SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 11, 2004
------------------------------------------------
Date of Report (date of earliest event reported)
Zynex Medical Holdings, Inc.
----------------------------------------------------
Exact Name of Registrant as Specified in its Charter
Nevada 33-26787-D 87-0403828
- --------------------------- --------------- ----------------------
State or Other Jurisdiction Commission File IRS Employer Identifi-
of Incorporation Number cation Number
8100 South Park Way, Suite A-9
Littleton, Colorado 80120
----------------------------------------------------
Address of Principal Executive Offices Zip Code
(303) 703-4906
------------------------------
Registrant's Telephone Number,
Including Area Code
378 North Main, No. 124, Logan, Utah 84041
-------------------------------------------
Former Name or Former Address, if Changed
Since Last Report
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following
financial statements of Zynex Medical, Inc. are filed herewith:
Page
----
Report of Independent Public Accountants ............. F-1
Balance Sheet - December 31, 2003 .................... F-2
Combined Statements of Operations for the Years
Ended December 31, 2002 and 2003 ................... F-3
Combined States of Cash Flows for the Years Ended
December 31, 2002 and 2003 ......................... F-4
Combined Statement of Stockholder's Deficiency ....... F-5
Notes to Combined Financial Statements ............... F-6 - F-14
(b) PRO FORMA FINANCIAL INFORMATION. The following pro forma financial
information is filed herewith:
Unaudited Summary Pro Forma - Combined Financial
Statements ......................................... F-15
Unaudited Pro Form Combined Statement of Financial
Position - December 31, 2003 ....................... F-16
Unaudited Pro Form Combined Statement of Operations -
December 31, 2002 .................................. F-17
Unaudited Pro Form Combined Statement of Operations -
December 31, 2003 .................................. F-18
Notes to Unaudited Combined Pro Forma Financial
Statements ......................................... F-19
(c) EXHIBITS.
Exhibit 10 Acquisition Agreement between Zynex Medical
Holdings, Inc. and Zynex Medical, Inc.
(Previously Filed)
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Zynex Medical, Inc.
Littleton, Colorado
We have audited the accompanying balance sheet of ZYNEX MEDICAL, INC. (the
"Company") as of December 31, 2003 and the combined statements of operations,
cash flows and stockholder's deficiency for the years ended December 31, 2003
and 2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and the significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred above present fairly, in all
material respects, the financial position of ZYNEX MEDICAL, INC. as of
December 31, 2003, and the results of its operations and its cash flows for
the years ended December 31, 2003 and 2002, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Gordon, Hughes & Banks, LLP
Greenwood Village, Colorado
May 21, 2004 (except as to the last paragraph of Note 5, which is as of June
4, 2004)
F-1
Zynex Medical, Inc.
Balance Sheet
December 31, 2003
ASSETS
Current Assets:
Receivables, less allowance for
uncollectible accounts of $314,000 $ 185,806
Inventory 166,245
Prepaid expenses 1,300
---------
Total current assets 353,351
Property and equipment, less accumulated depreciation 67,860
Other assets 9,765
---------
$ 430,976
=========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Current Liabilities:
Notes payable $ 221,404
Capital lease 9,324
Accounts payable, including bank overdrafts of $21,982 161,660
Accrued payroll and payroll taxes 51,922
Accrued income taxes 34,300
Other accrued liabilities 70,625
Advances from stockholder 12,816
---------
Total current liabilities 562,051
Notes Payable, less current maturities 11,634
Capital Lease, less current maturities 14,671
---------
Total liabilities 588,356
---------
Contingencies and Commitments -
Stockholder's Deficiency:
Common stock, $.000001 par value: 100,000,000 shares
authorized; 1,000,000 shares issued and outstanding 300
Accumulated deficit (157,680)
---------
Total stockholder's deficiency (157,380)
---------
$ 430,976
=========
F-2
Zynex Medical, Inc.
Combined Statements of Operations
Years Ended December 31,
2002 2003
---------- ----------
Net sales and rental revenue $1,281,823 $1,083,912
Cost of sales and rentals 337,683 186,081
---------- ----------
Gross profit 944,140 897,831
---------- ----------
Operating expenses:
Selling, general and administrative 861,586 762,819
Depreciation 22,083 26,985
---------- ----------
883,669 789,804
---------- ----------
Income from operations 60,471 108,027
Other income (expense):
Interest income 8,522 3,153
Interest expense (50,307) (45,674)
---------- ----------
Income before income taxes 18,686 65,506
Provision (benefit) for income taxes (2,200) 24,809
---------- ----------
Net Income $ 20,886 $ 40,697
========== ==========
Earnings per common share $ 0.00 $ 0.00
========== ==========
Pro forma weighted average common shares
outstanding* 22,151,662 22,151,662
========== ==========
* See Note 1 - Earnings Per Share
F-3
Zynex Medical, Inc.
Combined Statements of Cash Flow
Years Ended December 31,
2002 2003
---------- ----------
Cash flows from operating activities:
Net income $ 20,886 $ 40,697
Adjustments to reconcile net income to
cash provided by operations -
Depreciation expense 22,083 26,985
Changes in current assets and liabilities -
(Increase) decrease in receivables (25,893) 130,433
(Increase) decrease in inventory and rented
inventory (27,111) (291)
(Increase) decrease in prepaid expenses - (1,300)
Increase (decrease) in accounts payable 15,238 (22,152)
Increase (decrease) in accrued liabilities 45,289 14,712
---------- ----------
Net cash from operating activities 50,492 189,084
---------- ----------
Cash flows from (used in) investing activities:
Purchase of equipment - (10,004)
Decrease in deposits and other assets 2,108 -
---------- ----------
Net cash from (used in) investing activities 2,108 (10,004)
---------- ----------
Cash flow from (used in) financing activities:
Payments on notes payable and capital lease (69,344) (96,618)
Advances from (repayments to) stockholder 15,068 (82,462)
---------- ----------
Net cash used in financing activities (54,276) (179,080)
---------- ----------
Net increase (decrease) in cash (1,676) -
Beginning cash 1,676 -
---------- ----------
Ending cash $ - $ -
========== ==========
Supplemental cash flow information:
Interest paid $ 49,410 $ 31,336
Income taxes paid 3,493 2,871
Non-cash investing and fiancing activities -
Equipment financed with capital lease - 29,000
F-4
Zynex Medical, Inc.
Combined Statement of Stockholder's Deficiency
Common Stock Accumulated
Shares Amount Deficit Total
--------- ------ ----------- ---------
Balance, December 31, 2001 1,000,000 $300 $(219,263) $(218,963)
Net income - - 20,886 20,886
--------- ---- --------- ---------
Balance, December 31, 2002 1,000,000 300 (198,377) (198,077)
Net income - - 40,697 40,697
--------- ---- --------- ---------
Balance, December 31, 2003 1,000,000 $300 $(157,680) $(157,380)
========= ==== ========= =========
F-5
ZYNEX MEDICAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. The Company and Summary of Significant Accounting Policies
The Company
Zynex Medical, Inc. ("Zynex" or the "Company") was incorporated under the laws
of the state of Colorado on March 3, 1998, under the name of "Stroke Recovery
Systems, Inc." (SRSI). On October 1, 2003, Zynex acquired, through merger,
the assets and liabilities of Dan Med, Inc. (DMI), a Colorado corporation
under common control. The companies were merged in order to simplify the
operating and capital structure of both companies. SRSI concurrently changed
its name to Zynex Medical, Inc.
DMI was incorporated in 1996 with its primary activity importing European-made
electrotherapy devices until 1999 when DMI also began developing and
assembling its own line of electrotherapy products. SRSI was incorporated in
1998 with its main activity selling electrotherapy devices to homecare
patients suffering the effects of a stroke. In early 2002 SRSI began
marketing the entire DMI product line of standard electrotherapy products by
adding a small sales force. At present, Zynex generates substantially all its
revenue in North America from sales and rentals of its products to patients,
dealers and health care providers. Approximately 4.3% and 14.0% of sales in
2002 and 2003 involved payment by Medicare and Medicaid programs.
On February 11, 2004, Zynex was acquired by a Utah corporation, Zynex Medical
Holdings, Inc. in a reverse merger wherein the sole stockholder of the Company
received 19,500,000 shares of Zynex Medical Holdings, Inc.'s common stock
(approximately 88% of the shares of the combined entity) for all of the
Company's common stock (see Note 5).
Principles of Consolidation
The accompanying combined financial statements include the accounts of Zynex
and DMI for all periods presented. All inter-company transactions and
accounts have been eliminated.
Revenue Recognition
Sales and rental income is recognized when a product has been medically
prescribed and dispensed to a patient and, when applicable, a claim prepared
by the Company has been filed with the patient's insurance provider. Product
and rental revenue is recognized net of an estimated uncollectible percentage
of sales and rentals and other discounts.
F-6
Uncollectible Accounts Receivable
A significant portion of the accounts receivable balance is from insurance
companies or other third-party reimbursing agents. The nature of these
receivables within this industry has typically resulted in long collection
cycles. The Company establishes a reserve for uncollectible accounts based
upon various factors, including credit risk, historical trends, patient
responsibility and other information. Such reserves are also adjusted for
amounts otherwise covered by third-party payers.
Use of Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Ultimate results could differ from those estimates. The most significant
management estimates used in the preparation of the financial statements are
associated with the reserves established for uncollectible accounts
receivable.
Inventories
Inventories are valued at the lower of cost (average) or market. Finished
goods include products held at different locations by health care providers or
other third parties for rental or sale to patients.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method. Estimated useful lives are as follows:
Office furniture and equipment 3-7 years
Rented inventory 5 years
Vehicles 5 years
Assembly equipment 7 years
Research and Development
Research and development costs are expensed when incurred.
Fair Value of Financial Instruments and Credit Risk
The Company's financial instruments primarily consist of cash, receivables and
payables for which current carrying amounts approximate fair market value.
Additionally, interest rates on outstanding borrowings are at rates that
approximate market rates for borrowings with similar terms and average
maturities.
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and trade
receivables.
F-7
The Company transacts its business with a single financial institution.
However, the amount on deposit did not exceed the $100,000 federally insured
limited at December 31, 2003. Management believes that the institution is
financially sound and the risk of loss is minimal.
The Company has recorded trade receivables from business operations.
Management regularly evaluates the collectibility of accounts receivable and
believes that net receivables recorded as of December 31, 2003, to be
collectible.
Shipping Costs
Shipping costs are included in cost of goods sold.
Compensation
The Company accounts for stock-based compensation using Accounting Principles
Board's Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees."
Under APB No. 25, compensation expense is recognized for stock options and
warrants with an exercise price that is less than the market price on the
grant date. For stock options granted employees or directors with exercise
prices at or above the market value of the stock on the grant date, the
Company has adopted the Financial Accounting Standards Board ("FASB")
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123").
As of December 31, 2003, the Company did not have any employee stock-based
compensation programs. However, in March 2004 Zynex Medical Holdings, Inc.
issued stock warrants to an employee and two consultants (see Note 5).
Comprehensive Income
There are no adjustments necessary to the net income as presented in the
accompanying statement of operations to derive comprehensive income in
accordance with Statement of Financial Standards ("SFAS") No. 130, "Reporting
Comprehensive Income."
Segment Reporting
In June 1997, SFAS 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued. Operating segments, as defined in the
pronouncement, are components of an enterprise about which separate financial
information is available and that are evaluated regularly by management in
deciding how to allocate resources and assess performance. To date, the
Company has only had a single operating segment.
Cash and Cash Equivalents
Cash and cash equivalents are stated at cost. Cash equivalents consist of all
highly liquid investments with maturities of three months or less when
acquired.
F-8
Income Taxes
Deferred income taxes are based on temporary differences between the financial
statement and tax basis of assets and liabilities existing at each balance
sheet date using enacted tax rates for years during which taxes are expected
to be paid or recovered.
Earnings Per Share
Basic earnings per share are computed using the weighted average number of
shares outstanding during each period. Diluted earnings per share is computed
on the basis of the average number of common shares outstanding and the
dilutive effect of convertible securities, notes payable, stock options and
warrants using the "treasury stock" method. Basic and diluted earnings per
share are the same during the periods presented since the Company had no
convertible securities, warrants or options.
All pro forma share and per share amounts reflect the retroactive effect from
the beginning of the periods presented, of the reverse acquisition involving
Zynex Medical, Inc. and Zynex Medical Holdings, Inc. on February 11, 2004.
Recent Accounting Pronouncements
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133
on Derivative Instruments and Hedging Activities". SFAS No. 149 amends
certain portions of SFAS No. 133 and is effective for all contracts entered
into or modified after June 30, 2003 on a prospective basis. SFAS No. 149 is
not expected to have a material effect on the results of operations or
financial position of the Company because the it currently has no derivatives
or hedging contracts.
In June 2003, the FASB approved SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This Statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The adoption of SFAS
No. 150 is not expected to have a material effect on the Company's operations
or financial position.
In December 2003, the FASB issued a revised Interpretation No. 46,
"Consolidation of Variable Interest Entities". The interpretation clarifies
the application of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements", to certain types of entities. The Company does not
expect the adoption of this interpretation to have any impact on its financial
statements.
F-9
Selected Financial Statement Data
December 31, 2003
-----------------
Property and equipment -
Office furniture and equipment $ 69,097
Rented inventory 50,544
Vehicles 30,828
Assembly equipment 757
--------
151,226
Less accumulated depreciation (83,366)
--------
Net property, plant and equipment $ 67,860
2. Notes Payable and Leases
Notes Payable at December 31, 2003 consisted of the following:
Current Long-term
Maturities Maturities
---------- ----------
Note payable to a bank, principal and interest
payments of $4,331 due on a monthly basis
through November 15, 2004. At the end of the
term, the entire outstanding balance is due;
annual interest rate of 7.5%, collateralized
by accounts receivable and the President's
personal residence. $136,615 $ -
Small Business Administration revolving line
of credit, principal payments and interest of
$3,000 due on a monthly basis through May 4,
2004, annual interest rate based on 2% over the
lowest prime rate, collateralized by inventory
accounts receivable and all contract rights. 46,692 -
Inventory financing obligations to financial
institutions, monthly principal and interest
payments total $3,479; annual interest rates
approximating 20%, collateralized by inventory 28,168 11,634
Other 9,929 -
-------- -------
Total $221,404 $11,634
======== =======
The Company has commitments under various operating and capital leases that
are payable in monthly installments. As of December 31, 2003, future minimum
lease payments under non-cancelable operating and capital leases are as
follows:
F-10
Capital Operating
Lease Leases
--------- ---------
2004 $ 10,905 $ 46,056
2005 10,905 85,468
2006 4,668 93,231
2007 - 95,695
2008 - 98,160
Thereafter - 16,428
-------- --------
Total future minimum lease payments 26,478 $435,038
========
Less amount representing interest (2,483)
--------
Present value of net minimum lease
payments 23,995
Less current portion (9,324)
--------
Long-term capital lease obligation $ 14,671
========
Rent expense under operating leases for 2003 and 2002 was $51,051 and $41,553,
respectively.
3. Income Taxes
The following summarizes the components of the provision (benefit) for income
taxes:
2002 2003
------- -------
Current
Federal $(2,000) $17,109
State (200) 3,800
Other - 3,900
Deferred - -
------- -------
$(2,200) $24,809
======= =======
A reconciliation of income tax computed at the U.S. statutory rate to the
effective income tax rate is as follows:
2002 2003
------- -------
Statutory rate 35 % 35 %
State taxes (1)% 6 %
Surtax benefit (28)% (18)%
Nondeductible 14 % 9 %
Net operating loss carryover and other (32)% 6 %
----- -----
Combined effective rate (12)% 38 %
===== =====
F-11
4. Commitments and Contingencies
Billing Practices
In connection with its sale of medical devices, the Company sells disposable
supplies used with some of its devices. In some cases, the billings to
private insurance companies exceed supplies actually shipped. It is possible
that the affected private insurance companies could assert claims for such
overbillings. The Company discontinued this billing practice in March 2004
and has included the claim in the reserve against accounts receivable,
approximately $137,000 as of December 31, 2003.
Major Suppliers
During 2003 and 2002, the Company purchased approximately 76% and 43% of its
entire inventory purchases from two suppliers. One of these suppliers is
located in Europe.
Concentrations
The Company maintains its cash deposits in one bank. The deposits are
guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to
$100,000. At December 31, 2003, the Company's cash balance at the bank was
not in excess of the FDIC insurance limit.
5. Events Subsequent to December 31, 2003
Reorganization
On February 11, 2004, Zynex Medical Holdings, Inc. (the "Holding Company")
acquired all of the outstanding common stock of Zynex Medical, Inc. for
19,500,000 shares of the Holding Company's common stock. Coincidental with
the acquisition, $358,800 of Holding Company loans were converted to 2,601,786
shares of common stock and 10,500,001 previously issued shares were canceled
and returned to treasury. This reorganization resulted in a total of
22,151,662 Holding Company common shares outstanding, of which the 19,500,000
shares issued for Zynex Medical, Inc. represents approximately 88% of the
shares now outstanding.
The reorganization is recorded as a recapitalization effected by a reverse
acquisition wherein the Holding Company is treated as the acquiree for
accounting purposes, even though it is the legal acquirer. The transaction
has been accounted for as a purchase, and accordingly, since the transaction
occurred in February 2004, the accompanying financial statements represent
solely those of the accounting acquirer - Zynex Medical, Inc. Since the
Holding Company is a non-operating entity with limited business activities and
no assets, goodwill will not be recorded.
Employment Agreement
On February 1, 2004, Zynex Medical, Inc. entered into a three-year employment
agreement with the Company's President, Chief Executive Officer and sole
shareholder. The agreement expires January 31, 2007; if written notice is not
given, the agreement will automatically be extended for an additional 2-year
F-12
period. Initial annual compensation under the agreement is $174,000. This
amount may be increased annually at the board of director's discretion. The
agreement also provides for a 50% annual bonus in the event that annual net
revenue exceeds $2.25 million, Company insurance and benefit plans, as well
as, a Company provided vehicle. The agreement includes a non-compete
provision for the term of the agreement extended to 24 months after
termination of the agreement.
Issuance of Stock Warrants
On March 7, 2004, the Holding Company issued a total of 120,000 warrants to
purchase common stock for five years to an employee and two consultants for
past services; 110,000 of the warrants are exercisable at $3 per share and
10,000 warrants are exercisable at $.55 per share. The closing market
quotation of the stock was $2.75 per share on March 7, 2004.
Common Stock
In February 2004, 100,000 shares of the Holding Company's common stock were
issued to an investor at $1 per share.
During January through May, the Holding Company received $130,000 for common
stock subscriptions at $1 per share.
On June 4, 2004, the Holding Company sold 685,714 shares of common stock to
five investors at $1.75 per share. The proceeds realized from the sale were
$1,030,000, net of transaction costs. In connection with the sales, the
Holding Company granted Class A Warrants to purchase an additional 342,857
shares of common stock at $2.00 per share, Class B Warrants to purchase an
additional 685,714 shares of common stock at $2.50 per share, Class C Warrants
to purchase 22,858 shares of common stock at $.01 per share and Broker
Warrants to purchase 45,713 shares of common stock at $.01 per share. The
Class A Warrants expire on the 150th day after the actual effective date
during which a registration statement has been available for use by the holder
for resale under the Securities Act of 1933 of the common stock issuable upon
exercise of the Class A Warrants. The Class B, Class C and Broker Warrants
expire on June 4, 2009.
Upon exercise of the warrants, the Holding Company is required to pay Warrant
Exercise Compensation equal to 10 percent of the cash proceeds payable to the
Holding Company. The Holding Company is further required to issue one Broker's
Warrant for each 10 shares of Class A, Class B and Class C Warrants exercised
by the subscribers.
Acquisitions of Automobiles
During March 2004, the Company purchased an automobile costing $60,800
pursuant to a five-year 15% installment loan agreement, requiring monthly
payments of $1,351. In addition, the Company began leasing another automobile
over a 39-month period with monthly lease payments of $935.
F-13
Loans
From February through May 2004, the Company borrowed a total of $87,000, of
which $15,000 has been repaid. Of the $72,000 unpaid loans, $12,000 was a
ninety-day non-interest bearing bridge loan received on February 4, 2004, and
$60,000 was received on April 1, 2004, is due in six months, with interest
payable at 2% monthly plus 1,000 shares of common stock per month until
repayment.
F-14
Unaudited Summary Pro Forma
Combined Financial Information
The accompanying pro forma combined financial statements present the
historical financial information of Zynex Medical, Inc., as adjusted for the
transaction with Zynex Medical Holdings, Inc. (the "Holding Company") pursuant
to a purchase agreement and as if the merger occurred at the beginning of each
period presented. On February 11, 2004, the Holding Company acquired all of
the outstanding common stock of Zynex Medical, Inc. in exchange for 19,500,000
shares of the Holding Company's common stock. Coincident with the
acquisition, $358,800 of Holding Company loans were converted to 2,601,786
shares of common stock and 10,500,001 previously issued shares were canceled
and returned to the treasury. This reorganization resulted in a total of
22,151,662 Holding Company common shares outstanding, of which the 19,500,000
shares issued for Zynex Medical, Inc. represents approximately 88 percent.
The reorganization has been recorded as a recapitalization effected by a
reverse acquisition wherein the Holding Company is treated as the acquiree for
accounting purposes, even though it is the legal acquirer. The transaction
has been accounted for as a purchase and accordingly, the accompanying pro
forma combined financial statements represent solely the operations of the
accounting acquirer, Zynex Medical, Inc.
The summary unaudited pro forma combined financial information has been
derived from the audited and unaudited financial statements of the entities
being combined. The data is not necessarily indicative of the combined
results of operations or financial position that would have occurred if the
transaction had occurred at the beginning of each period presented or on the
dates indicated, nor is it necessarily indicative of the Company's future
operating results or financial position. The data set forth below should be
read in conjunction with the audited financial statements and unaudited
interim financial statements, including the notes thereto.
F-15
Zynex Medical, Inc.
Unaudited Pro Forma Combined Statement of Financial Position
December 31, 2003
Zynex Zynex Medical Pro Forma Pro Forma
Medical, Inc. Holdings, Inc. Adjustments Combination
------------- -------------- ----------- -----------
ASSETS
Current Assets:
Receivables $ 185,806 $ - $ - $ 185,806
Inventory 166,245 - - 166,245
Prepaid expenses 1,300 - - 1,300
--------- --------- ----------- ---------
Total current assets 353,351 - - 353,351
Property and equipment 67,860 - - 67,860
Other assets 9,765 - - 9,765
--------- --------- ----------- ---------
$ 430,976 $ - $ - $ 430,976
========= ========= =========== =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Notes payable $ 221,404 $ 250,000 $ (250,000)(a) $ 221,404
Capital lease 9,324 - - 9,324
Accounts Payable 161,660 3,310 - 164,970
Accrued payroll and payroll
taxes 51,922 - - 51,922
Accrued income taxes 34,300 - - 34,300
Other accrued liabilities 70,625 - - 70,625
Shareholder loans - 108,800 (108,800)(a) -
Advances from stockholder 12,816 - - 12,816
--------- --------- ----------- ---------
Total current liabilities 562,051 362,110 (358,800) 565,361
Notes payable 11,634 - - 11,634
Capital lease 14,671 - - 14,671
--------- --------- ----------- ---------
Total liabilities 588,356 362,110 (358,800) 591,666
Stockholders' Deficiency:
Common stock 300 10,550 11,302 (a)(b) 22,152
Additional paid-in capital - 3,031,989 (3,031,989)(a)(b) -
Accumulated deficit (157,680) (3,404,649) 3,379,487 (b) (182,842)
--------- --------- ----------- ---------
(157,380) (362,110) 358,800 (160,690)
--------- --------- ----------- ---------
$ 430,976 $ - $ - $ 430,976
========= ========= =========== =========
F-16
Zynex Medical Holdings, Inc.
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 2002
Zynex Zynex Medical Pro Forma Pro Forma
Medical, Inc. Holdings, Inc. Adjustments Combination
------------- -------------- ----------- -----------
Net sales and rental revenue $1,281,823 $ - $ - $1,281,823
Cost of sales and rentals 337,683 - - 337,683
---------- -------- ------- ----------
Gross profit 944,140 - - 944,140
Operating expenses:
Selling, general and adminis-
trative 861,586 5,858 - 867,444
Depreciation 22,083 - - 22,083
---------- -------- ------- ----------
883,669 5,858 - 889,527
---------- -------- ------- ----------
Income from operations 60,471 (5,858) - 54,613
Other income (expense):
Interest income 8,522 - - 8,522
Interest expense (50,307) (10,019) 10,019(c) (50,307)
---------- -------- ------- ----------
Income before income taxes 18,686 (15,877) 10,019 12,828
Provision for income taxes (2,200) - - (2,200)
---------- -------- ------- ----------
Net income $ 20,886 $(15,877) $10,019 $ 15,028
========== ======== ======= ==========
Pro forma earnings per share $ - $ - $ -
========== ======== ==========
F-17
Zynex Medical Holdings, Inc.
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 2003
Zynex Zynex Medical Pro Forma Pro Forma
Medical, Inc. Holdings, Inc. Adjustments Combination
------------- -------------- ----------- -----------
Net sales and rental revenue $1,083,912 $ - $ - $1,083,912
Cost of sales and rentals 186,081 - - 186,081
---------- --------- ------- ----------
Gross profit 897,831 - - 897,831
Operating expenses:
Selling, general and adminis-
trative 762,819 26,705 - 789,524
Depreciation 26,985 - - 26,985
---------- --------- ------- ----------
789,804 26,705 - 816,509
---------- --------- ------- ----------
Income from operations 108,027 (26,705) - 81,322
Other income (expense):
Interest income 3,153 - 3,153
Interest expense (45,674) (80,692) 80,692(c) (45,674)
---------- --------- ------- ----------
Income before income taxes 65,506 (107,397) 80,692 38,801
Provision for income taxes 24,809 - - 24,809
---------- --------- ------- ----------
Net income $ 40,697 $(107,397) $80,692 $ 13,992
========== ========= ======= ==========
Pro forma earnings per share $ - $ - $ -
========== ========= ==========
F-18
Zynex Medical, Inc.
Notes to Unaudited Combined Pro Forma Financial Statements
Note 1 - Basis of Presentation
The accompanying combined pro forma financial statements are presented to
reflect the merger of Zynex Medical Holdings, Inc. and Zynex Medical, Inc.,
accounted for as a reverse acquisition, with the pre-acquisition operation of
Zynex Medical, Inc. becoming the ongoing operations of the combined entities.
In February 2004, Zynex Medical Holdings, Inc. acquired 100 percent of the
common stock of Zynex Medical, Inc. in exchange for 19,500,000 shares of
common stock.
The accompanying pro forma combined statements of operations combines the
historical operations of Zynex Medical Holdings, Inc. and Zynex Medical, Inc.
for the years ended December 31, 2002 and 2003 as if the acquisition had
occurred on January 1, 2002 and January 1, 2003 of the periods presented,
respectively.
Note 2 - Pro Forma Adjustments
The acquisition has been accounted for as a purchase. Since Zynex Medical
Holdings, Inc. is a non-operating entity with limited business activity and no
assets, goodwill will not be recorded and has not been reflected in the pro
forma combined financial statements.
(a) Represents the conversion of debt into common stock.
(b) Represents the effect of the reverse acquisition.
(c) Coincident with the reorganization, all of the interest-bearing debt of
Zynex Medical Holdings, Inc. was converted to 2,601,786 shares of
common stock.
F-19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, hereunto duly authorized.
ZYNEX MEDICAL HOLDINGS, INC.
Dated: June 11, 2004 By:/s/ Thomas Sandgaard
Thomas Sandgaard, President
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