Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 9-May-14 | |
Document Document And Entity Information [Line Items] | ' | ' |
Entity Registrant Name | 'ZYNEX INC | ' |
Entity Central Index Key | '0000846475 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 31,171,234 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current Assets: | ' | ' |
Cash | $189 | $323 |
Accounts receivable, net | 6,284 | 7,033 |
Inventory, net | 5,011 | 5,002 |
Prepaid expenses | 244 | 346 |
Deferred tax assets, net | 72 | 72 |
Income tax receivable | 893 | 893 |
Other current assets | 64 | 35 |
Total current assets | 12,757 | 13,704 |
Property and equipment, net | 3,012 | 2,891 |
Deposits | 30 | 400 |
Deferred financing fees, net | 35 | 48 |
Intangible assets, net | 168 | 178 |
Total assets | 16,002 | 17,221 |
Current Liabilities: | ' | ' |
Line of credit | 5,608 | 5,820 |
Current portion of notes payable and other obligations | 68 | 92 |
Accounts payable | 2,905 | 2,743 |
Income taxes payable | 94 | 96 |
Accrued payroll and payroll taxes | 653 | 607 |
Current portion of contingent consideration | 7 | 7 |
Other accrued liabilities | 201 | 319 |
Total current liabilities | 9,536 | 9,684 |
Notes payable and other obligations, less current portion | 136 | 150 |
Deferred rent | 2,811 | 2,454 |
Deferred tax liabilities, net | 72 | 72 |
Warranty liability | 12 | 13 |
Total liabilities | 12,567 | 12,373 |
Stockholders’ Equity: | ' | ' |
Preferred stock; $.001 par value, 10,000,000 shares authorized, no shares issued or outstanding | ' | ' |
Common stock, $.001 par value, 100,000,000 shares authorized, 31,171,234 (2014 and 2013) shares issued and outstanding | 31 | 31 |
Paid-in capital | 5,617 | 5,586 |
Accumulated deficit | -2,165 | -735 |
Total Zynex, Inc. stockholders’ equity | 3,483 | 4,882 |
Noncontrolling interest | -48 | -34 |
Total stockholders’ equity | 3,435 | 4,848 |
Total liabilities and stockholders’ equity | $16,002 | $17,221 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ' | ' |
Preferred stock, shares outstanding | ' | ' |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 31,171,234 | 31,171,234 |
Common stock, shares outstanding | 31,171,234 | 31,171,234 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Net revenue: | ' | ' |
Rental | $735 | $1,679 |
Sales | 2,432 | 5,989 |
Total net revenue | 3,167 | 7,668 |
Cost of revenue: | ' | ' |
Rental | 135 | 301 |
Sales | 862 | 1,890 |
Total cost of revenue | 997 | 2,191 |
Gross profit | 2,170 | 5,477 |
Selling, general and administrative expense | 3,456 | 5,839 |
Loss from operations | -1,286 | -362 |
Other income (expense): | ' | ' |
Interest expense | -158 | -130 |
Total other income (expense) | -158 | -130 |
Loss before income taxes | -1,444 | -492 |
Income tax benefit | ' | 182 |
Net loss | -1,444 | -310 |
Plus: Net loss – noncontrolling interest | 14 | 6 |
Net loss – attributable to Zynex, Inc. | ($1,430) | ($304) |
Net loss per share – attributable to Zynex, Inc.: | ' | ' |
Basic | ($0.05) | ($0.01) |
Diluted | ($0.05) | ($0.01) |
Weighted - average number of common shares outstanding: | ' | ' |
Basic | 31,171,234 | 31,148,234 |
Diluted | 31,171,234 | 31,148,234 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (USD $) | Total | Common Stock | Paid-in Capital | Retained Deficit | Noncontrolling Interest |
In Thousands, except Share data | |||||
Balance at Dec. 31, 2013 | $4,848 | $31 | $5,586 | ($735) | ($34) |
Balance, shares at Dec. 31, 2013 | 31,171,234 | 31,171,234 | ' | ' | ' |
Employee stock-based compensation expense | 31 | ' | 31 | ' | ' |
Net loss | -1,444 | ' | ' | -1,430 | -14 |
Balance at Mar. 31, 2014 | $3,435 | $31 | $5,617 | ($2,165) | ($48) |
Balance, shares at Mar. 31, 2014 | 31,171,234 | 31,171,234 | ' | ' | ' |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities: | ' | ' |
Net loss | ($1,444) | ($310) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation expense | 135 | 213 |
Change in the value of contingent consideration | ' | 4 |
Provision for losses on accounts receivable | 8 | 136 |
Amortization of intangible assets | 21 | 15 |
Amortization of financing fees | 13 | 13 |
Change in obsolete inventory | 14 | 17 |
Deferred rent | 357 | -93 |
Employee stock-based compensation expense | 31 | 36 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 741 | 854 |
Inventory | -23 | -181 |
Prepaid expenses | 102 | -13 |
Deposits and other current assets | -47 | -170 |
Accounts payable | 162 | -382 |
Accrued liabilities | -71 | -705 |
Income taxes payable | -2 | -427 |
Net cash used in operating activities | -3 | -993 |
Cash flows from investing activities: | ' | ' |
Purchases of equipment and inventory used for rental | -11 | -55 |
Change in inventory used for rental | 130 | 247 |
Net cash provided by investing activities | 119 | 192 |
Cash flows from financing activities: | ' | ' |
Net (repayments) borrowings on line of credit | -212 | 696 |
Payments on notes payable and capital lease obligations | -38 | -37 |
Net cash provided by financing activities | -250 | 659 |
Net decrease in cash | -134 | -142 |
Cash at the beginning of the period | 323 | 823 |
Cash at the end of the period | 189 | 681 |
Supplemental cash flow information: | ' | ' |
Interest paid | 133 | 113 |
Income taxes paid (including interest and penalties) | 2 | 427 |
Supplemental disclosure of non-cash investing and financing activities: | ' | ' |
Equipment acquired through note payable and capital lease | ' | $72 |
Unaudited_Condensed_Consolidat
Unaudited Condensed Consolidated Financial Statements and Managements' Plans | 3 Months Ended |
Mar. 31, 2014 | |
Unaudited Condensed Consolidated Financial Statements and Managements' Plans | ' |
(1) UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENTS’ PLANS | |
Zynex, Inc. (a Nevada corporation) and its subsidiaries, Zynex Medical, Inc. (ZMI) (a Colorado corporation, wholly-owned), Zynex NeuroDiagnostics, Inc. (ZND) (a Colorado corporation, wholly-owned), Zynex Monitoring Solutions Inc. (ZMS) (a Colorado corporation, wholly-owned), Zynex Billing and Consulting, LLC (ZBC) (a Colorado limited liability company, 80% majority-owned) and Zynex Europe, ApS (ZEU) (a Denmark corporation, wholly-owned), are collectively referred to as the “Company”. | |
The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included herein are adequate to make the information presented not misleading. A description of the Company’s accounting policies and other financial information is included in the audited consolidated financial statements as filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. Amounts as of December 31, 2013 are derived from those audited consolidated financial statements. These interim condensed consolidated financial statements should be read in conjunction with the annual audited financial statements, accounting policies and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, which has previously been filed with the SEC. | |
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2014 and the results of its operations and its cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results that may be achieved for a full fiscal year and cannot be used to indicate financial performance for the entire year. | |
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. | |
For the three months ended March 31, 2014 and the twelve months ended December 31, 2013, the Company reported negative cash flows from operations of $3 and $382, respectively. In addition, the Company reported a net loss of $1,444 for the three months ended March 31, 2014 and $7,301 for the year ended December 31, 2013, and has no available borrowings as of March 31, 2014 under its line of credit. | |
As a result of the Company losses from operations, negative operating cash flow, and limited liquidity, the Company’s independent registered public accounting firm’s report on the Company’s consolidated financial statements as of and for the year ended December 31, 2013 includes an explanatory paragraph discussing that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. | |
During 2013 and the first quarter of 2014, the Company encountered industry challenges related to health care reform, including the Affordable Care Act and coverage and reimbursement changes from government and Third-party Payors (as defined below), which has caused uncertainty to exist at the medical practitioner level causing a delay and decline in demand for the Company ZMI electrotherapy products. In an effort to minimize the impact of health care reform and changes in reimbursement, during the second and third quarters of 2013, the Company made reductions in the its fixed expenses by cutting the Company’s annual employee costs by approximately $4,200 through headcount reductions. In 2013, the Company also renegotiated its existing building lease, under which, among other things, base rent has been lowered. The Company is monitoring the demand for its ZMI electrotherapy products and will make additional expense adjustments as necessary in future periods. Additionally, the Company recently added new products that are less impacted by insurance reimbursement to its ZMI sales channel and are pursuing other opportunities, including the compound and sale of topical and transdermal pain creams. In ZND, the Company is distributing electroencephalography (EEG) sleep diagnostic products in the US, which are all capital goods that are not subject to insurance reimbursement. The Company is also investing in its ZBC division where increased service based revenue is expected going forward. The Company believes these actions will serve to diversify the Company’s product mix and further reduce its dependency on insurance reimbursement. The Company developed its operating plans for 2014 to emphasize cash flow, under which the Company is focusing on its topical pain cream sales, which the Company believes will yield high margins, streamlining the Company’s electrotherapy products sales process and continuing to implement various cost modifications to reduce the Company’s expenses. | |
Due to the Company’s negative cash flows, there is no guarantee that the Company will be able to meet the requirements of its 2014 budget and limit the use of the Company’s cash. The Company’s line of credit decreased from $5,820 at December 31, 2013 to $5,608 at March 31, 2014, primarily driven by expense reductions made during the latter part of 2013. Maximum borrowings under the line of credit are $7,000, with zero available to borrow as of March 31, 2014 considering the Company’s asset borrowing base. The Company’s long-term business plan contemplates organic growth in revenues, through the addition of new products to the Company’s sales channel that could mitigate the decline in its ZMI electrotherapy products, and through possible acquisitions. Therefore, in order to support growth in revenue, the Company requires, among other things, funds for the purchase of equipment (primarily for rental inventory), funds for the purchase of inventory and the payment of commissions to sales representatives, funds for the expansion of the Company’s compound pharmacy, and creation of other new product lines. | |
There is no assurance that the Company’s operations and available borrowings, if any, will provide enough cash for operating requirements including payment of key Company suppliers or for increases in the Company’s inventory of products, as needed, for growth. In addition, the Company is not currently in compliance with its financial covenants under the line of credit, and may not be in compliance in the future which could limit the Company’s ability to draw on its credit line now or in the future, or lead to a default under the line of credit. A default under the line of credit would generally require the immediate repayment of all outstanding borrowings, which would likely cause the Company to be insolvent. The Company is currently in discussions with the lender and expects to receive a waiver; however, no assurance can be given. If a waiver is not obtained, in addition to demanding immediate payment of amounts outstanding under the line of credit, the lender can restrict or prevent the Company from borrowing while in default, which could have a material adverse impact on the Company’s cash flow and liquidity and could cause the Company to be insolvent or force the Company into bankruptcy. | |
The Company is actively seeking external financing through the issuance of debt or sale of equity, and the Company is not certain whether any such financing would be available to the Company on acceptable terms, or at all. Any additional debt would require the approval of Doral Healthcare Finance, the lender under the Company’s line of credit. The Company’s dependence on operating cash flow means that risks involved in the Company’s business can significantly affect the Company’s liquidity. Contingencies such as unanticipated shortfalls in revenues or increases in expenses could affect the Company projected revenue, cash flows from operations and liquidity which may force the Company to curtail its operating plan or impede the Company’s growth. |
Significant_Accounting_Policie
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2014 | |
Significant Accounting Policies | ' |
(2) SIGNIFICANT ACCOUNTING POLICIES | |
PRINCIPLES OF CONSOLIDATION | |
The accompanying unaudited condensed consolidated financial statements include the accounts of Zynex, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. | |
NONCONTROLLING INTEREST | |
Noncontrolling interest in the equity of a subsidiary is accounted for and reported as stockholders equity. Noncontrolling interest represents the 20% ownership in the Company’s majority-owned subsidiary, ZBC. In 2012, the noncontrolling interest member contributed $10 of property and equipment to ZBC. | |
USE OF ESTIMATES | |
Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying condensed consolidated financial statements are associated with the allowance for contractual adjustments and uncollectible accounts receivable, the reserve for obsolete and damaged inventory, stock-based compensation, valuation of long-lived assets, and income taxes. | |
REVENUE RECOGNITION, ALLOWANCE FOR CONTRACTUAL ADJUSTMENTS AND COLLECTIBILITY | |
The Company recognizes revenue when each of the following four conditions are met: 1) a contract or sales arrangement exists, 2) products have been shipped and title has transferred, or rental services have been rendered, 3) the price of the products or services is fixed or determinable, and 4) collectability is reasonably assured. Accordingly, the Company recognizes revenue, both rental and sales, when products have been delivered to the patient and the patient’s insurance (if the patient has insurance) has been verified. For medical products that are sold from inventories consigned at clinic locations, the Company recognizes revenue when it receives notice that the product has been prescribed and delivered to the patient and the patient’s insurance coverage has been verified or preauthorization has been obtained from the insurance company, when required. Revenue from the rental of products is normally on a month-to-month basis and is recognized ratably over the products’ rental period. Revenue from sales to distributors is recognized when the Company ships its products, which fulfills its order and transfers title. Revenue is reported net, after adjustments for estimated insurance company or governmental agency (collectively “Third-party Payors”) reimbursement deductions. The deductions are known throughout the health care industry as “contractual adjustments” whereby the Third-party Payors unilaterally reduce the amount they reimburse for the Company’s products. | |
A significant portion of the Company’s revenues are derived, and the related receivables are due, from Third-party Payors. The nature of these receivables within this industry has typically resulted in long collection cycles. The process of determining what products will be reimbursed by Third-party Payors and the amounts that they will reimburse is complex and depends on conditions and procedures that vary among providers and may change from time to time. The Company maintains an allowance for contractual adjustments and records additions to the allowance to account for the risk of nonpayment. Contractual adjustments result from reimbursements from Third-party Payors that are less than amounts claimed or where the amount claimed by the Company exceeds the Third-party Payors’ usual, customary and reasonable reimbursement rate. The Company determines the amount of the allowance, and adjusts it at the end of each reporting period, based on a number of factors, including historical rates of collection, the aging of the receivables, trends in the historical rates of collection and current relationships and experience with the Third-party Payors. If the rates of collection of past-due receivables recorded for previous fiscal periods changes, or if there is a trend in the rates of collection on those receivables, the Company may be required to change the rate at which it provides for additions to the allowance. A change in the rates of the Company’s collections can result from a number of factors, including experience and training of billing personnel, changes in the reimbursement policies or practices of Third-party Payors, or changes in industry rates of reimbursement. Accordingly, changes to the allowance for contractual adjustments, which are recorded in the income statement as a reduction of revenue, have historically fluctuated and may continue to fluctuate significantly from quarter to quarter. | |
Due to the nature of the industry and the reimbursement environment in which the Company operates, estimates are required to record net revenues and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of third-party billing arrangements and the uncertainty of reimbursement amounts for certain products or services from payors or an unanticipated requirements to refund payments previously received may result in adjustments to amounts originally recorded. Due to continuing changes in the health care industry and third-party reimbursement, as well as changes in our billing practices to increase cash collections, it is possible that management’s estimates could change in the near term, which could have an impact on our results of operations and cash flows. Any differences between estimated settlements and final determinations are reflected as an increase or a reduction to revenue in the period when such final determinations are known. | |
The Company frequently receives refund requests from insurance providers relating to specific patients and dates of service. Billing and reimbursement disputes are very common in the Company’s industry. These requests are sometimes related to a limited number of patients or products; at other times, they include a significant number of refund claims in a single request. The Company reviews and evaluates these requests and determines if any refund request is appropriate. The Company also reviews these refund claims when it is rebilling or pursuing reimbursement from that insurance provider. The Company frequently has significant offsets against such refund requests, and sometimes amounts are due to the Company in excess of the amounts of refunds requested by the insurance providers. Therefore, at the time of receipt of such refund requests, the Company is generally unable to determine if a refund request is valid and should be accrued. | |
As of March 31, 2014, the Company believes it has an adequate allowance for contractual adjustments relating to all known insurance disputes and refund requests. However, no assurances can be given with respect to such estimates of reimbursements and offsets or the ultimate outcome of any refund requests. | |
In addition to the allowance for contractual adjustments, the Company records an allowance for uncollectible accounts receivable. Uncollectible accounts receivable are primarily a result of non-payment from patients who have been direct billed for co-payments or deductibles, lack of appropriate insurance coverage and disallowances of charges by Third-party Payors. If there is a change to a material insurance provider contract or policy, application by a provider, a decline in the economic condition of providers or a significant turnover of Company billing personnel resulting in diminished collection effectiveness, the estimate of the allowance for uncollectible accounts receivable may not be adequate and may result in an increase in the future. At March 31, 2014 and December 31, 2013, the allowance for uncollectible accounts receivable is $1,837. | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | |
The Company’s financial instruments at March 31, 2014 include cash, accounts receivable and accounts payable, for which current carrying amounts approximate fair value due to their short-term nature. Financial instruments at March 31, 2014 also include the line of credit and notes payable, the carrying value of which approximates fair value because the interest rates on the outstanding borrowings are at rates that approximate market rates for borrowings with similar terms and average maturities. | |
INVENTORY | |
Inventories, which primarily represent finished goods, are valued at the lower of cost (average) or market. Finished goods include products held at the Company’s headquarters and at different locations by health care providers or other parties for rental or sale to patients. Total (gross) inventories at March 31, 2014 included $5,033 of finished goods, $377 of parts, and $893 of supplies. | |
The Company monitors inventory for turnover and obsolescence, and records losses for excess and obsolete inventory as appropriate. The Company provides reserves for estimated excess and obsolete inventories equal to the difference between the costs of inventories on hand and the estimated market value based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. To fulfill orders faster, the Company places a large amount of its inventory with field sales representatives. This increases the sensitivity of these products to obsolescence reserve estimates. As this inventory is not in the Company’s possession, management maintains additional reserves for estimated shrinkage of these inventories based on the Company’s aging. At March 31, 2014, the Company had an allowance for obsolete and damaged inventory of approximately $1,292. The allowance for obsolete and damaged inventory was approximately $1,278 at December 31, 2013. The Company had $703 of open purchase commitments at March 31, 2014. | |
PROPERTY AND EQUIPMENT | |
Property and equipment are stated at cost. Products on rental contracts are placed in property and equipment and depreciated over their estimated useful life. 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 over the useful life of the asset. As rental inventory contributes directly to the revenue generating process, the Company classifies the depreciation of rental inventory in cost of revenue. | |
Repairs and maintenance costs are charged to expense as incurred. | |
INTANGIBLE ASSETS | |
Intangible assets with estimable lives are amortized in a pattern consistent with the asset’s identifiable cash flows or using a straight- line method over their remaining estimated benefit periods if the pattern of cash flows is not estimable. The Company reviews the carrying value of intangible and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of their carrying amounts to the undiscounted cash flows that the asset or asset group is expected to generate. If the carrying amount of the assets exceeds the undiscounted cash flows the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. | |
CAPITALIZED SOFTWARE DEVELOPMENT COSTS | |
The Company capitalizes software development costs incurred during the application development stage related to new software or major enhancements to the functionality of existing software that is developed solely to meet the entity’s internal operational needs and when no substantive plans exist or are being developed to market the software externally. Costs capitalized include external direct costs of materials and services and internal payroll and payroll-related costs. Any costs during the preliminary project stage or related to training or maintenance are expensed as incurred. Capitalization ceases when the software project is substantially complete and ready for its intended use. The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life. When the projects are ready for their intended use, the Company amortizes such costs over their estimated useful lives of five years. | |
STOCK-BASED COMPENSATION | |
The Company accounts for stock-based compensation through recognition of the cost of employee services received in exchange for an award of equity instruments, which is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. The stock-based compensation expenses are recognized over the period during which an employee is required to provide service in exchange for the award (the requisite service period, which in the Company’s case is the same as the vesting period). For awards subject to the achievement of performance metrics, stock-based compensation expense is recognized when it becomes probable that the performance conditions will be achieved. | |
RECENT ACCOUNTING PRONOUNCEMENTS | |
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11 | |
“Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” Under ASU 2013-11, an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. If a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance affects presentation only and, therefore, did not have a material impact on the Company's financial condition, results of operations or cash flows. | |
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have an impact on the Company’s consolidated financial statements. |
Property_and_Equipment
Property and Equipment | 3 Months Ended | |||||||||||
Mar. 31, 2014 | ||||||||||||
Property and Equipment | ' | |||||||||||
(3) PROPERTY AND EQUIPMENT | ||||||||||||
Property and equipment as of March 31, 2014 and December 31, 2013 consist of the following: | ||||||||||||
March 31, | December 31, | Useful | ||||||||||
2014 | 2013 | lives | ||||||||||
(UNAUDITED) | ||||||||||||
Office furniture and equipment | $ | 2,073 | $ | 2,073 | 3-7 years | |||||||
Rental inventory | 2,002 | 2,142 | 5 years | |||||||||
Vehicles | 76 | 76 | 5 years | |||||||||
Leasehold improvements | 874 | 486 | 2-6 years | |||||||||
Assembly equipment | 171 | 171 | 7 years | |||||||||
5,196 | 4,948 | |||||||||||
Less accumulated depreciation | (2,184 | ) | (2,057 | ) | ||||||||
$ | 3,012 | $ | 2,891 | |||||||||
Intangible_Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2014 | |
Intangible Assets | ' |
(4) INTANGIBLE ASSETS | |
Intangible assets as of March 31, 2014 and December 31, 2013, consist of software development costs of $336 and $325, respectively. Accumulated amortization was $168 and $147, respectively. | |
Earnings_Loss_Per_Share
Earnings (Loss) Per Share | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Earnings (Loss) Per Share | ' | |||||||
(5) 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, calculated using the treasury-stock method. | ||||||||
The calculation of basic and diluted loss per share for the three months ended March 31, 2014 and 2013 is as follows: | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Basic: | ||||||||
Net loss applicable to common stockholders | $ | (1,430 | ) | $ | (304 | ) | ||
Weighted average shares outstanding – basic | 31,171,234 | 31,148,234 | ||||||
Net loss per share – basic | $ | (0.05 | ) | $ | (0.01 | ) | ||
Diluted: | ||||||||
Net loss applicable to common stockholders | $ | (1,430 | ) | $ | (304 | ) | ||
Weighted average shares outstanding – basic | 31,171,234 | 31,148,234 | ||||||
Dilutive securities | — | — | ||||||
Weighted average shares outstanding – diluted | 31,171,234 | 31,148,234 | ||||||
Net loss per share – diluted | $ | (0.05 | ) | $ | (0.01 | ) | ||
The effects of potential common stock equivalents related to certain outstanding options for the three months ended March 31, 2014 and 2013 of 1,090,000 and 1,237,000, respectively, have not been included in the computation of diluted net loss per share because the impact of the potential shares would decrease the loss per share. | ||||||||
StockBased_Compensation_Plans
Stock-Based Compensation Plans | 3 Months Ended | |||||||||||||||
Mar. 31, 2014 | ||||||||||||||||
Stock-Based Compensation Plans | ' | |||||||||||||||
(6) STOCK-BASED COMPENSATION PLANS | ||||||||||||||||
The Company has reserved 3,000,000 shares of common stock for issuance under its 2005 Stock Option Plan (the “Option Plan”). Vesting provisions are determined by the Board of Directors. All stock options under the Option Plan expire no later than ten years from the date of grant. | ||||||||||||||||
In the three months ended March 31, 2014 and 2013, the Company recorded compensation expense related to stock options of $31 and $36, respectively. Stock-based compensation recorded in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2014 and 2013 included $2 and $4, respectively, in cost of goods sold and $29 and $32, respectively, in selling, general and administrative expenses. | ||||||||||||||||
In the three months ended March 31, 2014, the Company granted options to purchase up to 25,000 shares of common stock to employees at an exercise price of $0.37 . No options were granted during the three months ended March 31, 2013. | ||||||||||||||||
The Company used the Black Scholes option pricing model to determine the fair value of stock option grants, using the following assumptions during the three months ended March 31, 2014: | ||||||||||||||||
2014 | ||||||||||||||||
Weighted average expected term | 6.25 years | |||||||||||||||
Weighted average volatility | 113% | |||||||||||||||
Weighted average risk-free interest rate | 1.30% | |||||||||||||||
Dividend yield | 0% | |||||||||||||||
A summary of stock option activity under the Option Plan for the three months ended March 31, 2014 is presented below: | ||||||||||||||||
Shares | Weighted | Weighted | Aggregate | |||||||||||||
Under | Average | Average | Intrinsic | |||||||||||||
Option | Exercise | Remaining | Value | |||||||||||||
Price | Contractual | |||||||||||||||
Life | ||||||||||||||||
Outstanding at January 1, 2014 | 2,472,216 | $ | 0.57 | |||||||||||||
Granted | 25,000 | $ | 0.37 | |||||||||||||
Exercised | — | $ | — | |||||||||||||
Forfeited | — | $ | — | |||||||||||||
Outstanding at March 31, 2014 | 2,497,216 | $ | 0.56 | 7.9 years | $ | 263 | ||||||||||
Exercisable at March 31, 2014 | 885,249 | $ | 1.02 | 5.4 years | $ | 10 | ||||||||||
A summary of status of the Company’s non-vested share awards as of and for the three months ended March 31, 2014 is presented below: | ||||||||||||||||
Nonvested Shares | Weighted Average | |||||||||||||||
Under Option | Grant Date Fair Value | |||||||||||||||
Non-vested at January 1, 2014 | 1,663,593 | $ | 0.29 | |||||||||||||
Granted | 25,000 | $ | 0.37 | |||||||||||||
Vested | (76,626 | ) | $ | 0.74 | ||||||||||||
Forfeited | — | $ | — | |||||||||||||
Non-vested at March 31, 2014 | 1,611,967 | $ | 0.56 | |||||||||||||
As of March 31, 2014, the Company had approximately $295 of unrecognized compensation expense related to stock options that will be recognized over a weighted-average period of approximately 3.28 years. |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Fair Value Measurements | ' | |||||||
(7) FAIR VALUE MEASUREMENTS | ||||||||
The Company measures certain assets and liabilities pursuant to accounting guidance which establishes a three-tier fair value hierarchy and prioritizes the inputs used in measuring fair value. Theses tiers include: | ||||||||
— | Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. | |||||||
— | Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. | |||||||
— | Level 3: Unobservable inputs are used when little or no market data is available. | |||||||
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2014, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value: | ||||||||
March 31, | Significant | |||||||
2014 | Unobservable | |||||||
Inputs | ||||||||
(Level 3) | ||||||||
Liabilities: | ||||||||
Contingent consideration | $ | 7 | $ | 7 | ||||
The fair value of the contingent consideration was determined using a discounted cash flow model at the acquisition date and is revalued at each reporting date or more frequently if circumstances dictate based on changes in the discount periods and rates, changes in the timing and amount of the revenue estimates and changes in probability assumptions with respect to the likelihood of achieving the obligations. Contingent payments of $3 were made in April 2014 related to 2013. | ||||||||
Changes in the fair value of these obligations are recorded as income or expense within the line item “Other income (expense)” in the Company’s consolidated statements of operations. Accretion expense related to the increase in the net present value of the contingent liabilities is also included in the line item “Other income (expense)” in the Company’s consolidated statements of operations. The fair value measurement is based on significant inputs not observable in the market, which are referred to as Level 3 inputs. | ||||||||
Changes in the fair value of the Level 3 liabilities for the three months ended March 31, 2014 were not significant. | ||||||||
Income_Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2014 | |
Income Taxes | ' |
(8) INCOME TAXES | |
The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate for the three months ended March 31, 2014 and 2013 was 0% and approximately 37%, respectively. During the three months ended March 31, 2014 the Company generated approximately $535 of deferred tax assets relating primarily to net operating loss carryforwards. However, as realization of these deferred tax assets is not more likely than not, a full valuation allowance was provided against the net deferred tax assets as of March 31, 2014. The Company paid income taxes of $2 during the three months ended March 31, 2014, and received $477 of its income tax refund of $893 as of December 31, 2013, in April 2014. |
Line_of_Credit
Line of Credit | 3 Months Ended |
Mar. 31, 2014 | |
Line of Credit | ' |
(9) LINE OF CREDIT | |
The Company has an asset-backed revolving credit facility of up to $7,000, subject to reserves and reductions to the extent of changes in the Company’s asset borrowing base, under a Loan and Security Agreement as amended, (the “Doral Agreement”) with Doral Healthcare Finance, a division of Doral Money, Inc. Borrowings under the Doral Agreement bear interest at a variable rate equal to the greater of (i) the British Bankers’ Association LIBOR rate as published in The Wall Street Journal for dollar deposits in the amount of $1,000 with a maturity of one month or (ii) 3% per annum, plus, in each case, a margin of 6.75% as of December 31, 2013. The Doral Agreement requires monthly interest payments in arrears on the first date of each month. The Doral Agreement will mature on December 19, 2014. The Company may terminate the Doral Agreement at any time prior to the maturity date upon thirty days’ prior written notice and upon payment in full of all outstanding obligations under the Doral Agreement. If the Company terminates the Doral Agreement, the Company must pay a specified early termination fee. As of March 31, 2014, $5,608 was outstanding under the Doral Agreement and zero was available for borrowing based on the Company’s current borrowing base. | |
The Doral Agreement requires a lockbox arrangement whereby all receipts are swept daily to reduce borrowings outstanding. This arrangement causes the Doral Agreement to be classified as a current liability. | |
As of March 31, 2014, the effective interest rate under the Doral Agreement was 10% (7% interest rate and 3% fees). | |
The Doral Agreement contains certain customary restrictive and financial covenants for asset-backed credit facilities. As of March 31, 2014, the Company was not in compliance with the financial covenants under the Doral Agreement. As a result, all amounts due under the Doral Agreement are callable by the lender. The Company is currently in discussions with the lender and expects to receive a waiver; however, no assurance can be given. If a waiver is not obtained, in addition to demanding immediate payment of amounts outstanding under the Doral Agreement, the lender can restrict or prevent the Company from borrowing while in default, which could have a material adverse impact on the Company’s cash flow and liquidity. |
Concentrations
Concentrations | 3 Months Ended |
Mar. 31, 2014 | |
Concentrations | ' |
(10) CONCENTRATIONS | |
The Company sourced approximately 19% and 23% of its electrotherapy products from one vendor during the three months ended March 31, 2014 and 2013, respectively. Management believes that its relationships with suppliers are good; however, the Company has delayed and extended payments to many of its vendors for cash flow reasons, which has caused many of its vendors to require pre-payment for products or services. If the relationships were to be replaced, there may be a short-term disruption to operations, a period of time in which products may not be available and additional expenses may be incurred. | |
The Company had receivables from a private health insurance carrier at March 31, 2014 and December 31, 2013 that made up approximately 8% and 7%, respectively, of the net accounts receivable balance. |
Litigation
Litigation | 3 Months Ended |
Mar. 31, 2014 | |
Litigation | ' |
(11) LITIGATION | |
From time to time, the Company may become party to litigation and other claims in the ordinary course of business. To the extent that such claims and litigation arise, management would provide for them if losses are determined to be both probable and estimable. | |
The Company is currently not a party to any material pending legal proceedings. |
Segment_Reporting
Segment Reporting | 3 Months Ended | |||||||||||||||
Mar. 31, 2014 | ||||||||||||||||
Segment Reporting | ' | |||||||||||||||
(12) SEGMENT REPORTING | ||||||||||||||||
At March 31, 2014, the Company has determined that it has three reporting segments comprised of the following subsidiaries, ZMI and ZBC, ZND and ZEU, and ZMS. This determination was made based on the nature of the products and services offered to customers or the nature of the function in the organization. The accounting policies for each of these segments are the same as those described in Note 2, and inter-segment transactions are eliminated. | ||||||||||||||||
Net revenue was primarily generated from sales in the United States. | ||||||||||||||||
ZMI & | ZND & | ZMS | TOTAL | |||||||||||||
ZBC | ZEU | |||||||||||||||
THREE MONTHS ENDED MARCH 31, 2014 | ||||||||||||||||
Sales | $ | 3,105 | $ | 62 | $ | - | $ | 3,167 | ||||||||
Gross profit | 2,144 | 26 | - | 2,170 | ||||||||||||
Total assets | 15,291 | 704 | 7 | 16,002 | ||||||||||||
THREE MONTHS ENDED MARCH 31, 2013 | ||||||||||||||||
Sales | $ | 7,606 | 62 | $ | - | $ | 7,668 | |||||||||
Gross profit | 5,430 | 47 | - | 5,477 | ||||||||||||
Total assets | 24,142 | 625 | 24 | 24,791 | ||||||||||||
Significant_Accounting_Policie1
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Principles of Consolidation | ' |
PRINCIPLES OF CONSOLIDATION | |
The accompanying unaudited condensed consolidated financial statements include the accounts of Zynex, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. | |
Noncontrolling Interest | ' |
NONCONTROLLING INTEREST | |
Noncontrolling interest in the equity of a subsidiary is accounted for and reported as stockholders equity. Noncontrolling interest represents the 20% ownership in the Company’s majority-owned subsidiary, ZBC. In 2012, the noncontrolling interest member contributed $10 of property and equipment to ZBC. | |
Use of Estimates | ' |
USE OF ESTIMATES | |
Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant management estimates used in the preparation of the accompanying condensed consolidated financial statements are associated with the allowance for contractual adjustments and uncollectible accounts receivable, the reserve for obsolete and damaged inventory, stock-based compensation, valuation of long-lived assets, and income taxes. | |
Revenue Recognition, Allowance for Contractual Adjustments and Collectability | ' |
REVENUE RECOGNITION, ALLOWANCE FOR CONTRACTUAL ADJUSTMENTS AND COLLECTIBILITY | |
The Company recognizes revenue when each of the following four conditions are met: 1) a contract or sales arrangement exists, 2) products have been shipped and title has transferred, or rental services have been rendered, 3) the price of the products or services is fixed or determinable, and 4) collectability is reasonably assured. Accordingly, the Company recognizes revenue, both rental and sales, when products have been delivered to the patient and the patient’s insurance (if the patient has insurance) has been verified. For medical products that are sold from inventories consigned at clinic locations, the Company recognizes revenue when it receives notice that the product has been prescribed and delivered to the patient and the patient’s insurance coverage has been verified or preauthorization has been obtained from the insurance company, when required. Revenue from the rental of products is normally on a month-to-month basis and is recognized ratably over the products’ rental period. Revenue from sales to distributors is recognized when the Company ships its products, which fulfills its order and transfers title. Revenue is reported net, after adjustments for estimated insurance company or governmental agency (collectively “Third-party Payors”) reimbursement deductions. The deductions are known throughout the health care industry as “contractual adjustments” whereby the Third-party Payors unilaterally reduce the amount they reimburse for the Company’s products. | |
A significant portion of the Company’s revenues are derived, and the related receivables are due, from Third-party Payors. The nature of these receivables within this industry has typically resulted in long collection cycles. The process of determining what products will be reimbursed by Third-party Payors and the amounts that they will reimburse is complex and depends on conditions and procedures that vary among providers and may change from time to time. The Company maintains an allowance for contractual adjustments and records additions to the allowance to account for the risk of nonpayment. Contractual adjustments result from reimbursements from Third-party Payors that are less than amounts claimed or where the amount claimed by the Company exceeds the Third-party Payors’ usual, customary and reasonable reimbursement rate. The Company determines the amount of the allowance, and adjusts it at the end of each reporting period, based on a number of factors, including historical rates of collection, the aging of the receivables, trends in the historical rates of collection and current relationships and experience with the Third-party Payors. If the rates of collection of past-due receivables recorded for previous fiscal periods changes, or if there is a trend in the rates of collection on those receivables, the Company may be required to change the rate at which it provides for additions to the allowance. A change in the rates of the Company’s collections can result from a number of factors, including experience and training of billing personnel, changes in the reimbursement policies or practices of Third-party Payors, or changes in industry rates of reimbursement. Accordingly, changes to the allowance for contractual adjustments, which are recorded in the income statement as a reduction of revenue, have historically fluctuated and may continue to fluctuate significantly from quarter to quarter. | |
Due to the nature of the industry and the reimbursement environment in which the Company operates, estimates are required to record net revenues and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of third-party billing arrangements and the uncertainty of reimbursement amounts for certain products or services from payors or an unanticipated requirements to refund payments previously received may result in adjustments to amounts originally recorded. Due to continuing changes in the health care industry and third-party reimbursement, as well as changes in our billing practices to increase cash collections, it is possible that management’s estimates could change in the near term, which could have an impact on our results of operations and cash flows. Any differences between estimated settlements and final determinations are reflected as an increase or a reduction to revenue in the period when such final determinations are known. | |
The Company frequently receives refund requests from insurance providers relating to specific patients and dates of service. Billing and reimbursement disputes are very common in the Company’s industry. These requests are sometimes related to a limited number of patients or products; at other times, they include a significant number of refund claims in a single request. The Company reviews and evaluates these requests and determines if any refund request is appropriate. The Company also reviews these refund claims when it is rebilling or pursuing reimbursement from that insurance provider. The Company frequently has significant offsets against such refund requests, and sometimes amounts are due to the Company in excess of the amounts of refunds requested by the insurance providers. Therefore, at the time of receipt of such refund requests, the Company is generally unable to determine if a refund request is valid and should be accrued. | |
As of March 31, 2014, the Company believes it has an adequate allowance for contractual adjustments relating to all known insurance disputes and refund requests. However, no assurances can be given with respect to such estimates of reimbursements and offsets or the ultimate outcome of any refund requests. | |
In addition to the allowance for contractual adjustments, the Company records an allowance for uncollectible accounts receivable. Uncollectible accounts receivable are primarily a result of non-payment from patients who have been direct billed for co-payments or deductibles, lack of appropriate insurance coverage and disallowances of charges by Third-party Payors. If there is a change to a material insurance provider contract or policy, application by a provider, a decline in the economic condition of providers or a significant turnover of Company billing personnel resulting in diminished collection effectiveness, the estimate of the allowance for uncollectible accounts receivable may not be adequate and may result in an increase in the future. At March 31, 2014 and December 31, 2013, the allowance for uncollectible accounts receivable is $1,837. | |
Fair Value of Financial Instruments | ' |
FAIR VALUE OF FINANCIAL INSTRUMENTS | |
The Company’s financial instruments at March 31, 2014 include cash, accounts receivable and accounts payable, for which current carrying amounts approximate fair value due to their short-term nature. Financial instruments at March 31, 2014 also include the line of credit and notes payable, the carrying value of which approximates fair value because the interest rates on the outstanding borrowings are at rates that approximate market rates for borrowings with similar terms and average maturities. | |
Inventory | ' |
INVENTORY | |
Inventories, which primarily represent finished goods, are valued at the lower of cost (average) or market. Finished goods include products held at the Company’s headquarters and at different locations by health care providers or other parties for rental or sale to patients. Total (gross) inventories at March 31, 2014 included $5,033 of finished goods, $377 of parts, and $893 of supplies. | |
The Company monitors inventory for turnover and obsolescence, and records losses for excess and obsolete inventory as appropriate. The Company provides reserves for estimated excess and obsolete inventories equal to the difference between the costs of inventories on hand and the estimated market value based upon assumptions about future demand. If future demand is less favorable than currently projected by management, additional inventory write-downs may be required. To fulfill orders faster, the Company places a large amount of its inventory with field sales representatives. This increases the sensitivity of these products to obsolescence reserve estimates. As this inventory is not in the Company’s possession, management maintains additional reserves for estimated shrinkage of these inventories based on the Company’s aging. At March 31, 2014, the Company had an allowance for obsolete and damaged inventory of approximately $1,292. The allowance for obsolete and damaged inventory was approximately $1,278 at December 31, 2013. The Company had $703 of open purchase commitments at March 31, 2014. | |
Property and Equipment | ' |
PROPERTY AND EQUIPMENT | |
Property and equipment are stated at cost. Products on rental contracts are placed in property and equipment and depreciated over their estimated useful life. 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 over the useful life of the asset. As rental inventory contributes directly to the revenue generating process, the Company classifies the depreciation of rental inventory in cost of revenue. | |
Repairs and maintenance costs are charged to expense as incurred. | |
Intangible Assets | ' |
INTANGIBLE ASSETS | |
Intangible assets with estimable lives are amortized in a pattern consistent with the asset’s identifiable cash flows or using a straight- line method over their remaining estimated benefit periods if the pattern of cash flows is not estimable. The Company reviews the carrying value of intangible and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of their carrying amounts to the undiscounted cash flows that the asset or asset group is expected to generate. If the carrying amount of the assets exceeds the undiscounted cash flows the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. | |
Capitalized Software Development Costs | ' |
CAPITALIZED SOFTWARE DEVELOPMENT COSTS | |
The Company capitalizes software development costs incurred during the application development stage related to new software or major enhancements to the functionality of existing software that is developed solely to meet the entity’s internal operational needs and when no substantive plans exist or are being developed to market the software externally. Costs capitalized include external direct costs of materials and services and internal payroll and payroll-related costs. Any costs during the preliminary project stage or related to training or maintenance are expensed as incurred. Capitalization ceases when the software project is substantially complete and ready for its intended use. The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life. When the projects are ready for their intended use, the Company amortizes such costs over their estimated useful lives of five years. | |
Stock-based Compensation | ' |
STOCK-BASED COMPENSATION | |
The Company accounts for stock-based compensation through recognition of the cost of employee services received in exchange for an award of equity instruments, which is measured based on the grant date fair value of the award that is ultimately expected to vest during the period. The stock-based compensation expenses are recognized over the period during which an employee is required to provide service in exchange for the award (the requisite service period, which in the Company’s case is the same as the vesting period). For awards subject to the achievement of performance metrics, stock-based compensation expense is recognized when it becomes probable that the performance conditions will be achieved. | |
Recent Accounting Pronouncements | ' |
RECENT ACCOUNTING PRONOUNCEMENTS | |
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11 | |
“Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” Under ASU 2013-11, an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. If a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance affects presentation only and, therefore, did not have a material impact on the Company's financial condition, results of operations or cash flows. | |
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have an impact on the Company’s consolidated financial statements. |
Property_and_Equipment_Tables
Property and Equipment (Tables) | 3 Months Ended | |||||||||||
Mar. 31, 2014 | ||||||||||||
Property and Equipment | ' | |||||||||||
Property and equipment as of March 31, 2014 and December 31, 2013 consist of the following: | ||||||||||||
March 31, | December 31, | Useful | ||||||||||
2014 | 2013 | lives | ||||||||||
(UNAUDITED) | ||||||||||||
Office furniture and equipment | $ | 2,073 | $ | 2,073 | 3-7 years | |||||||
Rental inventory | 2,002 | 2,142 | 5 years | |||||||||
Vehicles | 76 | 76 | 5 years | |||||||||
Leasehold improvements | 874 | 486 | 2-6 years | |||||||||
Assembly equipment | 171 | 171 | 7 years | |||||||||
5,196 | 4,948 | |||||||||||
Less accumulated depreciation | (2,184 | ) | (2,057 | ) | ||||||||
$ | 3,012 | $ | 2,891 | |||||||||
Earnings_Loss_Per_Share_Tables
Earnings (Loss) Per Share (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Calculation of Basic and Diluted Earnings Per Share | ' | |||||||
The calculation of basic and diluted loss per share for the three months ended March 31, 2014 and 2013 is as follows: | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Basic: | ||||||||
Net loss applicable to common stockholders | $ | (1,430 | ) | $ | (304 | ) | ||
Weighted average shares outstanding – basic | 31,171,234 | 31,148,234 | ||||||
Net loss per share – basic | $ | (0.05 | ) | $ | (0.01 | ) | ||
Diluted: | ||||||||
Net loss applicable to common stockholders | $ | (1,430 | ) | $ | (304 | ) | ||
Weighted average shares outstanding – basic | 31,171,234 | 31,148,234 | ||||||
Dilutive securities | — | — | ||||||
Weighted average shares outstanding – diluted | 31,171,234 | 31,148,234 | ||||||
Net loss per share – diluted | $ | (0.05 | ) | $ | (0.01 | ) | ||
StockBased_Compensation_Plans_
Stock-Based Compensation Plans (Tables) | 3 Months Ended | |||||||||||||||
Mar. 31, 2014 | ||||||||||||||||
Fair Value of Stock Options Grants | ' | |||||||||||||||
The Company used the Black Scholes option pricing model to determine the fair value of stock option grants, using the following assumptions during the three months ended March 31, 2014: | ||||||||||||||||
2014 | ||||||||||||||||
Weighted average expected term | 6.25 years | |||||||||||||||
Weighted average volatility | 113% | |||||||||||||||
Weighted average risk-free interest rate | 1.30% | |||||||||||||||
Dividend yield | 0% | |||||||||||||||
Summary of Stock Option Activity Under the Option Plan | ' | |||||||||||||||
A summary of stock option activity under the Option Plan for the three months ended March 31, 2014 is presented below: | ||||||||||||||||
Shares | Weighted | Weighted | Aggregate | |||||||||||||
Under | Average | Average | Intrinsic | |||||||||||||
Option | Exercise | Remaining | Value | |||||||||||||
Price | Contractual | |||||||||||||||
Life | ||||||||||||||||
Outstanding at January 1, 2014 | 2,472,216 | $ | 0.57 | |||||||||||||
Granted | 25,000 | $ | 0.37 | |||||||||||||
Exercised | — | $ | — | |||||||||||||
Forfeited | — | $ | — | |||||||||||||
Outstanding at March 31, 2014 | 2,497,216 | $ | 0.56 | 7.9 years | $ | 263 | ||||||||||
Exercisable at March 31, 2014 | 885,249 | $ | 1.02 | 5.4 years | $ | 10 | ||||||||||
Summary of Status of the Company's Non-Vested Shares Under Option | ' | |||||||||||||||
A summary of status of the Company’s non-vested share awards as of and for the three months ended March 31, 2014 is presented below: | ||||||||||||||||
Nonvested Shares | Weighted Average | |||||||||||||||
Under Option | Grant Date Fair Value | |||||||||||||||
Non-vested at January 1, 2014 | 1,663,593 | $ | 0.29 | |||||||||||||
Granted | 25,000 | $ | 0.37 | |||||||||||||
Vested | (76,626 | ) | $ | 0.74 | ||||||||||||
Forfeited | — | $ | — | |||||||||||||
Non-vested at March 31, 2014 | 1,611,967 | $ | 0.56 | |||||||||||||
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Fair Value of Assets and Liabilities on a Recurring Basis | ' | |||||||
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2014, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value: | ||||||||
March 31, | Significant | |||||||
2014 | Unobservable | |||||||
Inputs | ||||||||
(Level 3) | ||||||||
Liabilities: | ||||||||
Contingent consideration | $ | 7 | $ | 7 | ||||
Segment_Reporting_Tables
Segment Reporting (Tables) | 3 Months Ended | |||||||||||||||
Mar. 31, 2014 | ||||||||||||||||
Summarized Information about Reported Segment | ' | |||||||||||||||
Net revenue was primarily generated from sales in the United States. | ||||||||||||||||
ZMI & | ZND & | ZMS | TOTAL | |||||||||||||
ZBC | ZEU | |||||||||||||||
THREE MONTHS ENDED MARCH 31, 2014 | ||||||||||||||||
Sales | $ | 3,105 | $ | 62 | $ | - | $ | 3,167 | ||||||||
Gross profit | 2,144 | 26 | - | 2,170 | ||||||||||||
Total assets | 15,291 | 704 | 7 | 16,002 | ||||||||||||
THREE MONTHS ENDED MARCH 31, 2013 | ||||||||||||||||
Sales | $ | 7,606 | 62 | $ | - | $ | 7,668 | |||||||||
Gross profit | 5,430 | 47 | - | 5,477 | ||||||||||||
Total assets | 24,142 | 625 | 24 | 24,791 | ||||||||||||
Unaudited_Condensed_Consolidat1
Unaudited Condensed Consolidated Financial Statements and Managements' Plans (Details Textual) (USD $) | 3 Months Ended | 12 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
Unaudited Condensed Consolidated Financial Statements (Textual) [Abstract] | ' | ' | ' |
Percentage of limited liability | 80.00% | ' | ' |
Negative cash flows from operations | $3 | $993 | $382 |
Net loss | -1,444 | -310 | -7,301 |
Fixed expenses reduced by cutting annual employee costs through headcount reduction | 4,200 | ' | ' |
Maximum borrowings under line of credit | 7,000 | ' | ' |
Line of credit | 5,608 | ' | 5,820 |
Line of credit current borrowing capacity | $0 | ' | ' |
Significant_Accounting_Policie2
Significant Accounting Policies (Details Textual) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 |
Significant Accounting Policies [Abstract] | ' | ' | ' |
Equity and Noncontrolling interest | ' | 20.00% | ' |
Issuance of noncontrolling interest in ZBC | $10 | ' | ' |
Allowance for uncollectible accounts receivable | ' | 1,837 | 1,837 |
Inventory finished goods | ' | 5,033 | ' |
Inventory parts | ' | 377 | ' |
Inventory supplies | ' | 893 | ' |
Reserve for obsolete and damaged inventory | ' | 1,292 | 1,278 |
Open purchase commitments | ' | $703 | ' |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Gross | $5,196 | $4,948 |
Less accumulated depreciation | -2,184 | -2,057 |
Property and Equipment, Net | 3,012 | 2,891 |
Office furniture and equipment | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Gross | 2,073 | 2,073 |
Office furniture and equipment | Minimum | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Useful Life | '3 years | ' |
Office furniture and equipment | Maximum | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Useful Life | '7 years | ' |
Rental inventory | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Gross | 2,002 | 2,142 |
Property and Equipment, Useful Life | '5 years | ' |
Vehicles | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Gross | 76 | 76 |
Property and Equipment, Useful Life | '5 years | ' |
Leasehold improvements | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Gross | 874 | 486 |
Leasehold improvements | Minimum | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Useful Life | '2 years | ' |
Leasehold improvements | Maximum | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Useful Life | '6 years | ' |
Assembly equipment | ' | ' |
Property Plant And Equipment [Line Items] | ' | ' |
Property and Equipment, Gross | $171 | $171 |
Property and Equipment, Useful Life | '7 years | ' |
Intangible_Assets_Details_Text
Intangible Assets (Details Textual) (Software development costs, USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Software development costs | ' | ' |
Finite Lived Intangible Assets [Line Items] | ' | ' |
Intangible assets, gross | $336 | $325 |
Accumulated amortization | $168 | $147 |
Earnings_Loss_Per_Share_Detail
Earnings (Loss) Per Share (Details) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Basic: | ' | ' |
Net loss applicable to common stockholders | ($1,430) | ($304) |
Weighted average shares outstanding – basic | 31,171,234 | 31,148,234 |
Net loss per share – basic | ($0.05) | ($0.01) |
Diluted: | ' | ' |
Net loss applicable to common stockholders | ($1,430) | ($304) |
Weighted average shares outstanding – basic | 31,171,234 | 31,148,234 |
Dilutive securities | ' | ' |
Weighted average shares outstanding – diluted | 31,171,234 | 31,148,234 |
Net loss per share – diluted | ($0.05) | ($0.01) |
Earnings_Loss_Per_Share_Detail1
Earnings (Loss) Per Share (Details Textual) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Earnings Per Share [Abstract] | ' | ' |
Antidilutive securities excluded from computation of earnings per share | 1,090,000 | 1,237,000 |
StockBased_Compensation_Plans_1
Stock-Based Compensation Plans (Details Textual) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Stock-based compensation plans [Abstract] | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 3,000,000 | ' |
Stock Options Under Option Plan Maximum Expiry Period | '10 years | ' |
Stock Based Compensation Plans (Additional Textual) [Abstract] | ' | ' |
Employee stock-based compensation expense | $31 | $36 |
Granted options to purchase of common stock | 25,000 | 0 |
Granted options to purchase of common stock, exercise price | $0.37 | ' |
Unrecognized compensation expense related to stock options | 295 | ' |
Weighted-average period of unrecognized compensation expense related to stock option | '3 years 3 months 11 days | ' |
Cost of Sales | ' | ' |
Stock-based compensation plans [Abstract] | ' | ' |
Stock based compensation including cost of good sold | 2 | 4 |
Selling, General and Administrative Expenses | ' | ' |
Stock-based compensation plans [Abstract] | ' | ' |
Stock based compensation including cost of good sold | $29 | $32 |
StockBased_Compensation_Plans_2
Stock-Based Compensation Plans (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Fair value of stock option grants | ' |
Weighted average expected term | '6 years 3 months |
Weighted average volatility | 113.00% |
Weighted average risk-free interest rate | 1.30% |
Dividend yield | 0.00% |
StockBased_Compensation_Plans_3
Stock-Based Compensation Plans (Details 1) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Summary of stock option activity under the option Plan | ' | ' |
Shares under option outstanding beginning balance | 2,472,216 | ' |
Shares under option, granted | 25,000 | 0 |
Shares under option, exercised | ' | ' |
Shares under option, forfeited | ' | ' |
Shares under option outstanding ending balance | 2,497,216 | ' |
Shares under option, exercisable ending balance | 885,249 | ' |
Weighted average exercise price outstanding beginning balance | $0.57 | ' |
Weighted average exercise price, granted | $0.37 | ' |
Weighted average exercise price, exercised | ' | ' |
Weighted average exercise price, forfeited | ' | ' |
Weighted average exercise price outstanding ending balance | $0.56 | ' |
Weighted average exercise price, exercisable ending balance | $1.02 | ' |
Outstanding, weighted average exercise remaining contractual life | '7 years 10 months 24 days | ' |
Exercisable, weighted average exercise remaining contractual life | '5 years 4 months 24 days | ' |
Outstanding aggregate intrinsic value | $263 | ' |
Exercisable aggregate intrinsic value | $10 | ' |
StockBased_Compensation_Plans_4
Stock-Based Compensation Plans (Details 2) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Summary of status of the Company's non-vested share awards | ' |
Nonvested shares under option at January 1, 2014 | 1,663,593 |
Nonvested share under option, granted | 25,000 |
Nonvested share under option, vested | -76,626 |
Nonvested share under option, forfeited | ' |
Nonvested shares under option at March 31, 2014 | 1,611,967 |
Weighted average grant date fair value at January 1, 2014 | $0.29 |
Weighted average grant date fair value, granted | $0.37 |
Weighted average grant date fair value, vested | $0.74 |
Weighted average grant date fair value, forfeited | ' |
Weighted average grant date fair value at March 31, 2014 | $0.56 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (Fair Value, Measurements, Recurring, USD $) | Mar. 31, 2014 |
In Thousands, unless otherwise specified | |
Liabilities: | ' |
Contingent consideration | $7 |
Fair Value, Inputs, Level 3 | ' |
Liabilities: | ' |
Contingent consideration | $7 |
Fair_Value_Measurements_Detail1
Fair Value Measurements (Details Textual) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2014 |
Fair Value Measurements [Abstract] | ' |
Contingent payments | $3 |
Income_Taxes_Details_Textual
Income Taxes (Details Textual) (USD $) | 3 Months Ended | |||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Apr. 30, 2014 |
Subsequent Event | ||||
Income taxes (Textual) [Abstract] | ' | ' | ' | ' |
Statutory rate | 0.00% | 37.00% | ' | ' |
Deferred tax assets related to net operating loss carryforwards | $535 | ' | ' | ' |
Income taxes paid (including interest and penalties) | 2 | 427 | ' | ' |
State tax refunds | ' | ' | ' | 477 |
Expected net income tax refund | ' | ' | $893 | ' |
Line_of_Credit_Details_Textual
Line of Credit (Details Textual) (USD $) | 3 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Line of Credit Facility [Abstract] | ' | ' |
Maximum borrowings under line of credit | $7,000 | ' |
Line of Credit (Additional Textual) [Abstract] | ' | ' |
Dollar deposits in amount | ' | 1,000 |
Base rate for variable interest rate for borrowings | ' | 3.00% |
Basis spread on variable interest rate | ' | 6.75% |
Line of credit agreement maturity notice period | '30 days | ' |
Date of Maturity | 19-Dec-14 | ' |
Dollar deposit maturity period | '1 month | ' |
RLOC | ' | ' |
Line of Credit Facility [Abstract] | ' | ' |
Maximum borrowings under line of credit | 7,000 | ' |
Interest rate description | 'LIBOR rate as published in The Wall Street Journal for dollar deposits in the amount of $1,000 with a maturity of one month or (ii) 3% per annum, plus, in each case, a margin of 6.75% as of December 31, 2013. | ' |
Outstanding amount on the Credit Agreement | 5,608 | ' |
Remaining amount available for borrowing | $0 | ' |
Effective interest rate under the Credit Agreement | 10.00% | ' |
Interest rate | 7.00% | ' |
Fees include in effective interest rate under the credit agreement | 3.00% | ' |
Concentrations_Details_Textual
Concentrations (Details Textual) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Line of Credit Facility [Abstract] | ' | ' | ' |
Purchased electrotherapy products Percentage | 19.00% | 23.00% | ' |
Accounts receivable received by the company from a private health insurance company | 8.00% | ' | 7.00% |
Segment_Reporting_Details_Text
Segment Reporting (Details Textual) | 3 Months Ended |
Mar. 31, 2014 | |
Segment | |
Segment Reporting (Textual) [Abstract] | ' |
Number of reporting segments | 3 |
Segment_Reporting_Details
Segment Reporting (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
Segment Reporting Information [Line Items] | ' | ' | ' |
Sales | $3,167 | $7,668 | ' |
Gross profit | 2,170 | 5,477 | ' |
Total assets | 16,002 | ' | 17,221 |
Reporting Segments | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' |
Sales | 3,167 | 7,668 | ' |
Gross profit | 2,170 | 5,477 | ' |
Total assets | 16,002 | 24,791 | ' |
Reporting Segments | ZMI & ZBC | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' |
Sales | 3,105 | 7,606 | ' |
Gross profit | 2,144 | 5,430 | ' |
Total assets | 15,291 | 24,142 | ' |
Reporting Segments | ZND & ZEU | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' |
Sales | 62 | 62 | ' |
Gross profit | 26 | 47 | ' |
Total assets | 704 | 625 | ' |
Reporting Segments | ZMS | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' |
Total assets | $7 | $24 | ' |