

Our employees work with the commercial insurance and government third party payers, patients and commercial clients to collect product rental and purchase payments.

Products Purchased For Resale

In addition to our own products, we distribute a number of products from other domestic and international manufacturers in order to complement our core product line. These products include electrical stimulation devices and patient supplies, such as electrodes. Customarily, there are no formal contracts between vendors in the durable medical equipment industry. Replacement products and components are easily found, either from our own products or other manufacturers, and purchases are made by purchase order.

Intellectual Property

We have applied for a patent with 22 claims for our NeuroMove technology. With regard to our other products, we believe that the products contain certain proprietary software that protects them from being copied. In the future, we may seek patents for advances to our existing products and for new products as they are developed.

We hold registered trademarks for NeuroMove in the U.S. and the European Union. Zynex Medical is trademarked in the U.S.

We utilize non-disclosure and trade secret agreements with employees and third parties to protect our proprietary information.

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Regulatory Approval And Process

All our products are classified as Class II (Medium Risk) devices by the Food and Drug Administration (FDA), and clinical studies with our products are considered to be NSR (Non-Significant Risk Studies). Our business is governed by the FDA, and all products typically require 510(k) market clearance before they can be put in commercial distribution. Section 510(k) of the Federal Food, Drug and Cosmetics Act, is available in certain instances for Class II (Medium Risk) products. It requires that before introducing most Class II devices into interstate commerce, the company introducing the product must first submit information to the FDA demonstrating that the device is substantially equivalent in terms of safety and effectiveness to a device legally marketed prior to March 1976. When the FDA determines that the device is substantially equivalent, the agency issues a "clearance" letter that authorizes marketing of the product. We are also regulated by the FDA's QSR division (Quality Systems Regulation), which is similar to the ISO9000 and the European EN46000 quality control regulations. All our products currently produced for us or resold by us are cleared for marketing in the United States under FDA's 510(k) regulations.

Zynex expects to enter the European market through high quality and well-established local distributors after obtaining European Union ("EU") CE Marking. CE Marking is certification that a product meets the standards established by the 25 nations EU and qualifies for sale in the EU and 4-nation European Free Trade Association ("EFTA"). We are focusing much effort and significant resources on preparation of the CE application, and it is targeted for completion, submission and approval in 2008. In anticipation of such approval we have had discussions with, and received verbal or written distribution commitments from local distributors

CE Marking will also enhance our entry into other developed countries, and we plan to engage local distributors in those countries in the second half of 2008 and/or 2009.

The Far East, Middle East, Eastern Europe, and Latin American markets have different regulatory requirements. We intend to comply with applicable requirements if and when we decide to enter those markets.

In March 2008, Zynex received its ISO13485 : 2003 certification for its compliance with international standards in quality assurance for design, development, manufacturing and distribution of medical devices. This certification is not only important as an assurance that we have the appropriate quality systems in place but is also crucial to our efforts international expansion around the world as many countries require this certification as part of their regulatory approval. Zynex was audited by a corporation authorized by the International Organization for Standardization (ISO).

Healthcare Regulation

The delivery of health care services and products has become one of the most highly regulated of professional and business endeavors in the United States. Both the federal government and individual state governments are responsible for overseeing the activities of individuals and businesses engaged in the delivery of health care services and products. Federal law and regulations are based primarily upon the Medicare and Medicaid programs. Each program is financed, at least in part, with federal funds. State jurisdiction is based upon the state's interest in regulating the quality of health care in the state, regardless of the source of payment. We believe we are materially complying with applicable laws concerning our products; however, we have not received or applied for a legal opinion from counsel or from any federal or state judicial or regulatory authority. Additionally, many aspects of our business have not been the subject of state or federal regulatory interpretation. The laws applicable to us are subject to evolving interpretations. If our operations are reviewed by a government authority, we may receive a determination that could be adverse to us. Furthermore, laws that are applicable to us may be amended in a manner that could adversely affect us.

Federal health care laws apply to us when we submit a claim to Medicare, Medicaid or any other federally funded health care program. The principal federal laws that we must abide by in these situations include:

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-	Those that prohibit the filing of false or improper claims for federal payment.

-	Those that prohibit unlawful inducements for the referral of business reimbursable under federally funded health care programs.

The federal government may impose criminal, civil and administrative penalties on anyone who files a false claim for reimbursement from Medicare, Medicaid or other federally funded programs.

A federal law commonly known as the "anti-kickback law" prohibits the knowing or willful solicitation, receipt, offer or payment of any remuneration made in return for:

-	The referral of patients covered under Medicare, Medicaid and other federally-funded health care programs; or

-	The purchasing, leasing, ordering, or arranging for any goods, facility, items or service reimbursable under those programs.

Employees

As of December 31, 2007, we employed 45 full time employees (an increase from 17 as of December 31, 2006). We also engage a number of independent contractor, commission-only sales representatives. We believe our relations with all of our employees and independent contractors are good. We are subject to the minimum wage and hour laws and provide usual and customary employee benefits such as vacation, sick leave and health and dental insurance.

Executive Officers Of The Registrant

The following table sets forth information as to the name, age and office held by the two executive officers of the Company as of December 31, 2007:

Name	Age	Position

Thomas Sandgaard	49	President, Chief Executive Officer and Director.
		Set forth below is a biographical description of
		Mr. Sandgaard based on information supplied by him

Fritz G. Allison	48	Chief Financial Officer.
		Set forth below is a biographical description of
		Mr. Allison based on information supplied by him.

Mr. Sandgaard founded the Company in 1996 after a successful European based career in the semiconductor, telecommunications and medical equipment industries with ITT, Siemens and Philips Telecom. Mr. Sandgaard held middle and senior management positions in the areas of international sales and distribution, technology transfers, mergers and acquisitions and marketing. Mr. Sandgaard holds a degree in electronics engineering from Odense Teknikum, Denmark and an MBA from the Copenhagen Business School.

Mr. Allison was elected as Chief Financial Officer of Zynex, effective February 19, 2007. Prior to joining Zynex, Mr. Allison served as a Financial Consultant for MSS Technologies, a Phoenix-based provider of business application solutions, since 2004. From December 2000 until March 2004, Mr. Allison was the Vice-President, Controller and Chief Financial Officer of Orange Glo International, Inc, a manufacturer of cleaning products in the consumer package goods industry. Previous positions include Manager of Corporate Accounting for J.D. Edwards & Co., Controller at Powercom-2000 and International Controller for CH2M Hill International. Mr. Allison holds a B.A. in Business Administration from the University of Southern California and has been a Certified Public Accountant.

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ITEM 2. DESCRIPTION OF PROPERTY

In November 2007, the Company moved its headquarters, office, plant and warehouse to a new facility in Littleton, Colorado. This new space, consisting of 16,553 square feet, is sub-leased under a 25-month agreement at an annual cost of $100,975 plus property taxes and common area maintenance expenses. The Company also maintains its prior facility, which is under a five-year lease expiring in February 2009. The base rent on that facility was originally $93,642 per year plus common area maintenance expenses. Base rent increased to $96,106 March 1, 2007 and increases to $98,570 March 2, 2008. The present configuration of the both spaces will accommodate 100-125 employees. The Company believes that the leased property is sufficient to support its requirements until the sub-lease expires.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material pending or threatened legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II

ITEM 5. MARKET FOR COMMON EQUITY, AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is currently traded on the OTC Bulletin Board under the symbol "ZYNX".

The following table sets forth the range of high and low bid quotations for our common stock for each quarter of the last two fiscal years, as reported on the Bulletin Board. The quotations represent inter-dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions.

PERIOD	HIGH	LOW

Year ended December 31, 2006
First Quarter	$0.55	$0.31
Second Quarter	$0.50	$0.25
Third Quarter	$0.50	$0.25
Fourth Quarter	$0.45	$0.21

Year ended December 31, 2007
First Quarter	$0.45	$0.20
Second Quarter	$0.95	$0.34
Third Quarter	$1.43	$0.90
Fourth Quarter	$1.49	$1.18

As of April 15, 2008, there were 28,943,695 shares of common stock outstanding and approximately 242 registered holders of our common stock.

The Company has never paid any cash dividends on our capital stock and does not anticipate paying any cash dividends on the common shares in the foreseeable future. The Company intends to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors (the "Board") and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board deems relevant.

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During the third quarter of 2007, Zynex issued 49,524 shares of common stock from the exercise of then outstanding warrants at an exercise price of $0.01 per share, and 1,238 shares of common stock at $0.95 per share in cash. These warrants were originally issued in June 2004. During the fourth quarter of 2007, Zynex issued 9,524 shares of common stock from the exercise of then outstanding warrants at an exercise price of $0.01 per share. These warrants were originally issued in June 2004. In these issuances, Zynex made no general solicitation, Zynex believes that purchasers of the securities were accredited investors, Zynex believes that the investment bankers, lender and investor relations firms were accredited investors or met the standards for a purchaser is a non-public offering, and Zynex relied upon an exemption from securities registration for non-public offerings.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

For 2007, Zynex reported $8,048,253 revenue, an increase of 215% from 2006 and net income of $2,131,350, an increase from a net loss in 2006 of $320,370. The revenue increase was primarily accomplished through implementation of our 2004-2007 strategic and operating plans, recruitment of experienced sales representative in 2006 and 2007, and effective utilization of funds received from two 2004 private placements, 2005 and 2006 term loans from Silicon Valley Bank and proceeds from a 2006 non public offering to accredited investors and bridge loan. In the fall of 2005 the Company established a $400,000, three year term loan and banking relationship with Silicon Valley Bank, Costa Mesa, California and Boulder, Colorado. The relationship was expanded with an additional $240,000 three-year term loan in March 2006. Also in 2006 the Company raised a net $604,476 from the sale of 2,175,000 shares of common stock in a non public offering to accredited investors, and a net $206,563 from a bridge loan. For information on the repayment of the Silicon Valley Bank loan, see “Liquidity and Capital Resources” below.

The incremental addition of industry experienced sales representatives during 2007 and the second half of 2006 allowed us to increase our market presence and increase orders in during 2007. As a result of the sales force expansion our total orders increased 284% from 2,705 in 2006 to 10,383 in 2007

RESULTS OF OPERATIONS

Net sales and rental income for the quarter and twelve months ended December 31, 2007, were $3,101,869 and $8,048,253 an increase of $2,354,798 and $5,491,444 or 315% and 215% compared to $747,071 and $2,556,809 for the quarter and twelve months ended December 31, 2006. The increase in net sales and rental income for the quarter and twelve months ended December 31, 2007, compared to the quarter and twelve months ended December 31, 2006 was due primarily to an increase in prescriptions (orders) for rentals and purchases of the Company’s standard electrotherapy products resulting from the expansion of the sales force as discussed above, greater awareness of the Company's products by end users and physicians resulting from its increased 2006 and 2005 marketing investments, growing market penetration and increased rental income from the greater number of Zynex products placed in use during the prior periods.

Net sales and rental income by quarter were as follows:

	2007		2006

First quarter	$	1,336,731	$	505,091
Second quarter		1,505,207		560,860
Third quarter		2,104,446		743,787
Fourth quarter		3,101,869		747,071

Total net sales and rental income	$	8,048,253	$	2,556,809

Our sales and rental income is reported net, after deductions for bad debt and estimated insurance company reimbursement deductions. The deductions are known throughout the health care industry as “contractual adjustments” and describe the process whereby the healthcare insurers unilaterally reduce the amount they reimburse for our products as compared to the rental rates and sales prices charged by us. The amounts deducted from gross sales and rental income for these charges were $7,997,932 for the twelve months ended December 31, 2007 compared to $2,363,485 for the 2006 year, an increase of $5,634,447 or 238%.

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Gross profit increased $5,066,117 over 2006, an increase of 225%. Gross profit as a percent of net sales and rental income was 90.9% in 2007 compared to 88.1% in 2006. The improvement in gross profit amounts and percent in 2007 compared to 2006 was due to an increase in revenue and increased rental income as a percentage of total revenue (rental equipment is depreciated and not part of the cost of goods sold). The company also benefited from reductions in costing of certain items in cost of goods sold based on volume purchase discounts.

Selling, general and administrative expenses increased from $2,326,793 in 2006 to $4,003,432 in 2007, an increase of 72%. The increase was consistent with the growth in revenue and was primarily in the areas of sales commissions, salaries and wages, utilities, office expense, automobile, consulting expenses, postage and delivery, and travel and entertainment. The expense increases were somewhat offset by decreased expenses related to advertising, public company expense and equipment rental.

Depreciation increased $59,432, from $94,009 in 2006 to $153,441 in 2007. The increase results primarily from higher levels of rental inventory, which is considered property and equipment.

Interest expense increased $88,326 in 2007 compared to 2006. The increases resulted primarily from the note issued to Ascendiant Capital as well as loans from its majority stockholder, which is described in Note 3 to the consolidated financial statements in this report.

Income tax expense. We reported expenses for income taxes in the amount of $790,000 in 2007. This is primarily due to our having an income before taxes of $2,921,350. We expect to consume our net operating loss carry-forward, and therefore we will have to pay taxes on income going forward. Deferred tax assets have increased due to the effects of temporary differences primarily attributable to an increase in the allowance for doubtful accounts receivable.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $746,864 for the year ended December 31, 2007 compared with cash used in operating activities of $483,460 for the year ended December 31, 2006. The primary reasons for the increase in cash provided by operating activities was the net income for 2007 compared to the net loss for 2006. Accounts receivable increased primarily due to increased billings in the last half of 2007 compared to 2006. These factors were somewhat offset by growth in accounts payable and accrued liabilities due to purchases to build rental inventory for new orders and accruing commissions payable to sales representatives.

Cash used in investing activities was $758,310 for the year ended December 31, 2007 compared to cash used in investing activities of $151,586 for the year ended December 31, 2006. Cash used in investing activities represents the purchase of furniture, equipment and inventory rented to customers.

Cash used by financing activities was $253,751 for the year ended December 31, 2007 compared with cash provided by financing activities of $881,510 for the year ended December 31, 2006. The primary use of cash in financing activities during 2007, were the repayment of the bridge loan and principal payments on notes payable and a capital lease. Financing activities in 2006 include working capital loans from the principal stockholder and Chief Executive Officer, Thomas Sandgaard, a term loan from Silicon Valley Bank, net proceeds from an equity private placement and net proceeds from a bridge loan.

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Our cash requirements increase as our operations expand for the reasons indicated below for our limited liquidity. We have begun to see our operations provide enough cash for our current requirements, and our planned operations might also provide sufficient cash to implement our business plan. However, there can be no assurance that our operations will provide enough cash in the future. For this reason we may raise additional capital through debt or equity financing in 2008. There can be no assurance that we will be able to raise such additional financing or do so on terms that are acceptable to the Company.

Our limited liquidity is primarily a result of (a) the required high levels of consignment inventory that are standard in the electrotherapy industry, (b) the payment of commissions to salespersons based on sales or rentals prior to reimbursement for such transaction, (c) the high level of outstanding accounts receivable because of the deferred payment practices of third party health payers, and (d) the delayed cost recovery inherent in rental transactions. Our growth results in higher cash needs.

Contingencies such as unanticipated shortfalls in revenues or increases in expenses could affect our projected revenue, cash flows from operations and liquidity.

Payments Due by Period

Significant Contractual Obligations	Total		1 Year		2-3 Years		4-5 Years		5 Years

Notes payable (1)	$	397,041	$	354,009	$	43,032	$	--	$	--
Capital lease obligations		31,448		18,869		12,579		--		--
Operating leases		396,148		206,490		189,658		--		--

Total contractual cash obligations	$	824,637	$	579,368	$	245,269	$	--	$	--

(1)In February 2008, the Company paid $191,071 in full payment of the outstanding amounts under the notes to Silicon Valley Bank. Of this amount, $168,371 was due within one year and $22,700 was due within two to three years.

On October 5, 2005 Zynex received $400,000 under a three-year term loan agreement with Silicon Valley Bank, Santa Clara, California and Boulder, Colorado (the "Lender"). The loan incurred interest at a per annum fixed rate of 7.84%. The loan was guaranteed by Zynex Chairman, President and Chief Executive Officer Thomas Sandgaard and was collateralized by a first perfected security interest in accounts, inventory, chattel paper, equipment, fixtures, general intangibles, including intellectual property and other assets. The loan was payable in 36 equal monthly payments of principal and interest. The loan included financial covenants for minimum liquidity and minimum debt service coverage. In connection with the loan, the Lender was granted a seven-year warrant to purchase 50,000 shares of Zynex Common Stock at an exercise price of $0.71 per share.

On March 15, 2006 Zynex received another loan in the amount of $240,000 under a Default Waiver and First Amendment To Loan and Security Agreement with Silicon Valley Bank dated September 29, 2005. The Amendment to the existing loan agreement of September 29, 2005 provided for this second term loan and waived one covenant violation for the time period ended December 31, 2005. The new loan bore interest at a per annum fixed rate of 8.48%. Zynex began repaying the loan in 36 equal monthly payments of principal and interest, beginning April 1, 2006. All other terms and conditions were as stated in the September 29, 2005 loan agreement. This loan was also guaranteed by Zynex Chairman, President, Chief Executive Officer and major shareholder Thomas Sandgaard and was collateralized by a first security interest in accounts, inventory, chattel paper, equipment, fixtures, general intangibles, including intellectual property and other assets.

As indicated in the table above, the Silicon Valley Bank notes were repaid in full during February 2008.

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In May 2007, the Company and Ascendiant Capital agreed to extend the maturity date of the loan and to modify extension terms of the Note. Under the modified agreement the principal was to be paid in six equal monthly installments plus interest at 21%, although prepayment was permitted without penalty. The entire amount was to be repaid no later than October 18, 2007. For extending the Note, the Company issued 75,000 shares of common stock in May 2007. The shares were valued at $26,250. The extension agreement called for additional shares to be issued every month as long as an outstanding balance remained on the Note. The number of shares to be issued monthly depended upon the balance of the Note, up to an aggregate maximum of 450,000 shares of common stock, which number included the 75,000 shares of common stock issued in May 2007. Previously, 450,000 shares were to be issued upon the extension.

In May 2007, the Company repaid principal of $100,000 of the Ascendiant Capital note, interest of $4,812 and issued 50,000 shares of common stock valued at $21,500.

In June 2007, the Company repaid principal of $76,000, interest of $3,062 and issued 25,000 shares of common stock valued at $21,250.

On June 21, 2007, Ascendiant Capital surrendered the Note for conversion into common stock at the fixed conversion price of $0.32 per share. The remaining principal of $99,000 plus accrued interest of $173 were converted into 309,916 shares of common stock.

Effective March 1, 2006 a previously non-interest bearing loan from Thomas Sandgaard, President and Chief Executive Officer, in the amount of $14,980 was converted to a 24 month, 8.25% term loan, with equal monthly payments of principal and interest commencing April 1, 2006. As of December 31, 2007, this loan had been paid in full.

In 2006 Mr. Sandgaard loaned the Company $146,900, of which $50,000 was converted to a 24 month, 8.25% term loan, with equal monthly payments of principal and interest commencing April 1, 2006. As of December 31, 2007, $14,592 of this amount remained outstanding The remaining $96,900 was represented by 8.25% demand notes and will be repaid as the Company's cash position and its financing covenants allow. As of December 31, 2007, $4,171 of this amount remained outstanding. The loans from Mr. Sandgaard were used for working capital purposes.

In May and June 2007, Mr. Sandgaard made 24-month unsecured loans to the Company in the principal amounts of $50,000 and $24,000 for a total amount of $74,000, The loans bear interest at 8.25% per annum and require monthly payments of $2,267, commencing June 2007 and $1,088 commencing July 2007, for a total of $3,355. As of December 31, 2007, $36,256 and $18,365 remain outstanding. The loans from Mr. Sandgaard were used for working capital purposes and repayment of the Note Payable to Ascendiant Capital Group, LLC.

In September 2007, Mr. Sandgaard made a loan to the Company in the principal amount of $59,500. The loan bears interest at 8.25% per annum commencing September 30,2007 and is a demand note. As of December 31, 2007, $60,736 remains outstanding. The loan from Mr. Sandgaard was used for working capital purposes.

CRITICAL ACCOUNTING POLICIES

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. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

We have identified the policies below as critical to our business operations and the understanding of our results of operations.

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Revenue Recognition. Sales and rental income for patient transactions is recognized when a product has been medically prescribed and dispensed to a patient and an invoice sent to the patient or a claim prepared by the Company has been filed with the patient's insurance provider. Revenue for a non-patient purchaser or rental, for example a hospital, is recognized when an invoice has been sent and the product shipped to the person or entity. Product and rental revenues are recognized net of a reserve for collectibility.

Provision for Sales Returns, Allowances and Collectibility. The Company maintains a collectibility reserve for sales and rentals. The reserve is charged when reimbursements from insurance carriers and other third party payers are less than amounts claimed, as provided by agreement, where the amount claimed by the Company exceeds the insurance provider's usual, customary and reasonable reimbursement rate and when units are returned because of benefit denial. The provision is accounted for by reducing gross revenue by a portion of the amount invoiced during the relevant period. The amount of the reduction is estimated based on historical experience.

Reserve for Obsolete/Excess Inventory. Inventories are stated at the lower of cost or market. We regularly review our inventories and, when required, will record a provision for excess and obsolete inventory based on factors that may impact the realizable value of our inventory including, but not limited to, technological changes, market demand, regulatory requirements and significant changes in our cost structure. If ultimate usage varies significantly from expected usage, or other factors arise that are significantly different than those anticipated by management, inventory write-downs or increases in reserves might be required.

Share-based compensation. In December 2004, the FASB issued SFAS No. 123 (R) Share-Based Payment, which addresses the accounting for share-based payment transactions. SFAS No. 123(R) eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, and generally requires instead that such transactions be accounted and recognized in the statement of income based on their fair value. SFAS No. 123 (R) was effective and adopted by the Company as of January 1, 2006.

Transactions in which the Company issues stock-based compensation for goods or services received from non-employees are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is the more reliably measurable. The Company often utilizes pricing models in determining the fair values of options and warrants issued as stock-based compensations to non-employees. These pricing models utilize the market price of the Company’s common stock and the exercise price of the option or warrant, as well as time value and volatility factors underlying the positions.

RISKS RELATED TO OUR BUSINESS

WE MAY BE UNABLE TO OBTAIN ADDITIONAL CAPITAL REQUIRED TO GROW OUR BUSINESS. WE MAY HAVE TO CURTAIL OUR BUSINESS IF WE CANNOT FIND ADEQUATE FUNDING.

Our ability to grow depends significantly on our ability to expand our operations through internal growth and by acquiring other companies or assets. This will require significant capital resources. We may need to seek additional capital from public or private equity or debt sources to fund our operating plans and respond to other contingencies such as:

-	shortfalls in anticipated revenues or increases in expenses;

-	the development of new products; or

-	the expansion of our operations, including the recruitment of additional sales personnel.

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During 2006, we sold shares of our common stock and related warrants in a non-public offering in order to provide funds for working capital and growth. We cannot be certain that we will be able to raise additional capital in the future on terms acceptable to us or at all. If alternative sources of financing are insufficient or unavailable, we may be required to modify our growth and operating plans in accordance with the extent of available financing. Any additional equity financing may involve substantial dilution to our then existing shareholders.

WE HAVE LIMITED LIQUIDITY BECAUSE OUR CASH REQUIREMENTS INCREASE AS OUR OPERATIONS EXPAND

Our limited liquidity is primarily a result of (a) the required high levels of consignment inventory that are standard in the electrotherapy industry, (b) the payment of commissions to salespersons based on sales or rentals prior to reimbursement for such transactions, (c) the high level of outstanding accounts receivable because of deferred payment practices of third party health payers, and (d) the delayed cost recovery inherent in rental transactions.

OUR POTENTIAL COMPETITORS COULD BE LARGER THAN US AND HAVE GREATER FINANCIAL AND OTHER RESOURCES THAN WE DO AND THOSE ADVANTAGES COULD MAKE IT DIFFICULT FOR US TO COMPETE WITH THEM.

Substantial competition may be expected in the future in the area of stroke rehabilitation that may directly compete with our NeuroMove product. Competitors to our products may have substantially greater financial, technical, marketing, and other resources. Competition could result in price reductions, fewer orders, reduced gross margins, and loss of market share. These companies may use standard or novel signal processing techniques to detect muscular movement and generate stimulation to such muscles. Other companies may develop rehabilitation products that perform better and/or are less expensive than our products. Our products are regulated by the U.S. Food and Drug Administration. Competitors may develop products that are substantially equivalent to our FDA approved products, thereby using our products as predicate devices to more quickly obtain FDA approval for their own. If overall demand for our products should decrease it could have a materially adverse affect on our operating results.

FAILURE TO KEEP PACE WITH THE LATEST TECHNOLOGICAL CHANGES COULD RESULT IN DECREASED REVENUES.

The market for our products is characterized by rapid change and technological improvements. Failure to respond in a timely and cost-effective way to these technological developments could result in serious harm to our business and operating results. We have derived, and we expect to continue to derive, a substantial portion of our revenues from creating products in the medical device industry. As a result, our success will depend, in part, on our ability to develop and market product offerings that respond in a timely manner to the technological advances of our competitors, evolving industry standards and changing client preferences.

WE ARE DEPENDENT ON REIMBURSEMENT FROM INSURANCE COMPANIES AND GOVERNMENT (MEDICARE AND MEDICAID) AGENCIES; CHANGES IN INSURANCE REIMBURSEMENT POLICIES COULD RESULT IN DECREASED OR DELAYED REVENUES

A large percentage of our revenues comes from insurance company and government agency reimbursement. Upon delivery of our products to our customers, we directly bill the customers' private insurance company or government payer for reimbursement. If the billed payers do not pay their bills on a timely basis or if they change their policies to exclude coverage for our products, we would experience delayed revenue recognition or a decline in our revenue as well as cash flow issues.

A MANUFACTURER'S INABILITY TO PRODUCE OUR GOODS ON TIME AND TO OUR SPECIFICATIONS COULD RESULT IN LOST REVENUE.

Third-party manufacturers assemble and manufacture to our specifications most of our products. The inability of a manufacturer to ship orders of our products in a timely manner or to meet our quality standards could cause us to miss the delivery date requirements of our customers for those items, which could result in cancellation of orders, refusal to accept deliveries or a reduction in purchase prices, any of which could have a material adverse affect on our revenues. Because of the timing and seriousness of our business, and the medical device industry in particular, the dates on which customers need and require shipments of products from us are critical. Further, because quality is a leading factor when customers, doctors, health insurance providers and distributors accept or reject goods, any decline in quality by our third-party manufacturers could be detrimental not only to a particular order, but also to our future relationship with that particular customer.

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IF WE NEED TO REPLACE MANUFACTURERS, OUR EXPENSES COULD INCREASE RESULTING IN SMALLER PROFIT MARGINS.

We compete with other companies for the production capacity of our manufacturers and import quota capacity. Some of these competitors have greater financial and other resources than we have, and thus may have an advantage in the competition for production and import quota capacity. If we experience a significant increase in demand, or if we need to replace an existing manufacturer, we may have to expand our third-party manufacturing capacity. We cannot assure that this additional capacity will be available when required on terms that are acceptable to us or similar to existing terms, which we have with our manufacturers, either from a production standpoint or a financial standpoint. We enter into a number of purchase order commitments specifying a time for delivery, method of payment, design and quality specifications and other standard industry provisions, but do not have long-term contracts with any manufacturer. None of the manufacturers we use produces our products exclusively.

Should we be forced to replace one or more of our manufacturers, we may experience increased costs or an adverse operational impact due to delays in distribution and delivery of our products to our customers, which could cause us to lose customers or lose revenue because of late shipments.

OUR BUSINESS IS EXPOSED TO DOMESTIC INTEREST RATES AND FOREIGN CURRENCY FLUCTUATIONS; NEGATIVE CHANGES IN EXCHANGE RATES COULD RESULT IN GREATER COSTS.

Most of Zynex's revenue, expenses, and capital spending have been transacted in US dollars. Zynex's exposure to market risk for changes in interest rates relate primarily to Zynex's cash and cash equivalent balances, marketable securities, investment in sales-type leases, and loan agreements. The majority of Zynex's investments, if any, may be in short-term instruments and therefore subject to fluctuations in US interest rates. Due to the nature of such short-term investments, we cannot assure that this will not have a material adverse impact on our financial condition and results of operations.

IF WE ARE UNABLE TO RETAIN THE SERVICES OF MR. SANDGAARD OR IF WE ARE UNABLE TO SUCCESSFULLY RECRUIT QUALIFIED MANAGERIAL AND SALES PERSONNEL HAVING EXPERIENCE IN OUR BUSINESS, WE MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS.

Our success depends to a significant extent upon the continued service of Mr. Thomas Sandgaard, our Chief Executive Officer and currently sole director. Loss of the services of Mr. Sandgaard could have a material adverse effect on our growth, revenues, and prospective business. We do not maintain key-man insurance on the life of Mr. Sandgaard. In addition, in order to successfully implement and manage our business plan, we will be dependent upon, among other things, successfully recruiting qualified managerial and sales personnel having experience in business. Competition for qualified individuals is intense. There can be no assurance that we will be able to find, attract and retain qualified new employees and retain existing employees.

HOSPITALS AND CLINICIANS MAY NOT BUY, PRESCRIBE OR USE OUR PRODUCTS IN SUFFICIENT NUMBERS, WHICH COULD RESULT IN DECREASED REVENUES.

Hospitals and clinicians may not accept the NeuroMove NM900, IF8000, IF8100, TruWave or E-Wave products as effective, reliable, and cost-effective. Factors that could prevent such institutional customer acceptance include:

-	If customers conclude that the costs of these products exceed the cost savings associated with the use of these products;

-	If customers are financially unable to purchase these products;

-	If adverse patient events occur with the use of these products, generating adverse publicity;

-	If we lack adequate resources to provide sufficient education and training to Zynex's customers; and

-	If frequent product malfunctions occur, leading clinicians to believe that the products are unreliable.

If any of these or other factors results in the non-use or non-purchase of our products, we will have reduced revenues and may not be able to fully fund operations.

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AS A RESULT OF BEING IN THE MEDICAL DEVICE INDUSTRY, WE NEED TO MAINTAIN SUBSTANTIAL INSURANCE COVERAGE, WHICH COULD BECOME VERY EXPENSIVE OR HAVE LIMITED AVAILABILITY.

Our marketing and sale of products and services related to the medical device field creates an inherent risk of claims for liability. As a result, we carry product liability insurance with an aggregate limit of $5,000,000 and $2,000,000 per occurrence and will continue to maintain insurance in amounts we consider adequate to protect us from claims. We cannot, however, be assured to have resources sufficient to satisfy liability claims in excess of policy limits if required to do so. Also, there is no assurance that our insurance provider will not drop our insurance or that our insurance rates will not substantially rise in the future, resulting in increased costs to us or forcing us to either pay higher premiums or reduce our coverage amounts, which would result in increased liability to claims.

OUR FUTURE DEPENDS UPON OBTAINING REGULATORY APPROVAL OF ANY NEW PRODUCTS AND/OR MANUFACTURING OPERATIONS WE DEVELOP; FAILURE TO OBTAIN REGULATORY APPROVAL COULD RESULT IN INCREASED COSTS AND LOST REVENUE.

Before marketing any new products, we will need to complete one or more clinical investigations of each product. There can be no assurance that the results of such clinical investigations will be favorable to us. We may not know the results of any study, favorable or unfavorable to us, until after the study has been completed. Such data must be submitted to the FDA as part of any regulatory filing seeking approval to market the product. Even if the results are favorable, the FDA may dispute the claims of safety, efficacy, or clinical utility and not allow the product to be marketed. The sale price of the product may not be enough to recoup the amount of our investment in conducting the investigative studies.

WE MAY INCUR SUBSTANTIAL EXPENSES AND MAY INCUR LOSSES.

The area of medical device research is subject to rapid and significant technological changes. Developments and advances in the medical industry by either competitors or neutral parties can affect our business in either a positive or negative manner. Developments and changes in technology that are favorable to us may significantly advance the potential of our research while developments and advances in research methods outside of the methods we are using may severely hinder, or halt completely our development.

We are a small company in terms of employees, technical and research resources and capital. We expect to have research and development and significant sales and marketing, and general and administrative expenses for several years. These amounts may be expended before any commensurate incremental revenue from these efforts may be obtained. These factors could hinder our ability to meet changes in the medical industry as rapidly or effectively as competitors with more resources.

WE MAY BE UNABLE TO PROTECT OUR TRADEMARKS, TRADE SECRETS AND OTHER INTELLECTUAL PROPERTY RIGHTS THAT ARE IMPORTANT TO OUR BUSINESS.

We regard our trademarks, particularly our NeuroMove trademark which is registered in the United States and the European Union, our trade secrets and other intellectual property as an integral component of our success. We rely on trademark law, patents, and trade secret protection and confidentiality agreements with employees, customers, partners and others to protect our intellectual property. Effective trademark and trade secret protection may not be available in every country in which our products are available. We cannot be certain that we have taken adequate steps to protect our intellectual property, especially in countries where the laws may not protect our rights as fully as in the United States. In addition, if our third-party confidentiality agreements are breached there may not be an adequate remedy available to us. If our trade secrets become publicly known, we may lose our competitive position.

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SUBSTANTIAL COSTS COULD BE INCURRED DEFENDING AGAINST CLAIMS OF INFRINGEMENT.

Other companies, including competitors, may obtain patents or other proprietary rights that would limit, interfere with, or otherwise circumscribe Zynex's ability to make, use, or sell products. Should there be a successful claim of infringement against us and if we could not license the alleged infringed technology, business and operating results could be adversely affected. There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry. The validity and breadth of claims covered in medical technology patents involve complex legal and factual questions for which important legal principles remain unresolved. Any litigation claims against us, independent of their validity, may result in substantial costs and the diversion of resources with no assurance of success. Intellectual property claims could cause us to:

-	Cease selling, incorporating, or using products that incorporate the challenged intellectual property,

-	Obtain a license from the holder of the infringed intellectual property right on reasonable terms, if at all, and

-	Re-design Zynex's products incorporating the infringed intellectual property.

COMMERCIALIZATION OF OUR PRODUCTS COULD FAIL IF IMPLEMENTATION OF OUR SALES AND MARKETING STRATEGY IS UNSUCCESSFUL.

A significant sales and marketing effort may be necessary to achieve the level of market awareness and sales needed to achieve our financial projections. To increase sales and rental of our products we may utilize some or all of the following strategies in the future:

-	Contract with, hire and train sales and clinical specialists;

-	Build a larger direct sales force;

-	Manage geographically dispersed operations;

-	Explore potential reseller and original equipment manufacturer (OEM) relationships and assure that reseller and OEMs provide appropriate educational and technical support;

-	Promote frequent product use to increase sales of consumables; and

-	Enter into relationships with well-established distributors in foreign markets.

These strategies could be costly and may impact our operating results. If these strategies do not generate increased revenue, the result will be increased operating expenses greater than the revenue, resulting in a reduction of net income or even a net loss.

OUR BUSINESS COULD BE ADVERSELY AFFECTED BY RELIANCE ON SOLE SUPPLIERS.

Notwithstanding our current multiple supplier approach, in the future certain essential product components may be supplied by separate sole, or a limited group of, suppliers. Most of our products and components are purchased through purchase orders rather than through long term supply agreements and large volumes of inventory may not be maintained. There may be shortages and delays in obtaining certain product components. Disruption of the supply or inventory of components could result in a significant increase in the costs of these components or could result in an inability to meet the demand for our products. In addition, if a change in the manufacturer of a key component is required, qualification of a new supplier may result in delays and additional expenses in meeting customer demand for products. These factors could affect our revenues and ability to retain our experienced sales force.

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WE MAY NOT BE ABLE TO OBTAIN CLEARANCE OF A 510 (K) NOTIFICATION OR APPROVAL OF A PRE-MARKET APPROVAL APPLICATION WITH RESPECT TO ANY PRODUCTS ON A TIMELY BASIS, IF AT ALL.

If timely FDA clearance or approval of new products is not obtained, our business could be materially adversely affected. Clearance of a 510 (k) notification may also be required before marketing certain previously marketed products, which have been modified after they have been cleared. Company personnel currently believe that certain planned enhancements to our current products will not necessitate the filing of a new 510(k) notification. Should the FDA so require, the filing of a new 510(k) notification for the modification of the product may be required prior to marketing any modified devices.

THE FDA ALSO REQUIRES ADHERENCE TO GOOD MANUFACTURING PRACTICES (GMP) REGULATIONS, WHICH INCLUDE PRODUCTION DESIGN CONTROLS, TESTING, QUALITY CONTROL, STORAGE AND DOCUMENTATION PROCEDURES.

To determine whether adequate compliance has been achieved, the FDA may inspect our facilities at any time. Such compliance can be difficult and costly to achieve. Our compliance status may change due to future changes in, or interpretations of, FDA regulations or other regulatory agencies. Such changes may result in the FDA withdrawing marketing clearance or requiring product recall. In addition, any changes or modifications to a device or its intended use may require us to reassess compliance with Good Manufacturing Practices guidelines, potentially interrupting the marketing and sale of products. Failure to comply with regulations could result in enforceable actions, including product seizures, product recalls, withdrawal of clearances or approvals, and civil and criminal penalties.

OUR BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION, THE FAILURE TO COMPLY WITH WHICH COULD RESULT IN SIGNIFICANT PENALTIES.

Numerous state and federal government agencies extensively regulate the manufacturing, packaging, labeling, advertising, promotion, distribution and sale of our products. Our failure or inability to comply with applicable laws and governmental regulations may result in civil and criminal penalties, which we are unable to pay or may cause us to curtail or cease operations. We must also expend resources from time to time to comply with newly adopted regulations, as well as changes in existing regulations. If we fail to comply with these regulations, we could be subject to disciplinary actions or administrative enforcement actions.

CHANGES IN COVERAGE AND REIMBURSEMENT POLICIES FOR OUR PRODUCTS BY MEDICARE OR REDUCTIONS IN REIMBURSEMENT RATES FOR OUR PRODUCTS COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS.

In the United States, our products are prescribed by physicians for their patients. Based on the prescription, which Zynex considers an order, we submit a claim for payment directly to third party payers such as private commercial insurance carriers, Medicare or Medicaid and others as appropriate and the payer reimburses Zynex directly. Federal and state statutes, rules or other regulatory measures that restrict coverage of our products or reimbursement rates could have an adverse effect on our ability to sell or rent our products or cause physical therapists and physicians to dispense and prescribe alternative, lower-cost products.

With the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, a number of changes have been mandated to the Medicare payment methodology and conditions for coverage of our durable medical equipment, including our TENS and NMES devices. These changes include a freeze in payments for our durable medical equipment from 2004 through 2008, competitive bidding requirements, and new clinical conditions for payment and quality standards. Although these changes affect our products generally, specific products may be more or less affected by the Medicare Modernization Act's provisions.

- 23 -

Certain off-the-shelf durable medical equipment (DME), including TENS devices, may become subject to competitive bidding, in order to reduce costs and reimbursements to DME suppliers. Under competitive bidding, if implemented, Medicare will change its approach to reimbursing certain items and services covered by Medicare from the current fee schedule amount to an amount established through a bidding process between the government and suppliers. Competitive bidding may reduce the number of suppliers providing certain items and services to Medicare beneficiaries and the amounts paid for such items and services. Also, Medicare payments in regions not subject to competitive bidding may be reduced using payment information from regions subject to competitive bidding. Any payment reductions or the inclusion of certain of our products in competitive bidding, in addition to the other changes to Medicare reimbursement and standards contained in the Medicare Modernization Act, could have a material adverse effect on our results of operations.

In addition, in 2003, the Centers for Medicare and Medicaid Services, or CMS made effective an interim final regulation implementing "inherent reasonableness" authority, which allows adjustments to payment amounts for certain items and services covered by Medicare when the existing payment amount is determined to be "grossly excessive" or "grossly deficient " The regulation lists factors that may be used to determine whether an existing reimbursement rate is grossly excessive or grossly deficient and to determine what is a realistic and equitable payment amount. The regulation remains in effect after the enactment of the Medicare Modernization Act, although the new legislation precludes the use of inherent reasonableness authority for payment amounts established under competitive bidding. Medicare and Medicaid accounted for approximately 5% of our total sales and rental income for 2006. When using the inherent reasonableness authority, CMS may reduce reimbursement levels for certain of our products, which could have a material adverse effect on our results of operations.

OUR PRODUCTS ARE SUBJECT TO RECALL EVEN AFTER RECEIVING FDA OR FOREIGN CLEARANCE OR APPROVAL, WHICH WOULD HARM OUR REPUTATION AND BUSINESS.

We are subject to medical device reporting regulations that require us to report to the FDA or respective governmental authorities in other countries if our products cause or contribute to a death or serious injury or malfunction in a way that would be reasonably likely to contribute to death or serious injury if the malfunction were to recur. The FDA and similar governmental authorities in other countries have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacturing. A government mandated or voluntary recall by us could occur as a result of component failures, manufacturing errors or design defects, including defects in labeling. Any recall would divert managerial and financial resources and could harm our reputation with customers. We cannot assure you that we will not have product recalls in the future or that such recalls would not have a material adverse effect on our business. We have not undertaken any voluntary or involuntary recalls to date.

OUR PRINCIPAL OFFICER AND DIRECTOR OWNS A CONTROLLING INTEREST IN OUR VOTING STOCK AND INVESTORS WILL NOT HAVE ANY VOICE IN OUR MANAGEMENT.

Our Chief Executive officer and current sole director, Thomas Sandgaard, beneficially owns approximately 63.0% of our outstanding common stock as of April 15, 2008. As a result, Mr. Sandgaard has the ability to control substantially all matters submitted to our stockholders for approval, including:

-	Election of our board of directors;

-	Removal of any of our directors;

-	Amendment of our certificate of incorporation or bylaws; and

-	Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.

As a result of his ownership and position, Mr. Sandgaard is able to influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by Mr. Sandgaard, or the prospect of these sales, could adversely affect the market price of our common stock. Mr. Sandgaard's stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

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RISKS RELATING TO OUR COMMON STOCK

OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

Since our common stock is not listed or quoted on any stock exchange and no other exemptions currently apply, trading in our common stock on the Over-The-Counter Bulletin Board is subject to the "penny stock" rules of the SEC. These rules require, among other things, that any broker engaging in a transaction in our securities provide its customers with a risk disclosure document, disclosure of market quotations, if any, disclosure of the compensation of the broker and its salespersons in the transaction, and monthly account statements showing the market values of our securities held in the customer's accounts. The brokers must provide bid and offer quotations and compensation information before making any purchase or sale of a penny stock and also provide this information in the customer's confirmation. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

ITEM 7. FINANCIAL STATEMENTS.

The consolidated financial statements, the notes thereto, and the report thereon of GHP Horwath P.C. dated April 15, 2008, are filed as part of this report starting on page F-1 below.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 8A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2007. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses in internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective as of December 31, 2007.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO Framework").

Based on this evaluation, management has concluded that our internal control over financial reporting was not effective as of December 31, 2007. Our principal Chief Executive Officer and Chief Financial Officer concluded that the Company has a material weakness in its ability to produce financial statements free from material misstatements. Management reported a material weakness resulting from the combination of the following significant deficiencies:

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·	Lack of documentation and review of financial information by our accounting personnel with direct oversight responsibility, and lack of analysis and reconciliation of certain accounts on a periodic basis.

·	Lack of timely reconciliation of inventory quantities and inventory location and lack of timely calculation and review of unit costs applied to the valuation of our inventory.

·	Lack of timely write off of uncollectible and duplicate billings that result in an overstatement of our accounts receivable.

As a result of the above material weakness, our management concluded that, as of December 31, 2007, our internal controls over financial reporting are not effective.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management’s report on internal control in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the fourth quarter of 2007 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting, except as disclosed above.

In order to remediate the material weakness described above, our management has begun to implement the following changes to our internal control over financial reporting during the first quarter of 2008:

-	we have hired additional accounting personnel to assist us in the timely identification, research and resolution of accounting issues and with our documentation processes;

-	the hiring of additional high-level accounting personnel with experience in US GAAP;

-	the engagement of a third-party financial consulting firm to assist management in evaluating complex accounting issues on an as-needed basis, and the implementation of systems to improve control and review procedures over all financial statement and account balances.

We expect that if the steps that we implement are effective throughout a period of time, the material weakness described above will be remediated. We do not believe that the costs of remediation for the above material weakness will have a material effect on our financial position, cash flow, or results of operations.

ITEM 8B. OTHER INFORMATION.

None.

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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table provides information concerning each of the Company's directors and executive officers at March 1, 2008:

		Director
Name	Age	Since	Position or Office

Thomas Sandgaard	49	1996	President, Chief Executive Officer, Director and Chairman

Fritz G. Allison	48	N/A	Chief Financial Officer

During the five years preceding the date of this report, the director and executive officers named above have not been convicted in any criminal proceeding nor are they subject to any pending criminal proceeding.

The Company does not have an active audit committee or an audit committee financial expert.

We do not have procedures by which a security holder may recommend director nominees to our Board of Directors.

Code of Ethics

The Company has not adopted a written code of ethics for its senior executive and financial officers. The Board endeavors to hold these officers to high ethical standards in their conduct of our business and may decide to implement a code of ethics when the Company has additional resources.

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ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows, as to the Chief Executive Officer and the Chief Financial Officer, the only highly compensated executive officers whose salary plus bonus exceeded $100,000, information concerning compensation paid for services to the Company in all capacities during the years ended December 31, 2007 and December 31, 2006:

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($) (3)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)

Thomas Sandgaard	2007	100,000	50,000	0	0	0	0	51,414(1)	245,414
Chief Executive Officer	2006	144,000	16,000	0	0	0	0	43,880(1)	203,880


Fritz G. Allison	2007	98,354	0	0	3,217	0	0	1,472(2)	103,033
Chief Financial Officer	2006	N/a	N/a	N/a	N/a	N/a	N/a	N/a	N/a


Peter J. Leveton	2007	21,327	0	0	13,475	0	0	0	21,327
Former Chief Financial Officer	2006	83,063	102,500	0	0	0	0	0	185,563

______________

(1)

We pay for 100% of Mr. Sandgaard's health and dental insurance. In addition, two company vehicles and two home telephone lines are provided to Mr. Sandgaard at our expense.

(2)

We pay for 100% of Mr. Allison's health and dental insurance.

(3)

The Option Awards represents the dollar amount recognized for financial statement reporting purposes with respect to 2006 and 2007 for the fair value of stock options granted to each of the named executive officers, in accordance with SFAS 123R.

Mr. Leveton’s employment with us was terminated on February 16, 2007.

Employment Agreements

Thomas Sandgaard

On February 1, 2004, Zynex Medical, Inc. entered into a three-year employment agreement with the Company's President, Chief Executive Officer and former sole shareholder. The agreement expired January 31, 2007 and the agreement was automatically extended for an additional two-year period. The initial annual base salary under the agreement was $174,000 and may be increased annually at the board of director's discretion. The agreement also provides for a 50% annual bonus if annual net revenue exceeds $2.25 million, medical and life insurance, and a vehicle. The agreement contains a non-compete provision for the term of the agreement and 24 months following termination of the agreement.

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On January 1, 2005, the agreement was amended to provide an annual base salary of $144,000 and quarterly bonuses pursuant to the following schedule; provided that if the Company does not have net income for that quarter then only half of the bonus amount listed below shall be paid:

Quarterly Revenue	Quarterly Bonus

$0 to $600,000	$ 0
$600,001 - $800,000	$ 10,000
$800,001 - $1,000,000	$ 25,000
$1,000,001 and greater	$ 50,000

Fritz G. Allison

The Company has established the following compensation arrangements with Mr. Allison, effective February 19, 2007: A base salary of $8,000 per month, before taxes, for the first three months and $10,000 per month, before taxes, thereafter; grant under the Company’s 2005 stock option plan of an option to purchase up to 100,000 shares of the Company’s common stock, with a ten year term starting February 19, 2007, an exercise price equal to $0.45 per share, the fair market value of the Company’s common stock on such date, and a vesting schedule of 25,000 shares vesting on the first anniversary of the date of grant and 25,000 shares vesting on each subsequent anniversary of the date of grant; a bonus payable in 2008 in the amount of $20,000 cash and an option grant for an additional 50,000 shares in the event (a) the Company’s net revenue meets a revenue target for the 2007 year,(b) the Company has a positive net income for the 2007 year, and (c) the Company does not have any restatements of its financial statements during 2007 and for any periods during 2007 or the year 2007 on or prior to the completion of the audit of the 2007 financial statements. Mr. Allison also received full health and dental insurance coverage through the Company.

Peter J. Leveton

On May 31, 2005, Zynex Medical Holdings, Inc. entered into a compensation agreement with Peter J. Leveton, the Company's Chief Financial Officer to be effective as of April 18, 2005 (the "Effective Date"). Mr. Leveton’s employment with the Company was terminated on February 16, 2007. The agreement provided for a monthly salary of $2,250 per month. It also provided for an increase in the monthly salary of an additional $4,000 per month (the "First Raise") in the event (a) the Company obtained a line of credit of at least $250,000, or (b) the Company received third party equity or debt investment of at least $1,000,000, or (c) the Company had annual audited "positive net cash provided by operating activities" of at least $500,000, or (d) the Company underwent a liquidity event with a valuation of at least $10,000,000 (items (b) through (d) shall be referred to as "Raise Events"). Mr. Leveton met the standard for the First Raise and it was in effect. The agreement also provided for an additional increase in the monthly salary of $5,000 per month (the "Second Raise") in the event the Company undergoes a Raise Event. Mr. Leveton met the standard for the Second Raise in 2006, and it was in effect. The First Raise and Second Raise, once earned and vested, were paid in arrears with respect to each month of employment beginning as of the Effective Date through the month of vesting, and then were paid currently through the date of termination of Mr. Leveton's employment. Mr. Leveton and the Company entered into a Separation Agreement whereby Mr. Leveton agreed to extend payment of the previously earned portion of the second raise over the ten-month period January-October 2007 with interest at 8.25%.

Under the Agreement Mr. Leveton received stock options to purchase up to 350,000 shares of the Company's Common Stock. Such options have a ten-year term, except options for 100,000 shares which expire on April 17, 2010, and an exercise price equal to the fair market value of the Common Stock on the date of grant, April 18, 2005. Such options were subject to vesting as follows: 100,000 shares vested on the date of grant; 25,000 shares vested on June 30, 2005; and 25,000 shares vested as of the last day of each full calendar quarter beginning as of July 1, 2005 through March 31, 2007, provided that Mr. Leveton was employed as of such dates; and 50,000 shares vested upon a Raise Event which was completed in January, 2007. All unvested quarterly options would have immediately vested and become exercisable upon a liquidity event with a valuation of at least $10,000,000; provided the liquidity event occured during Mr. Leveton's employment or if Mr. Leveton played an active, integral and key role in accomplishing such event, within 90 days of involuntary termination. All unvested options expired upon the termination of Mr. Leveton’s employment. As of February 16, 2007, Mr. Leveton’s termination date, 325,000 of the options had vested. In February 2008, Mr. Leveton exercised all 325,000 option for 282,440 shares of common stock in a cashless exercise.

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OUTSTANDING EQUITY AWARDS AT 2007 YEAR-END

The following table sets forth information concerning unexercised options, stock that is not vested and equity incentive plan awards for each executive officer named in the Summary Compensation Table as of December 31, 2007:

Option Awards:

	Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise	Option Expiration
Name	Exercisable	Unexercisable	(#)	Price	Date

Thomas Sandgaard	--	--	--	--	--

Fritz G. Allison (2)	--	100,000	--	$0.45	February 17, 2017

Fritz G. Allison (2)	--	2,000	--	$0.45	June 30, 2017

Fritz G. Allison (2)	--	2,000	--	$0.45	September 30, 2017

Peter J. Leveton (2)	325,000	--	--	$0.22	April 18, 2015

____________

(1)

For information on the vesting of the options for 100,000 shares of common stock held by Mr. Allison, see "Employment Agreements – Fritz G. Allison" above in this Item. Mr. Allison also participates in the 2005 Stock Option Plan discussed below. The options under the Plan vest over a four year period.

(2)

For information on the vesting of the options held by Mr. Leveton, see "Employment Agreements - Peter J. Leveton" above in this Item.

Director Compensation

We have only one director, Mr. Sandgaard. He receives no additional compensation for serving as a director.

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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table contains certain information regarding beneficial ownership of the Company's common stock as of April 15, 2008 by (i) each person who is known by the Company to own beneficially more than 5% of the Company’s common stock, (ii) each of the Company’s directors, (iii) the Company’s executive officers named in the Summary Compensation Table above and (iv) all directors and executive officers as a group. The information provided regarding beneficial ownership of the principal stockholders is based on publicly available filings and, in the absence of such filings, on the shares held of record by such persons.

		Number of Shares	Percent
		Beneficially	Of
Name	Class of Stock	Owned(2)	Class

Executive Officers:

Thomas Sandgaard 8022 Southpark Cir. Suite 100 Littleton, CO 80120	Common	18,245,500	63.0%

Fritz Allison 8022 Southpark Cir. Suite 100 Littleton, CO 80120	Common	25,000(3)	--

Other 5% Beneficial Owners

Regency Group
4600 S Ulster St., Suite 975 Denver, Colorado (1)	Common	1,900,000	6.2%

All Directors and
Named Executive Officers
As a Group	Common	18,270,500	63.1%

_____________

(1)

On September 27, 2004, the Company issued options valued at $11,707 to acquire 1,900,000 shares of common stock to this financial consulting firm in exchange for consulting services provided in connection with the Company's reverse acquisition and past investor relations. The options, which expire September 26, 2009, permit the purchase of common stock in certain quantities and at various prices ranging from $.40 per share to $4.00 per share, as set forth in Note 5 of the Notes to Consolidated Financial Statements.

(2)

A person has beneficial ownership of any securities to which the person, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power or as to which such person has the right to acquire such voting and/or investment power within 60 days from April 15, 2007. The percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of unissued shares as to which the person has the right to acquire voting and/or investment power within 60 days.

(3)

These shares are subject to stock options held by Mr. Allison.

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EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2007 about shares of Common Stock available for issuance under the Company's equity incentive plans.

	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted Average Exercise Price	Number of Securities Remaining available for future issuance under Equity Compensation Plans (excluding securities reflected in column (a)

Plan Category	(a)	(b)	(c)

Plans Approved by Shareholders (1), (2)	496,000	$0.33	2,504,000

Plans Not Approved by Shareholders	325,000	$0.22	None

Total	821,000	$0.27	2,504,000

____________

(1)

All of the listed securities are available for issuance under the Zynex Medical Holdings, Inc. 2005 Stock Option Plan, approved by the Board of Directors on January 3, 2005.

(2)

(2) Effective December 30, 2005, the primary stockholder, Thomas Sandgaard, approved the 2005 Stock Option Plan ("2005 Plan") that authorized the granting of options to purchase 3,000,000 shares of the Company's common stock, subject to adjustment for stock splits, recapitalizations and similar events. Options granted under the 2005 Plan may be either non-qualified or incentive and may be granted to employees, directors, independent contractors and consultants. at the discretion of the Board of Directors (the "Board"). The 2005 Plan is available for option grants until December 31, 2014. The 2005 Plan is administered by Zynex's President and Chief Executive Officer (the "Administrator"). The option price per share under the 2005 Plan must be the fair market value of the Company’s common stock on the date of grant unless such option is granted in substitution of options granted by a new employee's previous employer or the optionee pays or foregoes compensation in the amount of any discount. The options have a maximum term of ten years and will vest as determined by the Administrator. Options cease to be exercisable one month after termination of an optionee's continuous service due to reasons other than cause, and twelve months after death, disability or retirement. Options may be suspended or terminated if the Administrator or any person designated by the Administrator reasonably believes that the optionee has committed an act of misconduct against Zynex. Options are not transferable unless specified by the Administrator.

For information on the options for 100,000 shares of common stock held by Mr. Allison, see "Employment Agreements – Fritz G. Allison" in Item 10 above

For information on Mr. Leveton's compensation arrangement, which includes options not approved by stockholders, see Item 10 above.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The Company has entered into loans to the Company by Thomas Sandgaard. Interest payable on these loans for 2007 was a total of $7,617, and the Company has paid this interest to Mr. Sandgaard. For a full description and the terms of these notes please see Note-4 “Notes Payable and Leases” in the notes to the consolidated financial statements below in this report.

The loans with Silicon Valley Bank in the amount of $400,000 and $240,000, made in 2005 and 2006, as described above, were guaranteed by Zynex Chairman, President and Chief Executive Officer, Thomas Sandgaard, and were collateralized by a first perfected security interest in accounts, inventory, chattel paper, equipment, fixtures, general intangibles, including intellectual property and other assets. Mr. Sandgaard did not receive any compensation for this guarantee.

Our sole director, Mr. Sandgaard, is not an independent director as defined in rules of the NASDAQ Stock Market.

Mr. Sandgaard, because of his stock ownership and position as the sole director, may be considered a “parent” of the Company.

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We employ Mr. Sandgaard’s wife in a full time position as Billing Manager. In addition, we employ Mr. Sandgaard’s two children in part time positions. The following table sets forth their compensation:

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($) (1)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Birgitte Sandgaard	2007	66,000	0	0	580	0	0	0	66,580
Billing Manager	2006	50,400	0	0	200	0	0	0	50,600

Joachim Sandgaard	2007	33,791	0	0	580	0	0	0	34,371
Insurance Claims	2006	17,528	0	0	200	0	0	0	17,728

Martin Sandgaard	2007	10,082	0	0	65	0	0	0	10,147
Accounts Receivable Specialist	2006	0	0	0	0	0	0	0	0

______________

(1)

ITEM 13. EXHIBITS


Exhibit Number	Description

3.1	Articles of Incorporation of Ibonzi.com, Inc, incorporated by
	reference to Exhibit 3.1 of the Company's Current Report on
	Form 8-K, filed January 31, 2002.

3.2	Articles of Merger of Ibonzi.com, Inc. with and into
	Ibonzi.com, to effect a migratory merger, incorporated by
	reference to Exhibit 2.1 of the Current Report on Form 8-K,
	filed January 31, 2002.

3.3	Amendment to Articles of Incorporation of Ibonzi.com, Inc.,
	changing the company's name to China Global Development, Inc.,
	by reference to Exhibit 3.2 of the Company's Current
	Report on Form 8-K, filed January 31, 2002.

3.4	Certificate of Correction to Amendment to Articles of
	Incorporation, incorporated by reference to Exhibit 3.3 of the
	Company's Current Report on Form 8-K, filed January 31, 2002.

3.5	Amendment to the Articles of Incorporation, changing the
	Company's name to Arizona Ventures, Inc. and effecting a 1:10
	reverse split of common stock, incorporated by reference to
	Exhibit 3.5 of the Company's registration statement filed on
	Form SB-2, filed July 6, 2004.

3.6	Amendment to the Articles of Incorporation, changing the
	Company's name to Fox River Holdings, Inc., incorporated by
	reference to Exhibit 3.6 of the Company's registration
	statement filed on Form SB-2, filed July 6, 2004.

3.7	Amendment to the Articles of Incorporation, effecting a 1:40
	reverse split of common stock, incorporated by reference to
	Exhibit 3.7 of the Company's registration statement filed on
	Form SB-2, filed July 6, 2004.

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Exhibit Number	Description

3.8	Amendment to the Articles of Incorporation, changing the
	Company's name to Zynex Medical Holdings, Inc., incorporated by
	reference to Exhibit 3.8 of the Company's registration
	statement filed on Form SB-2, filed July 6, 2004.

3.9	Bylaws of the Company, incorporated by reference to Exhibit 3.4
	of the Company's Current Report on Form 8-K, filed January 31,
	2002.

4.1	Subscription Agreement, dated as of June 4, 2004, by and among
	the Company, Alpha Capital Aktiengesellschaft, Stonestreet
	Limited Partnership, Whalehaven Funds Limited, Greenwich Growth
	Fund Limited and Ellis International Limited, Inc.,
	incorporated by reference to Exhibit 4.1 of the Company's
	registration statement filed on Form SB-2, filed July 6, 2004.

4.2	Form of A Common Stock Purchase Warrant, incorporated by
	reference to Exhibit 4.2 of the Company's registration
	statement filed on Form SB-2, filed July 6, 2004.

4.3	Form of B Common Stock Purchase Warrant, incorporated by
	reference to Exhibit 4.3 of the Company's registration
	statement filed on Form SB-2, filed July 6, 2004.

4.4	Form of C Common Stock Purchase Warrant, incorporated by
	reference to Exhibit 4.4 of the Company's registration
	statement filed on Form SB-2, filed July 6, 2004.

4.5	Escrow Agreement, dated as of June 4, 2004, by and among Zynex
	Medical Holdings, Inc., Alpha Capital Aktiengesellschaft,
	Stonestreet Limited Partnership, Whalehaven Funds Limited,
	Greenwich Growth Fund Limited, Ellis International Limited Inc.
	and Grushko & Mittman, P.C., incorporated by reference to
	Exhibit 4.5 of the Company's registration statement filed on
	Form SB-2, filed July 6, 2004.

4.6	Form of Securities Purchase Agreement, incorporated by reference to
	Exhibit 10.1 of the Company’s Current Report on Form 8-K filed
	January 30, 2007.

4.7	Form of Registration Rights Agreement, incorporated by reference to
	Exhibit 10.2 of the Company’s Current Report on Form 8-K filed
	January 30, 2007.

4.8	Form of Warrant, incorporated by reference to Exhibit 10.4 of the
	Company’s Quarterly Report on Form 10-QSB, filed August 18, 2006.

10.1	Acquisition Agreement, dated as of January 27, 2004, by and
	among Zynex Medical Holdings, Inc., Zynex Medical, Inc. and
	Thomas Sandgaard, incorporated by reference to Exhibit 10 of
	Zynex Medical Holdings, Inc.'s Current Report on Form 8-K,
	filed February 20, 2004.

- 34 -

Exhibit Number	Description
10.2	Thomas Sandgaard Employment Agreement, incorporated by
	reference to Exhibit 10.2 of the Company's registration
	statement filed on Form SB-2, filed July 6, 2004.

10.3	Amendment to Thomas Sandgaard Employment Agreement dated
	February 1, 2004, incorporated by reference to Exhibit 10.3 of
	Zynex Medical Holdings, Inc.'s Annual report on Form 10-K
	filed April 15, 2005.

10.4	Multi-Tenant Lease, dated January 20, 2004, by and between
	First Industrial, L.P., a Delaware limited partnership and
	Zynex Medical, Inc. a Colorado corporation , incorporated by
	reference to Exhibit 10.4 of Zynex Medical Holdings, Inc.'s
	Annual report on Form 10-K filed April 15, 2005.

. 10.5	2005 Stock Option Plan , incorporated by reference to Exhibit
	10.5 of Zynex Medical Holdings, Inc.'s Annual report on Form
	10-K filed April 15, 2005.

10.6	Compensation Agreement dated as of April 18, 2005 between
	Zynex Medical Holdings, Inc. and Peter J. Leveton,
	incorporated by reference to Exhibit 10.1 of Zynex Medical
	Holdings, Inc.'s Quarterly Report on Form 10-Q, filed August
	12, 2005.

10.7	Loan and Security Agreement among Zynex Medical Holdings, Inc.,
	Zynex Medical, Inc. and Silicon Valley Bank, dated
	September 29, 2005, incorporated by reference to Exhibit 10.1
	of Zynex Medical Holdings, Inc.'s Current Report on Form 8-K,
	filed October 7, 2006.

10.8	Warrant to Purchase Stock from Zynex Medical Holdings, Inc. to
	Silicon Valley Bank, incorporated by reference to Exhibit
	10.2 of Zynex Medical Holdings, Inc.'s Current Report on
	Form 8-K, filed October 7, 2006.

10.9	Unconditional Guaranty by Thomas Sandgaard for Silicon Valley
	Bank, dated September 29, 2005, incorporated by reference to
	Exhibit 10.3 of Zynex Medical Holdings, Inc.'s Current Report
	on Form 8-K, filed October 7, 2006.

10.10	Default Waiver and First Amendment to Loan and Security
	Agreement, dated March 6, 2006, incorporated by reference
	to Exhibit 10.1 of Zynex Medical Holdings, Inc.'s Current
	Report on Form 8-K, filed March 20, 2006.

10.11	Unconditional Guaranty by Thomas Sandgaard for Silicon Valley
	Bank, dated March 6, 2006, incorporated by reference to
	Exhibit 10.2 of Zynex Medical Holdings, Inc.'s Current Report
	on Form 8-K, filed March 20, 2006.

- 35 -

Exhibit Number	Description

10.12	Promissory Note dated March 1, 2006 to Thomas Sandgaard,
	Incorporated by reference to Exhibit 10.1 of the Company’s
	Quarterly Report on Form 10-QSB filed August 17, 2006

10.13	Promissory Note dated March 1, 2006 to Thomas Sandgaard,
	incorporated by reference to Exhibit 10.2 of the Company’s
	Quarterly Report on Form 10-QSB filed August 17, 2006.

10.14	Promissory Note dated June 30, 2006 to Thomas Sandgaard,
	incorporated by reference to Exhibit 10.3 of the Company’s
	Quarterly Report on Form 10-QSB filed August 17, 2006.

10.15	Convertible Secured Promissory Note dated October 18, 2006 by
	Zynex Medical Holdings, Inc., incorporated by reference to
	Exhibit 10.1 of the Company’s Current Report on Form 8-K filed
	October 18, 2006.

10.16	Warrant dated October 18, 2006 by Zynex Medical Holdings, Inc.
	to Ascendiant Capital Group, LLC, incorporated by reference to
	Exhibit 10.2 of the Company’s Current Report on Form 8-K filed
	October 18, 2006.

10.17	Security Agreement between Ascendiant Capital Group, LLC and
	Zynex Medical Holdings, Inc., incorporated by reference to
	Exhibit 10.3 of the Company’s Current Report on Form 8-K filed
	October 18, 2006.

10.18	Subordination Agreement dated October 17, 2006 among
	Ascendiant Capital Group, LLC, Silicon Valley Bank and Zynex
	Medical Holdings, Inc., incorporated by reference to Exhibit 10.4
	of the Company’s Current Report on Form 8-K filed October 18, 2006.

10.19	Separation Agreement dated February 16, 2007 between Peter J. Leveton
	and Zynex Medical Holdings, Inc., incorporated by reference to Exhibit 10.19 of the Company’s Annual report on Form 10-KSB filed April 17, 2007.

10.20	Letter Agreement, dated May 3, 2007 with Ascendiant Capital Group, LLC, incorporated by reference to Exhibit 10.1 of the Company’s Quarterly report on Form 10-QSB filed May 18, 2007.

10.21	Promissory Note dated May 16, 2007 by Zynex Medical Holdings, Inc., to Thomas Sandgaard, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed June 29, 2007.

10.22	Promissory Note dated June 15, 2007 by Zynex Medical Holdings, Inc., to Thomas Sandgaard, incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed June 29, 2007.

10.23	Promissory Note dated September 30, 2007 by Zynex Medical Holdings, Inc., to Thomas Sandgaard, incorporated by reference to Exhibit 10.1 of the Company’s Quarterly report on Form 10-QSB filed November 19, 2007

21	List of Subsidiaries, incorporated by reference to Exhibit 21 of Zynex Medical Holdings, Inc.’s Annual Report on Form 10-KSB, filed April 15, 2005.

23*	Consent of Independent Registered Public Accounting Firm.

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 Pursuant to 18 U.S.C. Section 1350, as Adopted
	Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

- 36 -

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a description of the fees billed to the Company by its independent auditor for each of the years ended December 31, 2007 and December 31, 2006.

	GHP Horwath, P.C,

	2007			2006
Audit Fees
Including
Reviews of 10QSB and SB-2		$	80,000		$	90,000

Audit Related Fees		$	-			-

Tax Related Fees			8,000			12,000
All Other Fees For General Consultation			-			-
Total		$	88,000		$	102,000

The tax related services provided by GHP Horwath, P.C. consisted of preparation and filing of the Company's Federal and state tax returns.

The Company's director, in reliance on statements by management and the independent auditors, has determined that the provision of the non-audit services described above was compatible with maintaining the independence of GHP Horwath, P.C.

GHP Horwath served as the Company's independent auditors for the fiscal years ended December 31, 2007 and 2006.

- 37 -

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		ZYNEX MEDICAL HOLDINGS, INC.
Date: April 16, 2008	By:	/s/ Thomas Sandgaard
		Thomas Sandgaard
		President, Chairman and Chief Executive Officer


Date: April 16, 2008	By:	/s/ Fritz G. Allison
		Fritz G. Allison, Chief Financial Officer

In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date	Name and Title	Signature

April 16, 2008	Thomas Sandgaard, Chief	/s/ Thomas Sandgaard
	Executive Officer and Sole
	Director

April 16, 2008	Fritz G. Allison, Chief Financial
	Officer	/s/ Fritz G. Allison

- 38 -

Zynex Medical Holdings, Inc.

Consolidated Financial Statements

December 31, 2007

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Zynex Medical Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Zynex Medical Holdings, Inc. and subsidiary (the “Company”) as of December 31, 2007 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Zynex Medical Holdings, Inc. and subsidiary as of December 31, 2007, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.

/s/ GHP Horwath, P.C.

GHP Horwath, P.C.

Denver, Colorado

April 15, 2008

F - - 1

Zynex Medical Holdings, Inc.

Consolidated Balance Sheet

December 31, 2007

ASSETS
Current Assets:
Accounts receivable, less allowance for uncollectible
accounts of $5,901,724	$	4,475,932
Inventory		937,694
Deferred financing fees		5,525
Prepaid expenses		34,795
Deferred tax asset		210,000
Other current assets		47,715

Total current assets		5,711,661

Property and equipment, less accumulated
depreciation of $412,315		932,222
Deposits		21,286


	$	6,665,169


LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank overdraft	$	89,347
Notes payable		252,573
Loan from stockholder		118,451
Capital lease		17,932
Accounts payable		817,429
Income taxes payable		910,000
Accrued payroll and payroll taxes		213,935
Other accrued liabilities		498,709

Total current liabilities		2,918,376

Loan from stockholder, less current maturities		20,332
Notes payable, less current maturities		6,732
Capital lease, less current maturities		12,189
Long-term deferred tax liability		90,000

Total liabilities		3,047,629

Contingencies and Commitments		--

Stockholders' Equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized,		--
no shares issued or outstanding
Common stock, $0.001, par value, 100,000,000 shares authorized,		26,831
26,831,113 shares issued and outstanding
Additional paid-in capital		2,634,075
Retained earnings		956,634


Total stockholders' equity		3,617,540

	$	6,665,169

See accompanying notes to financial statements.

F - - 2

Zynex Medical Holdings, Inc.

Consolidated Statements of Operations

Years ended December 31,

	2007			2006

Net sales and rental income	$	8,048,252		$	2,556,809
Cost of sales and rentals		729,046			303,719

Gross profit		7,319,206			2,253,090

Operating expenses:
Selling, general and administrative, including
common stock and warrants issued for consulting services
of $101,250 and $102,250 in 2007 and 2006, respectively		4,003,432			2,326,793
Depreciation		153,442			94,009

		4,156,874			2,420,802

Income (loss) from operations		3,162,332			(167,712	)

Other income (expense):
Interest income		24			1,370
Interest expense		(244,840	)		(155,492	)
Other income		3,834			1,464

		2,921,350			(320,370	)

Income tax expense		790,000			--


Net income (loss)	$	2,131,350		$	(320,370	)

Net income (loss) per common and common equivalent share

Basic	$	0.08			*

Diluted	$	0.07			*

Weighted average number of shares outstanding

Basic		26,595,967			24,026,988

Diluted		28,455,447			24,026,988

* Less than $0.01 per share

See accompanying notes to financial statements.

F - - 3

Zynex Medical Holdings, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31,

	2007			2006

Cash flows from operating activities:
Net income (loss)	$	2,131,350		$	(320,370	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		153,442			94,009
Provision for losses in accounts receivable		4,801,724			386,518
Amortization of deferred consulting and financing fees		156,303			108,816
Issuance of common stock and warrants for consulting services, interest and loan fees		68,537			46,000
Deferred income tax benefit		(120,000	)		--
Provision for obsolete inventory		109,886			16,000
Amortization of discount on note payable to interest expense		56,548			38,670
Amortization of beneficial conversion feature to interest expense		3,961			3,533
Employee stock based compensation expense		28,797			20,110
Changes in operating assets and liabilities:
Accounts receivable		(7,939,783	)		(1,029,501	)
Inventory		(486,567	)		(87,782	)
Prepaid expenses		3,271			(2,252	)
Refundable income taxes		--			7,586
Other current assets		(36,465	)		(9,818	)
Deposits and other assets		(10,348	)		--
Accounts payable		419,444			94,566
Accrued liabilities		495,589			150,455
Income taxes payable		910,000			--

Net cash produced by (used in) operating activities		745,689			(483,460	)

Cash flows from investing activities:
Purchases of equipment		(751,310	)		(151,586	)

Net cash used in investing activities		(751,310	)		(151,586	)

Cash flows from financing activities:
Increase in bank overdraft		89,347			--
Payments on notes payable and capital lease		(429,331	)		(208,275	)
Proceeds from sale of common stock and exercise warrants, net		1,767			604,476
Proceeds from loans payable		--			446,563
Proceeds from loans from stockholder		133,500			146,900
Repayment of loans from stockholder		(54,859	)		(108,154	)

Net cash (used in) financing activities		(259,576	)		881,510

(Decrease) increase in cash and cash equivalents		(265,197	)		246,464

Cash and cash equivalents at beginning of period		265,197			18,733

Cash and cash equivalents at end of period	$	--		$	265,197

Supplemental cash flow information:
Conversion of notes payable to common stock	$	99,175		$	--
Acquisition of furniture in exchange for note payable	$	7,000

See accompanying notes to financial statements.

F - - 4

Zynex Medical Holdings, Inc.

Consolidated Statements of Stockholders' Equity

					Additional
	Number				Paid in		Accumulated
	of Shares		Amount		Capital		Deficit			Total

January 1, 2006		23,199,421	$	23,199	$	1,465,024	$	(854,346	)	$	633,877

Private placement of common stock, net of offering costs		2,429,475		2,430		602,046		--			604,476

Warrants granted upon issuance of note payable and for financing fee		--		--		107,537		--			107,537

Conversion feature of note payable		--		--		8,593		--			8,593

Issuance of common stock for financing fee		65,000		65		21,385		--			21,450

Issuance of common stock for consulting services		575,612		576		202,924		--			203,500

Employee stock compensation expense		--		--		20,110		--			20,110

Issuance of common stock in satisfaction of payable		41,403		41		8,240		--			8,281

Net loss		--		--		--		(320,370	)		(320,370	)

December 31, 2006		26,310,911		26,311		2,435,859		(1,174,716	)		1,287,454

Issuance of common stock for loan extension and conversion		459,916		460		167,713		--			168,173

Issuance of common stock for the exercise of warrants		59,048		59		531		--			590

Issuance of common stock for cash		1,238		1		1,175		--			1,176

Employee stock compensation expense		--		--		28,797		--			28,797

Net income		--		--		--		2,131,350			2,131,350

December 31, 2007		26,831,113	$	26,831	$	2,634,075	$	956,634		$	3,617,540

See accompanying notes to financial statements.

F - - 5

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

Zynex Medical, Inc. was incorporated under the laws of the state of Colorado on March 3, 1998, under the name of "Stroke Recovery Systems, Inc." (SRSI). On October 1, 2003, Zynex Medical, Inc. acquired, through merger, the assets and liabilities of Dan Med, Inc. (DMI), a Colorado corporation under common control. The companies were merged in order to simplify the operating and capital structure of both companies. SRSI concurrently changed its name to Zynex Medical, Inc. Zynex Medical Holdings, Inc. (the “Company”) was created in February 2004 through a reverse acquisition.

At present, Zynex Medical, Inc. generates substantially all its revenue in North America from sales and rentals of its products to patients, dealers and health care providers. The amount of net revenue derived from Medicare and Medicaid programs for 2007 and 2006 is approximately 6% and 5% respectively.

The Company designs, assembles and commercializes a line of FDA cleared medical devices for the electrotherapy and stroke rehabilitation markets. The Company also purchases electrotherapy devices and supplies from other domestic and international suppliers for resale.

F - - 6

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Zynex Medical Holdings, Inc. and Zynex Medical, Inc. for all of the periods presented. All inter company balances and transactions have been eliminated in consolidation.

REVENUE RECOGNITION

Sales and rental income is recognized when a product has been medically prescribed and dispensed to a patient and, when applicable, a claim prepared by the Company has been filed with the patient's insurance provider. Product and rental income is recognized net of the estimated uncollectible percentage of sales as described below.

RESERVE FOR SALES RETURNS, ALLOWANCES AND COLLECTIBILITY

The Company maintains a reserve for sales allowances, returns and collectibility. Sales returns and allowances result from reimbursements from insurance providers that are less than amounts claimed, as provided by agreement, where the amount claimed by the Company exceeds the insurance provider's usual, customary and reasonable reimbursement rate and when units are returned because of benefit denial. The provision is provided for by reducing gross revenue by a portion of the amount invoiced during the relevant period. The amount of the reduction is estimated based on historical experience.

Changes in the allowance for uncollectible accounts receivable for the years ended December 31, 2007 and 2006 are as follows:

	2007			2006

Balances, beginning of year	$	1,100,000		$	713,481
Additions credited to net sales and rental income		8,033,045			1,128,734
Write-offs credited to accounts receivable		(3,231,321	)		(742,215	)

	$	5,901,724		$	1,100,000

USE OF ESTIMATES

Preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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. Ultimate results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying financial statements are associated with collectibility of accounts receivable.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are stated at cost. Cash equivalents consist of all highly liquid investments with maturities of three months or less when acquired.

F - - 7

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS AND CREDIT RISK

The Company's financial instruments primarily consist of cash, receivables and payables for which current carrying amounts approximate fair value. Additionally, interest rates on outstanding borrowings are at rates that approximate market rates for borrowings with similar terms and average maturities. The fair value of the loan from stockholder is not practicable to estimate, due to the related party nature of the underlying transactions.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade receivables.

The Company has recorded trade receivables from business operations. Management regularly evaluates the collectibility of accounts receivable and believes that net receivables recorded as of December 31, 2007 to be collectible.

INVENTORY

Inventories are valued at the lower of cost (average) or market. Finished goods include products held at different locations by health care providers or other third parties for rental or sale to patients.

The Company monitors inventory for turnover and obsolescence, and records losses for excess and obsolete inventory as appropriate. At December 31, 2007, the Company had a reserve balance for slow moving inventory of approximately $125,000.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. The Company removes the cost and the related accumulated depreciation from the accounts of assets sold or retired, and the resulting gains or losses are included in the results of operations. Depreciation is computed using the straight-line method. Cost and related estimated useful lives of property and equipment as of December 31, 2007 are as follows:

	Cost			Useful lives

Office furniture and equipment	$	198,173		3-7 years
Rental inventory		1,068,303		5 years
Vehicles		59,833		5 years
Leasehold Improvements		8,500		5 years
Assembly equipment		9,728		7 years
		1,344,537
Less accumulated depreciation		(412,315	)
Net	$	932,222

Repairs and maintenance costs are charged to expense as incurred.

SHIPPING COSTS

Shipping costs are included in cost of sales and rentals.

F - - 8

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION

Effective January 2006, the Company has adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires the recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. SFAS 123R requires the stock compensation expense to be 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).

In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB 107) relating to SFAS 123R. The Company has applied the provisions of SAB 107 in its adoption of SFAS 123R. Prior to our adopting SFAS 123R, we accounted for our employee stock-based compensation plans under Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Under APB 25, generally no compensation expense was recorded when the terms of the award were fixed and the exercise price of the employee stock option equaled or exceeded the fair value of the underlying stock on the date of grant.

F - - 9

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ADVERTISING

The Company expenses advertising costs as they are incurred. Advertising expenses for the years ended December 31, 2007 and 2006 totaled $32,008 and $146,814, respectively.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed when incurred. There were $15,705 in research and development expenses for the year ended December 31, 2007 and no research and development expenses in 2006. Research and development costs as well as salaries related to research and development are included in selling, general and administrative expenses.

INCOME TAXES

Income taxes are computed using the liability method. The provision for income taxes includes taxes payable or refundable for the current period and the deferred income tax consequences of transactions that have been recognized in the Company's financial statements or income tax returns. The carrying value of deferred income taxes is determined based on an evaluation of whether the Company is more likely than not to realize the assets. Temporary differences result primarily from basis differences in property and equipment and net operating loss carry forwards. The valuation allowance is reviewed periodically to determine the amount of deferred tax asset considered realizable.

COMPREHENSIVE INCOME

There are no adjustments necessary to the net income (loss) as presented in the accompanying statement of operations to derive comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income."

SEGMENT REPORTING

In June 1997, SFAS 131, "Disclosure about Segments of an Enterprise and Related Information," was issued. Operating segments, as defined in the pronouncement, are components of an enterprise about which separate financial information is available and that are evaluated regularly by management in deciding how to allocate resources and assess performance. To date, the Company has only had one operating segment.

F - - 10

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

The Company computes net earnings (loss) per share in accordance with SFAS No. 128, "Earnings per Share", which establishes standards for computing and presenting net earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding and the number of dilutive potential common share equivalents during the period. The effects of potential common stock equivalents have not been included in the computation of diluted net loss per share for the year ended December 31, 2006 as their effect is anti-dilutive.

The calculation of basic and diluted earnings per share for 2007 is as follows:

BASIC	2007

Net income applicable to common stockholders	$	2,131,350


Weighted average shares outstanding - basic		26,595,967


Net income per share - basic	$	0.08


DILUTED

Net income applicable to common stockholders	$	2,131,350
		��

Weighted average shares outstanding - basic		26,595,967


Dilutive securities		1,859,480


Weighted average shares outstanding - diluted		28,455,447

Net income per share - diluted	$	0.07

F - - 11

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations (“SFAS 141 (R)”) which becomes effective for fiscal periods beginning after December 15, 2008. SFAS No. 141 (R) requires all business combinations completed after the effective date to be accounted for by applying the acquisition method (previously referred to as the purchase method). Companies applying this method will have to identify the acquirer, determine the acquisition date and purchase price and recognize at their acquisition date fair values of the identifiable assets acquired, liabilities assumed, and any non-controlling interests in the acquiree. In the case of a bargain purchase the acquirer is required to reevaluate the measurements of the recognized assets and liabilities at the acquisition date and recognize a gain on that date if an excess remains. The Company is currently assessing the impact that the adoption of this statement may have on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51 (“SFAS 160”) which becomes effective for fiscal periods beginning after December 15, 2008. This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The statement requires ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. The statement also requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest with disclosure on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. In addition this statement establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation and requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. The Company does not expect the adoption of this statement to have a material impact on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment to FASB Statement No. 115 .This statement permits companies to choose to measure many financial instruments and other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement is expected to expand the use of fair value measurement of accounting for financial instruments. This statement applies to all entities, including not for profit. The fair value option established by this statement permits all entities to measure eligible items at fair value at specified election dates. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company is currently assessing the impact that the adoption of this statement may have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement (“SFAS No. 157”). This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2008 for non-financial assets and liabilities, and is effective for fiscal years beginning after November 15, 2007 for financial assets and liabilities.. The Company is currently assessing the impact that the adoption of this statement may have on its consolidated financial statements.

F - - 12

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - NOTES PAYABLE AND LEASES

On October 5, 2005 Zynex received $400,000 under a three-year term loan agreement with Silicon Valley Bank, Santa Clara, California and Boulder, Colorado (the "Lender"). The loan bore interest at a per annum fixed rate of 7.84%. The loan was guaranteed by Zynex Chairman, President and Chief Executive Officer Thomas Sandgaard and was collateralized by a first perfected security interest in accounts, inventory, chattel paper, equipment, fixtures, general intangibles, including intellectual property and other assets. The Company was to repay the loan in 36 equal monthly payments of principal and interest. The loan included financial covenants for minimum liquidity and minimum debt service coverage, which the Company was in compliance with as of December 31, 2007 and 2006. In connection with the loan, the Lender was granted a seven-year warrant to purchase 50,000 shares of Zynex Common Stock at an exercise price of $0.71 per share.

On March 15, 2006 Zynex received $240,000 under a three-year term loan agreement with Silicon Valley Bank, Santa Clara, California and Boulder, Colorado (the "Lender"). The loan bore interest at a per annum fixed rate of 8.48%. The loan was guaranteed by Zynex Chairman, President and Chief Executive Officer Thomas Sandgaard and was collateralized by a first perfected security interest in accounts, inventory, chattel paper, equipment, fixtures, general intangibles, including intellectual property and other assets. The Company was to repay the loan in 36 equal monthly payments of principal and interest. The loan included financial covenants for minimum liquidity and minimum debt service coverage, which the Company was in compliance with as of December 31, 2007 and 2006.

On October 18, 2006, the Company entered into a loan transaction with Ascendiant Capital Group, LLC (an affiliate of Ascendiant Securities, LLC) and issued to Ascendiant Capital (a) a secured Note in the total principal amount of $275,000 (the "Note") and (b) a five-year warrant to purchase a total of 429,867 shares of our common stock at a fixed exercise price of $0.39 per share. The warrants were valued at the date of grant at $113,437 using the Black-Scholes option-pricing model. The relative fair value of the warrants ($80,310) was accounted for as a discount applied against the face amount of the Note. The discount was amortized over the term of the promissory note to interest expense. For the years ended December 31, 2007 and 2006, the Company recorded $47,294 and $33,016 interest expense, respectively. The Note was convertible into common stock at a fixed conversion price of $0.32 per share. The conversion of the Note was deemed to be beneficial as the Note converted to common stock at $0.32 per share and the estimated fair value of the common stock was determined to be $0.33 per share on the date the transaction was entered into. The intrinsic value of the beneficial conversion feature of $8,593 was amortized as additional interest expense over the term of the Note. Net proceeds of approximately $206,000 from the transaction were used for general working capital.

In connection with the Note, the Company issued 65,000 shares of common stock to Ascendiant Capital as a fee and granted a warrant to purchase 103,130 shares of common stock with an exercise price of $0.39 per share as a placement fee to Ascendiant Securities. The shares were values at $21,450 (based on the closing market price of $0.33 per share at the date the transaction was closed) and the warrants were valued at $27,227 using the Black Scholes option-pricing model. These fees and $32,000 of financial fees paid at closing were amortized over the six month term.

F - - 13

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In May 2007, the Company repaid principal of $100,000, interest of $4,812 and issued 50,000 shares of common stock valued at $21,500.

In June 2007, the Company repaid principal of $76,000, interest of $3,062 and issued 25,000 shares of common stock valued at $21,250.

In November 2006, the Company issued a note payable in the amount of $25,881 in satisfaction of a payable due to a sales representative of the company. This note is unsecured and bears interest at 8.25%. Interest that accrues through March 31, 2007 was due and payable on that date. The note is being paid in 12 equal payments of $2,224 through March 1, 2008. Principal payments of $19,300 were made through December 31, 2007.

Notes payable at December 31, 2007 consisted of the following:

Note payable to a bank, principal and interest payments of $12,531 due on a monthly
basis through September, 2008. Annual interest rate of 7.84%, collateralized
by accounts, inventory, chattel papers, equipment, fixtures, and general intangibles,
including intellectual property. The note was guaranteed by the President and
Chief Executive Officer and largest shareholder	$	120,994

Note payable to a bank, principal and interest payments of $7,559 due on a monthly
basis through March, 2009. Annual interest rate of 8.48%, collateralized
by accounts, inventory, chattel papers, equipment, fixtures, and general intangibles,
Including intellectual property. The note was guaranteed by the President and
Chief Executive Officer and largest shareholder		107,221

Motor vehicle contract payable in 60 monthly
installments of $1,351, annual interest at
15.1%, secured by automobile.		18,350

Note payable to a sales representative of the Company, principal and interest
payments of $2,239 due in 12 equal installments from April 1, 2007 through
March 31, 2008, annual interest at 8.25%, unsecured.		6,580

Note payable to landlord for furniture payable in 25 monthly installments of $280, annual interest of 8.2%, secured by furniture.		6,440

Total		259,585


Less current maturities		(252,853	)

Long-term maturities	$	6,732

Future maturities of the notes payable are as follows:

Year ending December 31,

2008	$	252,853
2009		6,713

	$	259,585

F - - 14

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In May and June 2007, Mr. Sandgaard made 24-month unsecured loans to the Company in the principal amounts of $50,000 and $24,000 for a total amount of $74,000. The loans bear interest at 8.25% per annum and require monthly payments of $2,267, commencing June 2007 and $1,088 commencing July 2007, for a total of $3,355. As of December 31, 2007, $40,920 and $18,365 remain outstanding. The loans from Mr. Sandgaard were used for working capital purposes and repayment of the Note payable to Ascendiant Capital Group, LLC.

In September 2007, Mr. Sandgaard made a loan to the Company in the principal amount of $59,500. The loan bears interest at 8.25% per annum commencing September 30, 2007 and is a demand note. As of December 31, 2007, $60,735 remains outstanding. The loan from Mr. Sandgaard was used for working capital purposes.

Future maturities of these loans are as follows:

Year ending December 31,
2008	$	118,451
2009		20,332


	$	138,783

The Company has commitments under various operating and capital leases that are payable in monthly installments. In November 2007, the Company entered into a 25-month sublease of office, plant and warehouse space in Littleton, Colorado. The lease provides for annual rent of $100,975 plus property taxes and maintenance costs. As of December 31, 2007, future minimum lease payments under non-cancelable operating and capital leases are as follows:

	Capital			Operating
	Lease			Leases

2008	$	18,869		$	206,480
2009		12,579			175,083
2010					14,575

Total future minimum lease payments		31,448		$	396,138

Less amount representing interest		1,327

Present value of net minimum lease payments		30,121
Less current portion		(17,932	)

Long-term capital lease obligation	$	12,189

Rent expense under operating leases for 2007 and 2006 was $114,553 and $122,206, respectively.

F - - 15

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - INCOME TAXES

Income tax (benefit) expense consists of the following for the year ended December 31, 2007:


Current tax (benefit) expense

Federal	$	800,000
State		110,000

		910,000
Deferred tax (benefit) expense

Federal		(110,000	)
State		(10,000	)


Decrease in valuation allowance		(120,000	)

	$	790,000

There is no federal or state income taxes for the year ended December 31, 2006.

A reconciliation of income tax computed at the U.S. statutory rate of 35% to the effective income tax rate is as follows:

	2007			2006

Statutory rate		(35	)%		(35	)%
State taxes		(2	)%		(5	)%
Permanent differences		(2)	%		10	%
Temporary timing differences		10	%		1	%
Net operating loss carryover and other		2	%		29	%

Combined effective rate		27	%		0	%

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) at December 31, 2007 are as follows:

Current deferred tax assets:
Accrued expenses	$	14,000
Accounts receivable		185,000
Inventory		47,000

		246,000
Valuation allowance		(36,000	)

Net current deferred tax asset	$	210,000

Long-term deferred tax liabilities:
Property and equipment	$	90,000

Net long-term deferred tax liability	$	90,000

F - - 16

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SFAS 109 requires that all deferred tax balances be determined using the tax rates and limitations expected to be in effect when the taxes will actually be paid or recovered. Consequently, the income tax provision will increase or decrease in the period in which a change in tax rate or limitation is enacted. As of December 31, 2007, the Company had total deferred tax assets of $210,000 and deferred tax liabilities of $90,000. The Company recorded a valuation allowance in the amount of $36,000 at December 31, 2007, against the amount by which deferred tax assets exceed deferred tax liabilities. The valuation reserve at December 31, 2007 has been provided due to the uncertainty of the amount of future taxable income. The Company provides a valuation allowance in the full amount of its deferred tax assets that exceed deferred tax liabilities because under the criteria of SFAS No. 109, the Company does not have a basis to conclude that it is more likely than not that it will realize the deferred tax assets.

NOTE 5 - Stockholders' Equity, Common Stock and Warrants

On November 3, 2006, the Company entered into a twelve-month consulting services agreement with Ascendiant Capital, in which this party agreed to advise the Company in business and financial matters for the twelve-month term of the agreement. Compensation consisted of 150,000 shares of the Company’s restricted common stock with a market value of approximately $67,500 (based on the closing market price of $0.45 per share at the date the transaction was entered into). The deferred cost was amortized on a straight-line basis over the twelve-month period from the date of the agreement. During the years ended December 31, 2007 and 2006, $56,250 and $11,250, respectively, was expensed.

On July 1, 2006, the Company entered into a twelve-month agreement with a consultant for investor relations services. Compensation consists of (a) a monthly fee of $8,000 cash and either $4,000 cash or 13,333 shares and (b) 300,000 of the Company’s restricted common stock with a market value of approximately $90,000 (based on the closing market price of $0.30 per share at the date the transaction was entered into). In October 2006, the client renegotiated its agreement with the consultant to exclude the $8,000 cash payment. In November, the number of shares to be issued as part of the monthly retainer was reduced to 10,000 per month, effective October 1. During the year ended December 31, 2006, 69,999 shares were issued under the agreement with a fair market value of $21,000. The deferred cost of $90,000 was being amortized on a straight-line basis over the twelve-month period from the date of the agreement. During each of the years ended December 31, 2007 and 2006, $45,000 was expensed.

F - - 17

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2006, in terms of unregistered sales of securities, the Company (a) sold 2,175,000 shares of common stock, and five-year warrants to purchase a total of 1,740,000 shares of common stock at $0.32 per share, to accredited investors in a non public offering, (b) issued 254,475 shares to investment bankers responsible for the non public offering, issued to the provider of the convertible $275,000 bridge loan five-year warrants to purchase a total of 429,867 shares of common stock at $0.39 per share and a fee of 65,000 shares of common stock, (d) issued to the investment banker for the loan five-year warrants to purchase a total of 103,139 shares of common stock at $0.39 per share, (e) issued 150,000 shares to the investment banker responsible for such loan for future consulting services and (f) issued 425,612 shares to investor relations firms for services rendered including 55,613 shares with a total market value of $25,000 were issued to the Wall Street Group in return for investor relations services. In these issuances, the Company made no general solicitation, the Company believes that purchasers of the securities were accredited investors, the Company believes that the investment bankers, lender and investor relations firms were accredited investors or met the standards for a purchaser is a non-public offering, and the Company relied upon an exemption from securities registration for a non-public offering.

During the year ended December 31, 2005, the Company issued 312,500 warrants to purchase common stock with a fair market value of $41,250, 129,044 shares of unregistered common stock with a total market value of $46,500 and paid $6,250 to The Wall Street Group in return for investor relations services. The Company also issued (a) 8,333 warrants to purchase common stock at a fair market value of $2,870 to a financial consultant for preparation of financial projections and introduction to Silicon Valley Bank; (b) 50,000 warrants to purchase common stock with a fair market value of $22,100 to Silicon Valley Bank in connection with their September 2005, $400,000 term loan; (c) and 100,000 warrants to purchase common stock with a fair market value of $17,200 to an investment banking firm for services rendered. The agreement with The Wall Street Group ended in April 2006. The $22,100 additional compensation to Silicon Valley Bank was being amortized over the three-year term of the agreement and $5,525 has been deferred at December 31, 2007.

In, 2004, the Company sold 685,715 shares of common stock to five investors at $1.75 per share. The proceeds realized from the sale were $897,789, net of offering expenses and the fair value of Broker Warrants issued. In connection with the sales, the Company granted Class A Warrants to purchase an additional 342,859 shares of common stock at $1.75 per share, Class B Warrants to purchase an additional 685,715 shares of common stock at $2.00 per share, Class C Warrants to purchase 22,858 shares of common stock at $.01 per share and Broker Warrants to purchase 45,715 shares of common stock at $.01 per share.

The Class B, Class C and Broker's Warrants expire on June 4, 2009. The Class A Warrants expired February 20, 2006. The Company's registration statement, filed July 16, 2004 on Form SB-2/A, became effective July 20, 2004 and a First Amendment on Form SB-2/A became effective June 7, 2005.

Upon exercise of the warrants, the Company is required to pay Warrant Exercise Compensation equal to 10 percent of the cash proceeds payable to the Company. The Company is further required to issue one Broker's Warrant for each 10 shares of Class A, Class B and Class C Warrants exercised by the subscribers.

During the year ended December 31, 2007, the Company issued 59,048 shares of common stock upon the exercise of Class B and Class C Warrants and received $590.

F - - 18

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In September 2004, the Company issued options to acquire 1,900,000 shares of common stock to a financial consulting firm in exchange for consulting services provided in connection with the Company's reverse acquisition, private placement and ongoing investor relations. The options, which expire September 26, 2009, permit the purchase of common stock in quantities and at prices set forth as follows:

Number of Shares	Price Per Share

100,000	$0.40
400,000	$1.75
200,000	$2.00
200,000	$2.25
200,000	$2.50
200,000	$2.75
200,000	$3.00
200,000	$3.50
200,000	$4.00

Also during 2004, the Company issued 120,000 warrants to purchase common stock for five years to two consultants and one employee; 110,000 of these warrants are exercisable at $3.00 per share and 10,000 are exercisable at $0.55 per share.

During 2006 and 2005, the Company also issued common stock and common stock warrants to consultants and debtors - see Note 3 - Notes payable and leases.

Stock Options:

On January 3, 2005, the Company established the 2005 Stock Option Plan (the "Option Plan") and reserved 3,000,000 shares of common stock for issuance under the Option Plan. Vesting provisions are determined by the Board of Directors. All stock options expire 10 years from the date of grant.

A summary of stock option activity under the Option Plan for the year ended December 31, 2007 is presented below:

						Weighted
				Weighted		Average
	Shares			Average		Remaining	Aggregate
	Under			Exercise		Contractual	Intrinsic
	Option			Price		Life	Value

Outstanding at January 1, 2007		286,670		$	0.34

Granted		352,000		$	0.68
Exercised		--		$	--
Forfeited		(142,670	)	$	0.36
Outstanding at December 31, 2007		496,000		$	0.58	8.52 Years		$	276,640

Exercisable December 31, 2007		91,500		$	0.34	7.74 Years		$	89,040

F - - 19

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about stock options outstanding as of December 31, 2007:

Options Outstanding			Options Exercisable

		Remaining
Exercise	Number of	contractual	Number of	Exercise
prices	options	life (years)	options	price


$0.30	80,000	7.00	40,000	$0.30
$0.23	10,000	7.25	5,000	$0.23
$0.50	14,000	7.50	6,000	$0.26
$0.75	14,000	7.75	7,000	$0.50
$0.27	92,000	8.50	6,000	$0.26
$0.33	14,000	8.75	23,000	$0.27
$0.26	24,000	9.00	3,500	$0.33
$0.45	100,000	9.25
$0.42	22,000	9.25
$0.85	32,000	9.50
$1.32	74,000	9.75
$1.33	10,000	9.80
$1.43	10,000	9.90

	496,000		91,500

For the years ended December 31, 2007 and 2006, the Company recorded compensation expense related to stock options that decreased net income (increased net loss) from operations and decreased net income (increased net loss) by $28,797 and $20,110, respectively. The stock compensation expense was included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

During the year ended December 31, 2007 the Company granted stock options to acquire 352,000 shares of common stock to employees at exercise prices that ranged from 90,000 shares of common stock at $0.26 per share, 100,000 shares of common stock at an exercise price of $0.45 per share, 28,000 shares of common stock at an exercise price of $0.42 per share, 38,000 shares of common stock at an exercise price of $0.85 per share, 76,000 shares of common stock at an exercise price of $1.32 per share, 10,000 shares of common stock at an exercise price of $1.33 per share and 10,000 shares of common stock at an exercise price of $1.43 per share. The fair value of stock options at the date of grant during the three months ended December 31, 2007 was $1.199, $1.203 and $1.291 respectively. During the year ended December 31, 2006 the Company granted stock options to acquire 146,000 shares of common stock at an exercise prices that ranged from $0.27 to $0.33. The Company used the following assumptions to determine the fair value of stock option grants during the years ended December 31, 2007 and 2006:

	2007	2006
Expected life	6.25 years	4 years
Volatility	114 - 123%	121.00%
Risk-free interest rate	3.9 – 4.7%	4.10%
Dividend yield	0%	0%

The expected life of stock options represents the period of time that the stock options granted are expected to be outstanding and was calculated using the simplified method per the guidance of SAB 107 “Share Based Payment” (“SAB107”) for “plain vanilla” options.. The expected volatility is based on the historical price volatility of our common stock. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related stock options. The dividend yield represents our anticipated cash dividend over the expected life of the stock options. The estimated average forfeiture rate for the year ended December 31, 2007 was 35% and for the year ended December 31, 2006 was 50%.

F - - 20

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of status of the Company’s non-vested shares as of and for the year ended December 31, 2007 is presented below:


				Weighted
	Shares			Average
	Under			Grant Date
	Option			Fair Value

Nonvested at January 1, 2007		251,503		$	0.26

Granted		352,000		$	0.68
Vested		(69,168	)	$	0.26
Forfeited		(129,835	)	$	0.26
Nonvested at December 31, 2007		404,500		$	0.55

As of December 31, 2007, we had $155,386 of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of approximately 4 years.

In addition, stock options to acquire 350,000 shares of common stock were granted to an employee prior to January 1, 2007, which were granted separate from the Option Plan. Upon the employee’s termination in February 2007, options for 325,000 shares of common stock were vested and options for 25,000 shares of common stock were unvested and forfeited. The options for 325,000 shares of common stock remain outstanding; these options have an exercise price of $0.22 and a term of 10 years, except options for 100,000 shares of common stock, which terminate in April 2010.

Note 6 - MAJOR SUPPLIERS

The Company purchased approximately 20% 2007 additions to inventory from one supplier and an additional 14% from a second supplier. In 2006, the Company purchased approximately 14%, respectively, of its entire inventory purchases from one European supplier. The Company has purchased 100% of its NeuroMove inventory from one supplier. Management believes that its relationships with these suppliers is strong, however, if necessary these relationships can be replaced. If the relationships were to be replaced, there may be a short term disruption to operations, a period of time in which products would not be available and additional expenses may be incurred.

Note 7 - EMPLOYMENT AGREEMENTS

On February 1, 2004, Zynex Medical, Inc. entered into a three-year employment agreement with the Company's President and Chief Executive Officer. The agreement expired January 31, 2007 and was automatically extended for an additional two-year period. The initial annual base salary under the agreement was $174,000 and may be increased annually at the board of director's discretion. The agreement also provides for a 50% annual bonus if annual net revenue exceeds $2.25 million, medical and life insurance, and a vehicle. The agreement contains a non-compete provision for the term of the agreement that extends for 24 months following termination of the agreement.

F - - 21

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On January 1, 2005, the agreement was amended to provide an annual base salary of $144,000 and quarterly bonuses as follows:

Quarterly Revenue	Quarterly Bonus
$0 to $600,000	$ 0
$600,001 - $800,000	$ 10,000
$800,001 - $1,000,000	$ 25,000
$1,000,001 and greater	$ 50,000

The bonus amounts reflected in the above table shall be reduced by one-half if the Company sustains a net loss during the quarter. At December 31, 2007, the Company recorded a $100,000 accrual related to this bonus.

Under the Agreement Mr. Leveton received stock options to purchase up to 350,000 shares of the Company's Common Stock. Such options had a ten-year term, except options for 100,000 shares which expire on April 17, 2010, and an exercise price equal to the fair market value of the Common Stock on the date of grant, April 18, 2005. Such options were subject to vesting as follows: 100,000 shares vested on the date of grant; 25,000 shares vested on June 30, 2005; and 25,000 shares vested as of the last day of each full calendar quarter beginning as of July 1, 2005 through March 31, 2007, provided that Mr. Leveton was employed as of such dates; and 50,000 shares vested upon a Raise Event which was completed in January, 2007. All unvested quarterly options would have immediately vested and become exercisable upon a liquidity event with a valuation of at least $10,000,000; provided the liquidity event occurred during Mr. Leveton's employment or if Mr. Leveton played an active, integral and key role in accomplishing such event, within 90 days of involuntary termination. All unvested options expired upon the termination of Mr. Leveton’s employment. As of February 16, 2007, Mr. Leveton’s termination date, 325,000 of the options had vested.

Effective February 19, 2007, the Company entered into a compensation arrangement with its new Chief Financial Officer, Fritz G. Allison. The arrangement provides for a monthly salary of $8,000 per month, before taxes, for the first three months and $10,000 per month, before taxes, thereafter; grant under the Company’s 2005 stock option plan of an option to purchase up to 100,000 shares of the Company’s common stock, with a ten year term starting February 19, 2007, an exercise price equal to $0.45 per share, the fair market value of the Company’s common stock on such date, and a vesting schedule of 25,000 shares vesting on the first anniversary of the date of grant and 25,000 shares vesting on each subsequent anniversary of the date of grant; a bonus payable in 2008 in the amount of $20,000 cash and an option grant for an additional 50,000 shares in the event (a) the Company’s net revenue meets a revenue target for 2007, (b) the Company has a positive net income for 2007, and (c) the Company does not have any restatements of its financial statements during 2007 and for any periods during 2007 or the year 2007 on or prior to the completion of the audit of the 2007 financial statements. Mr. Allison also received full health and dental insurance coverage through the Company.

F - - 22

ZYNEX MEDICAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - RELATED PARTY TRANSACTIONS

The Company provides the President with two automobiles for personal use costing $2,287 per month.

NOTE 9 - SUBSEQUENT EVENTS

In January 2008, the Company notified warrant holders from the 2006 private placement that an event had occurred which accelerated the expiration date of the warrants. In February 2008 the Company had received notices of exercise and payments from all the warrant holders notified. The Company issued 1,740,000 shares of common stock to the warrant holders and received $678,600 in proceeds from them. The Company is obligated to pay $67,860 to the two investment firms that originally aided in the 2006 private placement as fees related to the warrant exercise.

In January 2008, the Company defaulted on the monthly installment payable to the Lender. As a result of this default, the Lender called the outstanding balances of both term loans payable to the Lender. The loans were paid off in February 2008. These loans were presented as a current liability at December 31, 2007.

In February 2008, the Company received a notice of exercise related to a warrant for 100,000 shares of common stock; 80,392 shares of common stock were issued in a cashless exercise.

In February 2008, the Company issued 2,000 shares of common stock to an employee for a cash payment of $2,618.

In March 2008, the Company received a notice of exercise related to options for 325,000 shares of common stock; 282,440 shares of common stock were issued in a cashless exercise.

In March 2008, the Company issued 7,750 shares of common stock to an individual for a cash payment of $10,145.

F - 23

Zynex (ZYXI) 424B3Prospectus supplement