U.S. SECURITIES AND EXCHANGE COMMISSION Washington,
D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006
------------------
Commission File Number: 33-26787-D
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Zynex Medical Holdings, Inc.
----------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 33-26787-D 90-0214497
---------------------------------- -------------- ---------------------
State or Other Jurisdiction Commission File IRS Employer
of Incorporation or Organization) Number Identification Number
8100 Southpark Way, Suite A-9
Littleton, Colorado 80120
-----------------------------------------------
Address of Principal Executive Offices Zip Code
(303) 703-4906
------------------------------
Registrant's Telephone Number,
Including Area Code
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes[X] No[ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of April 28, 2006 23,243,923 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
ZYNEX MEDICAL HOLDINGS, INC.
FORM 10-QSB
INDEX
Page
Number
------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet - March 31, 2006 3
Condensed Consolidated Statements of Operations -
Quarters Ended March 31, 2006 and 2005 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2006 and 2005 5
Condensed Consolidated Statement of Stockholders' Equity-
Three Months Ended March 31, 2006 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operations 14
Item 3. Controls and Procedures 15
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds 16
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits 16
SIGNATURES 17
Zynex Medical Holdings, Inc.
Condensed Consolidated Balance Sheet
March 31, 2006
Current Assets:
Cash and cash equivalents 143,609
Receivables, less allowance for uncollectible
accounts of $828,959 814,267
Inventory 377,850
Deferred consulting fees and other 18,416
Prepaid Expenses 22,463
Other Current Assets 1,068
-----------
Total Current Assets 1,377,673
Property and equipment, less accumulated
depreciation of 180,017 164,629
Deposits 10,940
-----------
Total Assets 1,553,242
===========
Current Liabilities:
Notes Payable 214,240
Capital Lease 14,691
Loans from stockholder 65,290
Accounts payable 239,867
Accrued payroll and payroll taxes 47,824
Other accrued liabilities 91,671
-----------
Total current liabilities 673,583
Long Term Liabilities:
Notes payable, less current maturities 415,905
Loans from stockholder 26,864
Capital lease, less current maturities 41,092
-----------
Total Liabilities 1,157,444
Stockholders' Equity:
Preferred stock, $0.001 par value,
10,000,000 authorized, no shares
issued and outstanding --
Common stock, $0.001 par value,
100,000,000 authorized,
23,232,018 shares
issued and outstanding 23,232
Additional paid-in capital 1,484,845
Accumulated deficit (1,112,279)
-----------
Total stockholders' equity 395,798
-----------
1,553,242
===========
See accompanying notes to financial statements.
3
Zynex Medical Holdings, Inc.
Condensed Consolidated Statements of Operations
Quarter Ended March 31,
--------------------------
2006 2005
----------- -----------
Net sales and rental income 505,091 544,943
Cost of sales and rentals 63,827 80,145
----------- -----------
Gross Profit 441,264 464,798
Operating expenses:
Selling, general and administrative 477,618 389,007
Depreciation 15,153 16,027
----------- -----------
492,771 405,034
Income (loss) from operations (51,507) 59,764
Interest and other income (expense) (13,318) (3,684)
----------- -----------
Income (loss) before income taxes (64,825) 56,080
Provision (benefit) for income taxes -- --
----------- -----------
Net income (loss) (64,825) 56,080
Net income (loss) per common and common
equivalent share
Basic -- --
Diluted -- --
Weighted average number of shares outstanding
Basic 23,208,748 23,070,377
Diluted 23,208,748 23,136,558
See accompanying notes to financial statements.
4
Zynex Medical Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
Quarter Ended March 31,
-----------------------
2006 2005
-------- --------
Cash flows from operating activities:
Net income (loss) (64,825) 56,080
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operations:
Depreciation 15,153 16,027
Issuance of stock for consulting services 15,000 --
Amortization of deferred consulting fees and other 13,873 --
Employee stock option expense 4,854 --
Changes in operating assets and liabilities:
Accounts receivable (119,375) (149,956)
Inventory 8,269 (65,472)
Refundable income taxes 7,586 3,847
Other current assets 364 (1,359)
Prepaid Assets (9,339) --
Deposits -- 3,532
Bank overdraft -- 26,192
Accounts payable (42,178) 120,322
Accrued Liabilities 17,360 21,515
-------- --------
Net cash (used in) provided by operating activities (153,258) 30,728
Cash flows from investing activities:
Purchase of equipment -- (17,238)
-------- --------
Net cash (used in) investing activities -- (17,238)
Cash flows from financing activities:
Payments on notes payable and capital lease (39,040) (28,568)
Proceeds from loan payable 240,000
Proceeds from loans from stockholder 107,000 12,000
Repayment of loans from stockholder (29,826) --
-------- --------
Net cash provided by (used in) financing activities 278,134 (16,568)
Increase (decrease) in cash and cash equivalents 124,876 (3,078)
Cash and cash equivalents at beginning of period 18,733 3,078
-------- --------
Cash and cash equivalents at end of period 143,609 --
======== ========
Supplemental cash flow information:
Interest paid 14,055 5,144
See accompanying notes to financial statements.
5
Zynex Medical Holdings, Inc.
Condensed Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 2006
(unaudited)
Additional
Number Paid in Accumulated
of Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
December 31, 2005 23,199,421 $ 23,199 $ 1,465,024 $(1,047,454) $ 440,769
Issuance of Common stock for
consulting services 32,597 33 14,967 -- 15,000
Employee stock
option expense -- -- 4,854 -- 4,854
Net Income -- -- -- (64,825) (64,825)
----------- ----------- ----------- ----------- -----------
March 31, 2006 23,232,018 23,232 1,484,845 (1,112,279) 395,798
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
6
ZYNEX MEDICAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of Business
Zynex Medical Holdings, Inc. ("Zynex" or the "Company") engineers, manufactures,
markets and sells its own design of FDA cleared (1) standard electrotherapy
medical devices for pain relief / pain management, and (2) the NeuroMove(TM)
medical device for stroke and spinal cord injury ("SCI") rehabilitation.
2. Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited
pursuant to the rules and regulations of the Securities and Exchange Commission
and in accordance with accounting principles for interim financial information.
In the opinion of management, these condensed consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to fairly state the financial position of the Company as of March 31,
2006 and the results of its operations for the quarters ended March 31, 2006 and
2005, and its cash flows for the quarters ended March 31, 2006 and 2005.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Furthermore, these financial statements should
be read in conjunction with Zynex Medical Holdings, Inc.'s audited financial
statements at December 31, 2005 included in the Company's Form 10-KSB filed
April 18, 2006.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities as well as disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
Certain reclassifications have been made to conform previously reported data to
the current presentation. These reclassifications have no effect on net income
(loss), financial position or cash flows as previously reported. During the
quarter ended March 31, 2006 the Company changed its classification of freight
out costs from cost of sales and rentals to selling, general and administrative
expenses as management considers these costs to be part of its marketing program
and thus they believe it is preferable to classify these costs as a component of
selling, general and administrative expenses. Freight costs included in selling,
general and administrative expenses during the three months ended March 31, 2006
and 2005 amounted to $8,942 and 6,967, respectively.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which is a revision
of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS 123R supersedes
APB Opinion No. 25, "Accounting for Stock Issued to Employees" and amends SFAS
No. 95, "Statement of Cash Flows". SFAS 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions and requires all share-based payments to employees, including
grants of employee stock options, to be recognized as additional compensation
expense in the financial statements based on the calculated fair value of the
awards. SFAS 123R also requires the benefits of tax deductions in excess of
recognized compensation costs to be reported as a financing cash flow. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. We adopted this statement effective for our
fiscal year beginning January 1, 2006. We have described the impact of adopting
SFAS 123R in our condensed consolidated financial statements below.
7
ZYNEX MEDICAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Stock Based Compensation
The Company has a 2005 Stock Option Plan (the "Option Plan") and has 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 no
later than ten (10) years from the date of grant.
Effective January 1, 2006, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"),
using the modified prospective method. 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. SFAS 123R also requires the stock option compensation
expense to be recognized over the period during which an employee is required to
provide service in exchange for the award (the vesting period). Prior to our
adopting SFAS 123R, we accounted for our 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 is
recorded when the terms of the award are fixed and the exercise price of the
employee stock option equals or exceeds the fair value of the underlying stock
on the date of grant. We adopted the disclosure-only provision of SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123").
In the first quarter of 2006, the Company recorded compensation expense related
to stock options that increased the loss from operations by $4,854 and its net
loss by $4,854. The stock option compensation expense was included in selling,
general and administrative expenses in the accompanying condensed consolidated
statement of operations.
There were no options granted during the three months ended March 31, 2006. The
fair value of stock options at the date of grant during the three months ended
March 31, 2005 was $0.207. The Company used the following assumptions to
determine the fair value of stock option grants during the three months ended
March 31, 2005:
Expected life 2 years
Volatility 139%
Risk-free interest rate 4.95%
Dividend yield 0
The expected life of stock options represents the period of time that the stock
options granted are expected to be outstanding based on historical exercise
trends. 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.
A summary of stock option activity for the three months ended March 31,
2006 is presented below:
8
ZYNEX MEDICAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Weighed
Weighted Average
Shares Average Remaining
Under Exercise Contractual
Option Price Life
-------- -------- --------
Outstanding at January 1, 2006 520,670 $ 0.28 9 years
Granted -- -- --
Exercised -- --
Forfeited (12,000) 0.40 9 years
-------- -------- --------
Outstanding at March 31, 2006 508,670 $ 0.27 9 years
======== ======== ========
Exercisable at March 31, 2006 222,000 $ 0.23 9 years
======== ======== ========
The total fair value of stock options that vested during the three months ended
March 31, 2006 and 2005 was $32,354 and $0.00, respectively. The average grant
date fair value of options issued during the three months ended March 31, 2005
was $19,458. A summary of the status of the Company's nonvested shares as of
March 31, 2006, and changes during the period ended March 31, 2006 is presented
below.
Nonvested Weighted
Shares Average
Under Grant Date
Nonvested Shares Option Fair Value
---------------------------------------------------------------
Nonvested at January 1, 2006 345,670 $ 0.26
Granted -- --
Vested (47,000) 0.17
Forfeited (12,000) 0.26
--------- ---------
Nonvested at March 31, 2006 286,670 $ 0.26
========== =========
As of March 31, 2006, we had $34,365 of unrecognized compensation cost related
to stock options that will be recognized over a weighted average period of
approximately 3.5 years.
Prior to January 1, 2006, we accounted for stock-based compensation plans under
APB 25. We adopted the disclosure-only provision of SFAS 123. Had compensation
expense for stock option grants been determined based on the fair value at the
grant dates consistent with the method prescribed by SFAS 123, our net income
and net income per share would have been adjusted to the pro forma amounts for
the three months ended March 31, 2005, as indicated below:
9
ZYNEX MEDICAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Three Months
Ended
March 31, 2005
--------------
Net income as reported $ 56,080
Deduct: Total stock-based
employee compensation
expense determined
under fair value based
method for all awards 1,216
-------------
Pro forma net income $ 54,864
=============
Income per share:
Basic - as reported $ 0.00
=============
Diluted - as reported $ 0.00
=============
Basic - pro forma $ 0.00
=============
Diluted - pro forma $ 0.00
=============
10
ZYNEX MEDICAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Recent Events:
As reported in the December 31, 2005 Form 10-KSB, the Company executed a
$400,000 term loan agreement with Silicon Valley Bank, Santa Clara, CA and
Boulder, CO on September 29, 2005 and a Default Waiver and First Amendment for
an additional $240,000 term loan with Silicon Valley Bank on March 6, 2006 (Note
4). The Company believes these loans, coupled with cash from operations and, if
needed, additional loans from Mr. Thomas Sandgaard, Chairman, Chief Executive
Officer and majority shareholder, will provide the funds necessary to continue
its operations as a going concern.
3. 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. For the three months ended March 31, 2006, the basic and diluted
loss per share is the same, as the impact of potential dilutive common shares is
anti-dilutive.
11
ZYNEX MEDICAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The calculation of basic and diluted earnings per share for the three months
ended March 31, 2005 is as follows:
BASIC
Three Months Ended
March 31, 2005
-------------
Net (loss) income applicable to
common stockholders - basic $ 56,080
============
Weighted average shares outstanding - basic 23,070,377
============
Net income per share - basic $ 0.00
============
DILUTED
Net (loss) income applicable to common
stockholders - diluted $ 56,080
============
Weighted average shares outstanding - basic 23,070,377
Dilutive securities 66,181
------------
Weighted average shares outstanding - diluted 23,136,558
============
Net income per share - diluted $ 0.00
============
4. Borrowings
Notes Payable:
On March 15, 2006 Zynex received a 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 new loan bears interest at a per annum
fixed rate of 8.48%. Zynex will repay the loan in 36 equal monthly payments of
principal and interest, beginning April 1, 2006. All other terms and conditions
are as stated in the September 29, 2006 loan agreement. The new loan is also
guaranteed by Zynex Chairman, President, Chief Executive Officer and major
shareholder Thomas Sandgaard and is collateralized by a first security interest
in accounts, inventory, chattel paper, equipment, fixtures, general intangibles,
including intellectual property and other assets.
12
ZYNEX MEDICAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Loans from stockholder:
Effective March 1, 2006, a previously non-interest bearing loan by Thomas
Sandgaard 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.
During the three months ended March 31, 2006, Mr. Sandgaard loaned the Company
$108,400, 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. The
remaining $58,400 was represented by 8.25% demand notes and will be repaid as
the Company's cash position and its financing covenants allow. At March 31,
2006, $92,154 loans from stockholder remained outstanding.
5. Stockholders' Equity
For the quarter ended March 31, 2006, the Company issued 32,597 shares of common
stock to investor relations consultants for services performed, at prices
ranging from $0.44 to $0.4825 per share.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following information should be read in conjunction with the Company's
condensed consolidated financial statements and related footnotes contained in
this report.
Results of Operations
Gross and Net Sales and Rental Income. Gross sales and rental income for the
quarters ended March 31, 2006 and 2005 were $877,504 and $865,395, respectively,
an increase of $12,109, or 1.4%%. Net sales and rental income for the quarters
ended March 31, 2006 and 2005 were $505,090 and $544,943, respectively, a
decrease of $39,853, or 7.3%. The increase in gross sales and rental income for
the quarter ended March 31, 2006 compared to the quarter ended March 31, 2005
was due primarily to greater awareness of the Company's products by end users
and physicians because of the Company's 2005 and 2006 marketing investments,
growing market penetration and increased rental income from the greater number
of Zynex products placed in use during the prior periods. The decrease in net
revenue for the quarter ended March 31, 2006 compared to the quarter ended March
31, 2005 was primarily due to a $67,457 increase in the reserve for contractual
adjustments (i.e., estimated insurance company adjustments) for the quarter
ended March 31, 2006, coupled with a first quarter 2005 reduction of $69,000 to
an accounts receivable reserve for NeuroMove Medicare accounts. Both the reserve
and the NeuroMove Medicare accounts were eliminated September 30, 2005.
Gross Profit. Gross profit for the quarter ended March 31, 2006 was $441,264 or
87.4% of net revenue, a decrease of $23,534, or 5.1%, from the gross profit of
$467,798 or 85.3% of net revenue for the quarter ended March 31, 2005. The
decrease in gross profit for the quarter ended March 31, 2006, as compared with
the same period last year, is due to the reduction in net sales and rental
income resulting from an increase in contractual adjustments as discussed above.
Gross profit as a percent of net revenue for the quarter ended March 31, 2006 is
greater than for the like period in 2005 because rental revenue, which maintains
a higher profit margin, represents a larger percentage of total revenue than in
the prior period.
Selling, General and Administrative. Selling, general and administrative
expenses for the quarter ended March 31, 2006 were $492,771, an increase of
$87,737 or 21.7%, compared to $405,034 for the same period last year. The
increase was primarily due to increases in commissions, in part because of
certain adjustments for commissions paid in 2005 for sales made in 2004, public
company and consulting expenses, and a small payroll increase, offset by
decreases in advertising, marketing and promotion, insurance, and temporary
services expenses.
Interest and other income (expense). Interest and other income (expense) were
($13,318) for the quarter ended March 31, 2006, an increase of $7,349 compared
to ($5,969) for the same period last year. The increase resulted primarily from
an increase in the Company's debt during the period.
Liquidity and Capital Resources. We expect that our cash requirements will
increase as our operations expand. Based on the Company's results for the first
three months of 2006, our projected revenue through 2006, our $400,000 in 2005
and $240,000 in 2006 working capital bank loans and working capital loans from
Thomas Sandgaard, of which $92,154 are outstanding as of March 31, 2006, we
believe available cash will be adequate to meet our requirements for at least
the balance of 2006. However, to fully implement our business plan through 2006
and subsequent periods, we need to raise additional equity or debt financing. To
achieve this objective we are in discussions with potential investors and
investment bankers that may provide long term funding to further assist in
executing our business plan. 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.
14
Contingencies such as unanticipated shortfalls in revenues or increases in
expenses could affect our projected revenue, cash resulting from operations and
liquidity and thus we could possibly be in need of additional external financing
Cash used in operating activities was $153,258 for the three months ended March
31, 2006 compared to $30,738 cash provided by operating activities for the three
months ended March 31, 2005. The primary reasons for the decrease in
cash flow were the first quarter operating loss and utilization of bank loans
and loans from Mr. Sandgaard to reduce accounts payable compared to net income
and an increase in accounts payable in 2005.
No cash was used nor provided in investing activities for the three months ended
March 31, 2006 compared to cash used in investing activities of $17,238 for the
same period in 2005. Cash used in investing activities represents the purchase
of equipment and inventory rented to customers.
Cash provided by financing activities was $278,134 for the three months ended
March 31, 2006 compared with cash used in financing activities of $16,568 for
the three months ended March 31, 2005. During the three months ended March 31,
2006 the Company received net working capital of $200,960 in bank financing and
$75,300 in loans from Thomas Sandgaard.
To conserve and most efficiently and effectively use our financial resources we
do now and will continue to closely monitor our actual and projected revenue,
costs and cash flow, and will take appropriate action as circumstances require.
For information regarding borrowings from Silicon Valley Bank and Mr. Sandgaard,
see Note 4 to our Condensed Consolidated Financial Statements in this Report and
Item 6 in our Form 10-KSB for the year ended December 31, 2005.
Recently issued accounting pronouncements:
- ------------------------------------------
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which is a revision
of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS 123R supersedes
APB Opinion No. 25, "Accounting for Stock Issued to Employees" and amends SFAS
No. 95, "Statement of Cash Flows". SFAS 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions and requires all share-based payments to employees, including
grants of employee stock options, to be recognized as additional compensation
expense in the financial statements based on the calculated fair value of the
awards. SFAS 123R also requires the benefits of tax deductions in excess of
recognized compensation costs to be reported as a financing cash flow. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. We adopted this statement effective for our
fiscal year beginning January 1, 2006. We have described the impact of adopting
SFAS 123R in our condensed consolidated financial statements in Note 2, Stock
Based Compensation.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this quarterly report contains statements that
are forward-looking, such as statements relating to plans for future expansion
and other business development activities, as well as other capital spending and
financing sources. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks
include the 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 on 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 our 10-KSB Report for the year ended December 31, 2005.
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this quarterly report, an evaluation was
performed under the supervision and with the participation of the Company's
management including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of March 31, 2006.
There have been no changes in internal control over financial reporting that
occurred during the quarter that have materially affected, or are reasonably
likely to affect, the Company's internal control over financial reporting.
15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
See Note 3 to the Notes to the Condensed Consolidated Financial Statements for
Information regarding the issuance of common stock to investor relations
consultants. In the issuances, we made no general solicitation, and we believe
that the investor relations consultants met the standards for a purchaser in a
non-public offering. We relied upon an exemption from securities registration
for a non-public offering in issuing these securities to the investor relations
consultants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS.
(a) Exhibits
18 Preferability letter from GHP Horwath, P.C. regarding
the reclassification of certain costs.
31.1 Certification of Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to Section 18 U.S.C.
Section 1350
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZYNEX MEDICAL HOLDINGS, INC.
Date: May 16, 2006 By: /s/ Thomas Sandgaard
----------------------------
President and
Chief Executive Officer,
Treasurer
By: /s/ Peter J. Leveton
---------------------------
Chief Financial Officer
Principal Financial Officer
17
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
18 Preferability letter from GHP Horwath, P.C. regarding the
reclassification of certain costs.
31.1 Certification Of the Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification of the Chief Executive Officer and Chief
Financial Officer Pursuant to Section 18 U.S.C. Section 1350
18