Initiating Coverage

Healthcare

September 23, 2019

Zynex, Inc. (ZYXI) Yi Chen, Ph.D. CFA

212-916-3971
Rating: Buy ychen@hcwresearch.com
Raghuram Selvaraju, Ph.D.
212-916-3966
rselvaraju@hcwresearch.com

Powering Past Pain With Sustainable Profitability; Initiating at Buy and $12 Price Target

Stock Data 09/20/2019 Non-invasive multi-modal electrotherapy platform for pain relief.
Price $9.99 We are initiating coverage of Zynex, Inc. with a Buy rating and 12-month
Exchange NASDAQ price target of $12 per share. As a commercial-stage medical device
Price Target $12.00 company, Zynex is primarily focused on the marketing of NexWave,
52-Week High $11.75 a non-invasive electrical stimulator that can operate in the modes of
52-Week Low $2.46 interferential current (IFC), transcutaneous electrical nerve stimulation
Enterprise Value (M) $314 (TENS), and neuromuscular electrical stimulation (NMES) for temporary
Market Cap (M) $324 pain relief. NexWave is marketed by Zynex’s own sales force to
Public Market Float (M) 15.8 physicians and therapists, so that a prescription for NexWave would
Shares Outstanding (M) 32.5 allow patients to use the device at home along with consumables. Zynex
3 Month Avg Volume 345,721 obtains payment from patients’ public or private payors or directly from
Short Interest (M) 2.26 patients. Sales of NexWave constitute over 90% of the company’s total
revenue; sales from other marketed device products, including those in
Balance Sheet Metrics
Europe, are relatively insignificant compared to those of NexWave. We
Cash (M) $10.1 note that there are many FDA-cleared muscle stimulators on the market;
Total Debt (M) $0.0 however, Zynex is the only company we are aware of that has solid
Total Cash/Share $0.31 and continuous revenue growth with sustainable profitability. This is not
Book Value/Share $0.44 because its device is proprietary or the reimbursement is exclusive.
EPS Diluted What we see that makes Zynex successful is its prescription-based
Full Year - Dec 2018A 2019E 2020E business model supported by an expanding sales force and improving
1Q 0.06 0.07A 0.06 billing and collection procedures. The company’s sales force advocates
2Q 0.07 0.06A 0.07 prescribing NexWave as the first line of defense in treating every chronic
3Q 0.08 0.06 0.09 and acute pain patient, which result in growing orders of NexWave in
4Q 0.08 0.07 0.12 doctors’ office, followed by strong reimbursement. Notably, the company
FY 0.28 0.26 0.34 has achieved positive EBITDA for the past 12 consecutive quarters. We
FY P/E 35.7x 38.4x 29.4x expect the company to remain profitable in the coming quarters.
Revenue ($M)
Full Year - Dec 2018A 2019E 2020E Major unmet need for non-opioid pain therapy in the U.S. The opioid
1Q 6.9 9.2A 12.2 crisis was declared a public health emergency by the incumbent U.S.
2Q 7.6 10.3A 13.3 administration in 2017, and the federal government has announced
3Q 8.1 11.0 14.4 over $2B in grants within the past month to help fight the opioid
4Q 9.3 12.5 16.4 epidemic. With 50M Americans experiencing chronic pain and a multi-
FY 31.9 43.0 56.3 billion dollar prescription opioid market, a key way to manage the
Vol. (mil) Price
crisis remains safe prescription practices to help curb unnecessary
2.5 14 opioid use. As an established non-pharmaceutical alternative to opioids,
12 electrotherapy using devices such as NexWave could alleviate pain
2
without side effects, thus reducing or eliminating the use of opioids and
10
1.5 the associated addiction. In the pain management setting, we estimate
8 that the annual market for electrotherapy is $500M - $1B. Zynex is taking
1 advantage of this opportunity and plans to continue the expansion of its
6
sales force to increase visibility and accessibility of the NexWave device
0.5 4 for physicians and patients.
0 2 Impressive growth in orders in 2Q19. For 2Q19, Zynex reported
SEP-18 JAN-19 MAY-19 SEP-19
$10.3M in total revenue, representing 36% YoY growth, and $2.4M of
cash generated from operations. More importantly, orders of NexWave
grew 65% YoY in 2Q19. We note that the company’s quarterly revenue
from supplies has been between 3.3-4.3x revenue from devices in the
past quarters. Therefore, the impressive growth in 2Q19 orders foretells
strong growth in sales of consumables in the coming quarters, in our
view.

For definitions and the distribution of analyst ratings, analyst certifications, and other disclosures, please refer to pages 21 - 22 of this report.
Zynex, Inc. September 23, 2019
Blood volume monitor is a future upside driver. Zynex has submitted a 510(k) application for its proprietary blood volume
monitor and has been exchanging comments with the FDA and other regulatory agencies. This non-invasive device can be
used in operating and recovery rooms to detect blood loss during surgery and internal bleeding during recovery. We note that
there are no non-invasive devices available that can detect blood loss or internal bleeding. If approved and commercialized, the
blood volume monitor has the potential to address the unmet need to manage blood volume in hospital and surgical settings,
and enable timely and crucial fluid management to avoid devastating complications. Potential future sales of the blood volume
monitor are not included in our current valuation of the company.

Valuation and risks. Our price target is derived from an estimated market value of firm at $408M, which includes a discounted
cash flow (DCF)-based asset value of $398M for NexWave, with an 11% discount rate and 0.5% terminal growth rate, and cash
position of $10M as of end-2Q19. Using 34M fully diluted shares, this leads to a price per share of $12. Of note, ZYXI stock
currently trades at 8.5x EV/Sales (TTM), 27.7x EV/EBITDA (TTM), and 34.5x P/E (TTM), which may appear relatively high
among pain therapy or medical device companies. However, we feel that Zynex’s position as a potential alternative source to
opioid-based pain management aligns it well for further near- and medium-term growth. The company’s track record of growing
sales and profitability provide risk mitigation, in our view, and its established selling and billing infrastructure act as an effective
barrier to entry. We believe more investors should start to pay attention to this unique cash-generating gem within the medical
device space. To provide a perspective on valuation multiples using our revenue and earnings estimates of 2020 and 2021,
the current enterprise value of the company leads to EV/Sales ratios of 5.6x and 4.3x, and P/E ratios of 28.5x and 17.8x for
2020 and 2021, respectively. As the company continues to grow its top and bottom line, we expect these valuation metrics of
future periods to gradually increase driven by the potential appreciation in stock price. Risks include, but are not limited to: (1)
slower-than-anticipated future revenue growth of NexWave for pain management due to competition; and (2) inability to secure
regulatory clearance for other pipeline medical devices.

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Zynex, Inc. September 23, 2019

Company Overview

Founded in 1996 and headquartered in Englewood, CO, Zynex, Inc. is a commercial-stage

medical device company primarily focused on pain management via electrotherapy. The
company conducts active business within three subsidiaries: Zynex Medical, Inc. (ZMI); Zynex
Monitoring Solutions, Inc. (ZMS); and Zynex Europe (ZEU). The primary subsidiary is ZMI, which
designs, manufactures and markets electrotherapy devices to treat chronic and acute pain, as
well as activate and exercise muscles for rehabilitative purposes with electrical stimulation. The
lead commercialized product is NexWave™, a dual-channel, multiple-mode stimulator that allows
users to select from a choice of treatment options comprising interferential current (IFC),
transcutaneous electrical nerve stimulation (TENS), and neuromuscular electrical stimulation
(NMES). NexWave provides non-invasive muscle stimulation for pain relief, and is intended to
reduce reliance on medications. The device is small, portable, battery operated, and includes an
electrical pulse generator connected to the body via electrodes for home use. Zynex markets
NexWave to physicians and therapists by its own sales team, and the device is dispensed based
on a physician’s prescription. Zynex either bills the patient directly or the patient’s private or
government payors for payment. NexWave requires consumable supplies, e.g., electrodes and
batteries, which are shipped to patients on a recurring monthly basis (razor/razorblade model).

ZMI also markets NeuroMove, which contains electromyography and electric stimulation
technology that is primarily used for stroke, spinal cord and traumatic brain injury (TMI)
rehabilitation (SCI); and InWave, a muscle stimulator to treat female incontinence. ZMS is
developing a blood volume monitor, CM-1500. This is a non-invasive device for monitoring central
blood volume that would be used in operating and recovery rooms to detect blood loss during
surgery and internal bleeding during recovery. ZMS has submitted a 510(k) application to the
FDA in 2015 and is awaiting a regulatory decision. Concurrent to the FDA application, the
company is also pursuing CE Mark for the blood volume monitor in the European Union.
Figure 1. Zynex FDA-Approved Devices for Pain and Rehabilitation

Source: Company reports.

Revenue from NexWave and related consumables represent over 90% of historical sales with
gross margins exceeding 80%. As of mid-2019, Zynex has achieved 12 consecutive quarters of
positive net income with growing top-line sales; there is no outstanding debt. Management plans
to strengthen the profitable prescription-based business model by adding more sales personnel to
support NexWave, while taking advantage of the current opioid crisis in the U.S. by offering an
alternative treatment that can eliminate or reduce the use of opioids. The company up-listed from
OTCQB to NASDAQ in February 2019, and executed stock buybacks from 2017 into 2019.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 3

Zynex, Inc. September 23, 2019

Investment Thesis

1. A non-invasive, multi-modality electrotherapy device for pain management.

Electrotherapy has been a clinically proven and medically accepted alternative to manage acute
and chronic pain for several decades. In fact, the first electrical muscle stimulator gained
regulatory approval in 1976; this was the product cited as the predicate device in NexWave’s
510(k) application. Electrotherapy introduces an electrical current applied through surface
electrodes. The electrical current distorts a pain signal on its way to the central nervous system
(CNS), thus reducing the pain. Electrical stimulation has been shown to reduce most types of
local pain, such as tennis elbow, neck or lower back pain, arthritis, and others. Of note,
electrotherapy does not have any side effects that are typically associated with most pain relief
medications (e.g., opioid-based painkillers, which cause addiction, constipation and other issues).
This is a significant advantage for patients experiencing chronic pain, in our view.

One of the most common forms of electrical stimulation for pain management is transcutaneous
electrical nerve stimulation (TENS) therapy. As stated in a review article published in Pain
Management in 2014, high frequency (HF) and low frequency (LF) TENS activate different opioid
receptors. Both applications have been shown to provide analgesia specifically when applied at a
strong, nonpainful intensity. HF TENS may be more effective for people taking opioids. Targeting
the use of TENS during movement or activity may be most beneficial. Of note, TENS, when
applied at adequate intensities, is effective for post-operative pain, osteoarthritis, painful diabetic
neuropathy (PDN) and some acute pain conditions. In addition, this non-pharmacological
intervention is inexpensive and has a favorable safety profile compared with long-term medication.

Approved in September 2011 via 510(k) premarket notification as a Class II Medical Electrical
(ME) equipment, NexWave is a multiple-mode stimulator. As mentioned earlier, the product
allows users a choice of treatment options spanning interferential current (IFC), transcutaneous
electrical nerve stimulation (TENS), and neuromuscular electrical stimulation (NMES).
Figure 2. NexWave Device Controls

Source: Company reports.

In the IFC mode, the left channel (i.e., channel 1) produces a signal at a frequency of 4000 Hz. A
slightly higher frequency (4001-4128 Hz) is produced by the right channel (i.e., channel 2). When
applied to the skin, the signals from the two channels “interfere” with each other, and create a
difference frequency that is felt during treatment. IFC therapy requires the use of both channels
(four electrodes). The indication for use in the IFC mode is management and symptomatic relief

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Zynex, Inc. September 23, 2019

of chronic, intractable, post-traumatic and post-surgical pain. These represent the most difficult
types of pain to address, which are often unresponsive or only partially responsive to traditional
anti-nociceptive medications (e.g., non-steroidal anti-inflammatory drugs, or NSAIDS, as well as
opioid-based painkillers).

In the TENS mode, the device delivers electrical impulses through the skin in the range of 1-125
Hz. TENS treatments can range from 10 minutes to many hours and can be applied as needed
for pain relief. Patients can use one or two channels (two or four electrodes) for TENS therapy.
The indication for use in the TENS mode is also management and symptomatic relief of chronic
intractable, post-traumatic and post-surgical pain.

When in the NMES mode, the device delivers electrical impulses to muscle motor points at a
frequency of 35 Hz. The stimulation is set by the user at a level to cause muscle contraction.
There are three different programs to choose from and each program has a preset stimulation “on
time” of 10 seconds. The “rest period” (no stimulation) varies from 10 seconds to 30 seconds
depending on which program is used. Channel 1 and channel 2 have the same “On” and “Off”
times and when used together will operate simultaneously. The indications for use in the NMES
mode are muscle re-education, prevention or retardation of disuse atrophy, increasing local blood
circulation, maintaining or increasing range of motion, and relaxation of muscle spasms.

The device provides recommended intensity level, device set-up and electrode placement for
various types of pain at different locations of the body, including radicular back pain-sciatica,
lumber back, cervical or upper back, thoracic back, shoulder, elbow, wrist, hip, back of leg,
anterior knee, lateral or medial knee, ankle, foot, post-operative knee, and muscle spasm. A
sample diagram of electrode placement is shown in the figure below.
Figure 3. Electrode Placement for Back Pain

Source: Company reports.

Evidently, NexWave addresses most common types of pain a patient may experience. Its multi-
modality operation satisfies different needs of patients, as IFC may reach greater depths and

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Zynex, Inc. September 23, 2019

offers electrotherapy to a larger number of tissues than TENS. In addition, IFC stimulates
circulation and may have a role in stimulating healing and restoration of tissues, while TENS only
focuses on controlling pain. Though electrotherapy may not work on every single patient,
NexWave provides an alternative to traditional opioid-based treatment regimen with a
prescription-strength product that has no side effects.

2. A considerable unmet medical need for non-opioid pain relief.

According to a report released by the Centers for Disease Control and Prevention (CDC) in
September 2018, approximately 50 million people in the U.S.—just over 20% of the adult
population—suffer chronic pain on a daily basis. About 20 million of them have high-impact
chronic pain—pain severe enough that it frequently limits life or work activities.

Opioids are a type of narcotic pain medication derived from the plant-based chemical opium.
These compounds act by binding to opioid receptors, which are found principally in the central
and peripheral nervous system (PNS) as well as the gastrointestinal (GI) tract. Since opioids are
addictive and may result in fatal overdose, most are controlled substances. The global opioids
market was valued at $25.4 billion in 2018 and is projected to expand at a 1.8% CAGR over the
next few years, according to Grand View Research, a market research firm.

The CDC report estimates that, from 1999 to 2017, almost 400,000 people died from overdoses
involving any opioid, including both prescription and illicit opioids. The rise in opioid overdose
deaths can be outlined in three distinct waves, characterized by prescription opioids, heroin, and
synthetic opioids (particularly those involving illicitly-manufactured fentanyl). The opioid overdose
death waves are depicted in the figure below.
Figure 4. Three Waves of the Rise in Opioid Overdose Deaths

Source: CDC.
The opioid overdose epidemic could partially be the result of prescription habits in the U.S.
Published in JAMA Network in September 2019, a study compared differences in the frequency,
amount and type of opioids dispensed after surgery among the U.S., Canada, and Sweden
among 223,834 opioid-naive patients undergoing four common surgical procedures. The results

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Zynex, Inc. September 23, 2019

showed that the U.S. and Canada have a seven-fold higher rate of opioid prescriptions filled in
the immediate post-operative period compared with Sweden. Across the three countries
examined, the mean dose of opioids for most surgical procedures was highest in the U.S. Data
from this study are shown in the two figures below.
Figure 5. Patients Filling an Opioid Prescription During First Seven Days After Surgery

Source: JAMA Network.

Figure 6. Distribution of Morphine Milligram Equivalents (MMEs) Dispensed in First Rx

Source: JAMA Network.

Published in JAMA Network in February 2019, a study on county-level opioid prescribing in the
U.S. pointed out that prescription opioids accounted for 40% of the 42,249 opioid-related
overdose deaths in 2016. Though the pace of opioid prescribing decreased starting in 2015
through 2017, current U.S. opioid prescribing rates are still almost three times as high as they
were in 1999. In our view, these published data suggest that safe prescribing practices by
physicians constitute a key factor in addressing the opioid epidemic. Hence, one option worth
promoting is the use of evidence-based non-opioid or non-pharmaceutical treatments for pain.

In October 2017, President Trump declared the opioid crisis a public health emergency. His
Initiative to Stop Opioid Abuse, unveiled in 2018, is confronting the driving forces behind the
opioid crisis. Part 1 is reducing demand and over-prescription, including educating Americans
about the dangers of opioid misuse. Part 2 is cutting down on the supply of illicit drugs by
cracking down on the international and domestic drug supply chains that devastate American
communities. Part 3 is helping those struggling with addiction through evidence-based treatment

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Zynex, Inc. September 23, 2019

and recovery support services. On October 24, 2018, the President signed the “Substance Use–
Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities
Act” or the “SUPPORT for Patients and Communities Act” into law. On September 4, 2019, the
President announced $1.8 billion in new grants to help U.S. states fight the opioid crisis and to
help prevent more American lives from being lost to overdose. This follows nearly $400 million
awarded in August 2019 to help community health centers, rural organizations, and academic
institutions expand access to substance use disorder and mental health services.

In our view, the current administration is taking opioid abuse prevention very seriously and has
acted by raising awareness and cracking down on over-prescription. However, much more
remains to be accomplished. According to an article published in The Washington Post on
September 10, 2019, millions of pain patients have been forced to taper off high doses of opioids
under new CDC guideline on prescribing opioids, which could cause extreme pain from drug
withdrawal. We believe NexWave offers an effective and safe option for pain relief when opioid
prescriptions need to be reduced, and Zynex is well positioned to take advantage of this unmet
medical need in the U.S. Indeed, NexWave prescriptions orders have been increasing in recent
months. According to Grand View Research, the global muscle stimulator market was valued at
$589 million in 2016, and is slated to reach $853 million in 2025. Therefore, there is sufficient
room for ample further NexWave revenue growth, in our view.

3. A profitable business model.

A search for muscle stimulator in FDA’s 510(k) database shows that 124 devices have been
approved between 1976 and 2019. What then makes NexWave successful? In our view, it is
Zynex’s prescription-based business model and its established selling and billing infrastructure
that have made NexWave and the company a profitable business. The company currently has
roughly 175 sales reps, including 134 direct reps and over 40 independent reps. These sales reps
meet with physicians as well as physical therapists face-to-face and discuss the NexWave
treatment option as an alternative to opioids. As we previously discussed, physician prescription
is a key for reduction in opioid use. When Zynex’s reps ask physicians to write prescriptions of
NexWave for every pain patient, the physicians may then reduce or even eliminate opioids
prescriptions. With prescriptions of NexWave, Zynex then contacts the patients’ health insurance
providers for pre-authorization. Insurance providers either purchase or lease NexWave, which is
shipped to patients. When a patient starts using NexWave, recurring revenues of consumables
would ensue. Zynex bills the insurance providers for the device and consumables.

This business model compares favorably to the one under which a device is sold over the counter
(OTC) and has to be purchased by the patient, in our view, since OTC products have no
physician influence at the point of care and are typically not reimbursed. Considering that the
CDC guideline says doctors should not increase an opioid dose to more than 90 morphine
milligram equivalents (MME) and doctors are tapering back opioids prescription, we believe being
able to offer a non-pharmaceutical product that physicians can prescribe in the office and is well
known for pain relief is a huge advantage for Zynex.

NexWave has been used to treat over 500,000 pain patients to date. To increase accessibility to
the device nationwide, Zynex plans to continue to add roughly 10 sales reps per month and reach
200 reps by the end of 2019, the majority of which would be direct reps that have higher
efficiency in generating sales compared to independent reps. Furthermore, the company aims to
achieve 400 reps in about 24 months of time. The company’s investment in sales and marketing
has resulted in sustainable top-line revenue growth on a relatively sequential basis, driven by
sales of NexWave and supplies. We note that revenues from purchased device and consumables
are recognized once delivered to the patient; revenue from devices out on lease is recognized
monthly as operating leases. It is worth mentioning that, along with growth in device orders,
Zynex is also continually improving its billing and collection procedures, which allow the company
to collect more for each dollar of billing.

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Zynex, Inc. September 23, 2019

Perhaps more importantly, we note that the company has been profitable for the past 12 quarters,
which manifests successful management of operating expenses along with the revenue growth.
We believe that this positions Zynex favorably going forward, since the company has not
historically leveraged itself or diluted shareholders to drive sales. Historical revenue growth and
EBITDA trend are shown in the figures below.
Figure 7. Zynex Revenue Shows Solid Growth

Source: Company reports.

Figure 8. Positive Adjusted EBITDA for the Past 12 Quarters

Source: Company reports.

As the nation continues to tackle the opioid epidemic at both the federal and state levels in the
coming years (and possibly decades), we believe Zynex has adopted the correct and profitable
business strategy to strengthen the national footprint of its sales reps and increase the visibility
and accessibility of its NexWave device in physicians’ and therapists’ offices. In our view, Zynex
should remain consistently profitable, while NexWave sales could exceed $200 million in 2027.

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Zynex, Inc. September 23, 2019

4. The ZMS blood volume monitor, if approved, could drive additional future upside.

The company’s ZMS subsidiary is developing a non-invasive blood volume monitor (CM-1500) for
monitoring central blood volume that would be used in operating and recovery rooms to detect
blood loss during surgery and internal bleeding during recovery. The device has been subjected
to multiple clinical studies, which are being utilized for collecting data to further validate the
algorithm used to determine changes in central blood volume.

Cardiac Monitor Model 1500 (CM-1500) simultaneously monitors various biological and
biophysical parameters. These include bioelectrical impedance, electrocardiography (ECG), heart
rate, ECG amplitude, photoplethysmogram (PPG) amplitude, skin temperature, and skin humidity.
A Relative Index value is calculated as a combination of these parameters and is represented by
a single number. The methods and processes used to monitor and filter these physiological
parameters, through the use of a weighted summation algorithm, so as to produce a singular
Relative Index score is a unique functionality of CM-1500. In September 2015, Zynex filed a
510(k) application with the FDA for approval of CM-1500. In October 2018, Zynex obtained a U.S.
utility patent for CM-1500, which protects the algorithm that computes multiple vital signs into an
easy-to-understand index. We note that there are currently no other non-invasive devices
available that can detect blood loss or internal bleeding. Current approaches are either too
invasive or lack precision and early predictive capability for blood loss and intervention. Thus,
CM-1500 has the potential to address the unmet need to manage blood volume in hospital and
surgical settings, whether it is fluid loss, fluid overload or internal bleeding that is rarely detected
until it becomes critical or fatal, in our view.
Figure 9. CM-1500 Blood Volume Monitor

Source: Company reports.

To be clear, CM-1500 is still awaiting FDA clearance and European CE Marking. According to
management, Zynex and the agencies have been exchanging correspondence over the past few
years. The company is currently collecting data to provide answers to FDA’s most recent
feedback. Though no guidance has been given on the potential time frame for approval, we
believe it is possible that the device may obtain FDA clearance in 2020. It is also worth noting that
Zynex has built a number of commercial devices in pilot-production and continue to refine the
algorithms for the Blood Volume Index (BVI). The initial production units are being used in
hospitals for field testing and validation, and there is strong interest from the U.S. Army. In our
view, the CM-1500 device could save lives by enabling timely and accurate fluid management in
order to avoid significant complications during and after surgeries. Importantly, the value of the
blood volume monitor is not included in our current valuation given lack of clarity in timing of
regulatory clearance. Approval and commercialization of CM-1500 in the U.S. and Europe could
drive significant upside to our projections.

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Zynex, Inc. September 23, 2019

5. Leadership with substantial prior expertise in the device industry.

Through our interactions with Zynex’s management, we have learned that the team has a lengthy
history of participating in groundbreaking innovation within the medical device domain.
Specifically, Mr. Thomas Sandgaard—who originally founded the company and ran it from a
single room, while funding initial corporate expenses with his personal credit cards—has an in-
depth knowledge of the industry and is the driving force of the company’s strategies. The team
has consistently delivered products that by design show that they are well-versed in the nature of
medical device marketplace and customer needs utilizing innovative approaches to target a host
of different disease areas. Therefore, we believe that this management team should be able to
deliver sound returns to shareholders.

Mr. Sandgaard has been the Chairman of the Board, President and Chief Executive Officer of
Zynex, Inc. since founding the company in 1996. He previously held management positions with
firms such as ITT, Siemens, GN Danavox, Dataco and Philips. Most of his work has been in the
areas of international sales and distribution, technology transfers, mergers and marketing
management in the semiconductor, telecommunications, data communications and medical
equipment industries. He has a degree in electronics engineering from Denmark’s Odense
University of Engineering and an M.B.A. from Copenhagen Business School. We believe that his
track record in establishing Zynex, growing sales and achieving sustainable profitability—without
resorting to dilutive financing or onerous debt instruments—demonstrates his solid stewardship.
Mr. Sandgaard also formed The Sandgaard Foundation in 2018 with a nationwide focus to save
lives from opioid overdose and support those in recovery and their families.

6. We model sales of NexWave only; other products may drive upside to our estimates.

For 2Q19, Zynex reported net revenue of $10.3 million, representing 36% growth YoY. Gross
margin was 81% and net income was $2.2 million. Adjusted EBITDA was $2.8 million; the
company generated $2.4 million of cash from operations during the second quarter. Importantly,
orders increased 65% YoY in 2Q19 and were 48% higher in 1H19 compared to 1H18, and
reimbursement was strong as well, according to management, suggesting higher top-line
revenues in the coming months. At the end of 2Q19, the company had $10.1 million in cash. For
3Q19, management has provided revenue guidance in the $10.7 – 11.2 million range, with
adjusted EBITDA of $2.4 – 2.9 million, representing approximately 32-38% revenue growth YoY.
We currently project approximately $11 million in total revenue for 3Q19.

For the market model, our sales projection is primarily focused on the NexWave device and the
consumables for pain management, since over 90% of the total revenue comes from this device.
We estimate annual revenue per patient to be around $1,800, including the device and the
consumables. Reimbursement for TENS or muscle stimulation devices has been in place for
decades. We project that peak sales could be achieved in the 2030 – 2031 time frame at roughly
$240 million, after which market shares could drop due to new competition in the market. We
assume flat sales for all other products, and our revenue projection does not include potential
sales from the blood volume monitor. In our view, potential regulatory approval and sales of the
blood volume monitor, meaningful growth in the sales of other products, and potential sales
growth in Europe, could drive upsides to our current valuation of the company. Thus, we consider
our assessment to be conservative, with multiple potential drivers of positive surprises vs. our
forecasts. As such, we believe Zynex represents a risk-mitigated investment opportunity.

Though Zynex is focused on driving value through organic growth in the near term, the company
could make strategic acquisitions to better position itself in the medical device space, in our view.
The company has been executing stock buybacks and declared a one-time special dividend of
$0.07 per share in November 2018. A sizeable acquisition may require the company to raise
additional capital. However, given the current low interest rate environment, we feel that Zynex
should have multiple opportunities to tap sources of funding if an appropriate acquisition target
were to emerge.

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Table 1. Zynex Medical Device Estimated Sales—Pain Management Market Size Model
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
NexWave sales
U.S. chronic pain population ('000) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
NexWave penetration 0.035% 0.047% 0.062% 0.081% 0.103% 0.127% 0.151% 0.175% 0.200% 0.224% 0.246% 0.258% 0.263% 0.263% 0.237% 0.221% 0.205% 0.191%
Number of patients using NexWave ('000) 17.5 23.7 31.0 40.3 51.6 63.4 75.5 87.6 99.8 111.8 123.0 129.2 131.7 131.7 118.6 110.3 102.6 95.4
Annual revenue per patient ($) $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800
NexWave revenue ($MM) $31.5 $42.6 $55.8 $72.5 $92.9 $114.2 $135.9 $157.7 $179.7 $201.3 $221.4 $232.5 $237.1 $237.1 $213.4 $198.5 $184.6 $171.7
35.1% 31.1% 30.0% 28.0% 23.0% 19.0% 16.0% 14.0% 12.0% 10.0% 5.0% 2.0% 0.0% -10.0% -7.0% -7.0% -7.0%

Other product sales ($MM) 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Total revenues ($MM) $31.9 $43.0 $56.3 $73.0 $93.4 $114.7 $136.4 $158.2 $180.2 $201.8 $221.9 $233.0 $237.6 $237.6 $213.9 $199.0 $185.1 $172.2
34.7% 31.0% 29.7% 27.8% 22.9% 18.9% 15.9% 14.0% 12.0% 10.0% 5.0% 2.0% 0.0% -10.0% -7.0% -7.0% -7.0%

Source: H.C. Wainwright & Co. estimates.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 12

Zynex, Inc. September 23, 2019

Valuation

We utilize an enterprise value analysis to value Zynex’s shares. Specifically, a discounted cash
flow assessment is applied in the valuation of NexWave. We are not including any pipeline
products such as the blood volume monitor in our valuation. Advances in the regulatory process
with the blood volume monitor and sales growth in other marketed products may drive additional
upside in the stock. Growth in revenues in ex-U.S. territories such as Europe may also constitute
sources of further upside. Our analysis shows that Zynex’s common share is worth approximately
$12 per share.
Table 2. Composite Analysis With DCF
Zynex, Inc. Product Launch Patent Peak Royalty Probability NPV Amount
($MM except amount per share) Year Expiry Sales Rate To Launch Per Share

Marketed
Electrotherapy for pain relief NexWave 2011 NA $240 NA 100%

$398 $11.69

Enterprise value of the firm $398 $11.69

Debt at end-2Q19 $0 $0.00
Cash at end-2Q19 $10 $0.30
Market value of the firm $408 $11.99

Source: H.C. Wainwright & Co. estimates.

For the DCF analysis, we project U.S. peak sales of NexWave in 2030 – 2031. Market adoption
should continue to increase in the coming years, in our view, as the company adds more sales
reps to promote the device as an alternative to opioids treatment to physicians. Peak market
penetration is estimated at approximately 0.26% of the 50 million chronic pain patients in the U.S.,
considering that electrotherapy is unlikely to overtake pharmaceuticals as the primary treatment
for pain. We believe NexWave market shares could start to decrease after 2031 due to new
competitors in the pain management space. We estimate peak U.S. sales of roughly $240 million
in 2030. We are not aware of any company other than Zynex that is currently marketing a home
electrotherapy device for pain relief with growing top-line sales and sustainable profitability.

Since the blood volume monitor is awaiting FDA clearance and the potential time frame for 510(k)
approval is unclear, we have decided not to include future revenue from this product in our model
at this point. We apply an 11% discount rate to all future cash flows, which is justified by the
company’s consistent positive cash flows in the past 12 quarters with multiple commercialized
products, and a 0.5% terminal growth rate to derive a terminal value at 2036. The company’s
WACC is 7.1%, according to Bloomberg.

The sum of the present values of period cash flows and the terminal cash flow is $398 million,
which is indicated in the center of the sensitivity analysis table on the following page. Since the
company has no outstanding debt, and is profitable with a cash position of $10 million as of mid-
2019, the estimated market value is $408 million. Using 34 million fully diluted shares of common
stock, we have derived a value of approximately $12 per share. We believe our price target could
be achieved within an approximately 12-month time frame, given the projected top-line sales
growth for NexWave.

At current trading price of $9.99 per share, ZYXI stock has EV/Sales (TTM) and EV/EBITDA
(TTM) ratios of 8.5x and 27.7x, respectively; and the P/E (TTM) ratio is 34.5x. Using our revenue
estimates of 2020 and 2021, EV/Sales ratios are 5.6x and 4.3x, respectively. Using our earnings
estimates of 2020 and 2021, P/E ratios are 28.5x and 17.8x, respectively. As the company
continues to grow its top- and bottom-line, we expect these valuation metrics of future periods to
gradually increase driven by the potential appreciation in stock price.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 13

Zynex, Inc. September 23, 2019

Table 3. Zynex Estimated Sales—Discounted Cash Flow (DCF) Analysis

Fiscal Year Ending 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 12/31/2026 12/31/2027 12/31/2028 12/31/2029 12/31/2030 12/31/2031 12/31/2032 12/31/2033 12/31/2034 12/31/2035

Revenue ($MM) $24 $56 $73 $93 $115 $136 $158 $180 $202 $222 $233 $238 $238 $214 $199 $185 $172

EBIT $6 $16 $26 $39 $48 $57 $66 $75 $84 $92 $97 $99 $99 $89 $83 $77 $72
Less: Taxes ($2) ($4) ($7) ($10) ($12) ($15) ($17) ($19) ($22) ($24) ($25) ($26) ($26) ($23) ($22) ($20) ($19)
Debt-Free Earnings $4 $12 $19 $29 $35 $42 $49 $55 $62 $68 $72 $73 $73 $66 $61 $57 $53
Less: Capital Expenditures ($1) ($2) ($2) ($3) ($3) ($4) ($5) ($5) ($6) ($7) ($7) ($7) ($7) ($6) ($6) ($6) ($5)
Less: Working Capital Requirements $0 ($2) ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($0) $0 $1 $1 $1 $1
Add: Depreciation and Amortization $1 $1 $2 $3 $3 $4 $5 $5 $6 $7 $7 $7 $7 $6 $6 $6 $5
Total Net Investment $0 ($3) ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($0) $0 $1 $1 $1 $1

Net Debt-Free Cash Flows: $5 $9 $18 $28 $34 $41 $48 $54 $61 $67 $71 $73 $73 $67 $62 $58 $54
Discount Period 0.27 1.28 2.28 3.28 4.28 5.28 6.28 7.28 8.28 9.28 10.28 11.28 12.28 13.28 14.28 15.28 16.28
Discount Factor 11.0% 0.97 0.88 0.79 0.71 0.64 0.58 0.52 0.47 0.42 0.38 0.34 0.31 0.28 0.25 0.23 0.20 0.18
PV of Net Debt-Free Cash Flows: $5 $8 $15 $20 $22 $24 $25 $25 $26 $26 $24 $22 $20 $17 $14 $12 $10

Total Value ($MM) - Sensitivity Analysis DCF Assumptions

Growth Rate Discount Rate 11.0%

$397.55 -3.5% -1.5% 0.5% 2.5% 4.5% Tax Rate 26.0%
Discount Rate

7.0% 584 624 688 810 1,127

9.0% 459 479 509 556 647
Perpetuity Growth Assumptions
11.0% 372 383 398 420 455
2036 Cash Flow (0.5% Growth Rate) $53.9
13.0% 308 314 322 333 350 Growth Rate 0.01
15.0% 260 263 268 274 283
Terminal Value $513
Probability of approval: 100% for NexWave Discount Period 17.28
Probability-adjusted NPV: $398 million Discount Factor @ 11.0% 0.16
PV of Terminal Value $85

Distribution of Value

Period Cash Flow 78.7%

Terminal Cash Flow 21.3%
Total 100.0%
Source: H.C. Wainwright & Co. estimates.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 14

Zynex, Inc. September 23, 2019

Financial Review and Outlook

Revenue. We forecast total revenue of $43.0 million for 2019 and $56.3 million for 2020,
respectively. Management has provided revenue guidance for 3Q19 in the $10.7 – 11.2 million
range. Our projections reflect revenue growth of 35% and 31% in 2019 and 2020, respectively.

Gross margin. Historical gross margins have been over 80%. We expect the gross margin to
remain at this level, and potentially improve going forward as the company distributes more units
of NexWave and related consumables.

Operating expenses. The company has been adding sales reps every quarter, and plans to
continue to do so going forward. Therefore, we expect sales and marketing expenses to increase
meaningfully in the coming quarters and years going from $11.1 million in 2018 to $13.5 million in
2019 and $18.9 million in 2020. We expect the G&A expenses to remain relatively stable, at
roughly $11 million for both 2019 and 2020.

Taxes. We believe Zynex has depleted its operating loss carry-forwards to offset against future
taxable income. Thus, we project that future revenues are to be taxed at a 26% effective rate.

Share count. As of mid-2019, the company had about 32.4 million common shares outstanding.
The company also had roughly 2.0 million stock options and 71K restricted stock units. Fully
diluted shares are approximately 34.0 million. The company may need to raise additional capital if
it decides to make a sizeable acquisition.

EPS. We forecast diluted net income per share at $0.26 in 2019 and $0.34 in 2020, respectively.

Balance sheet. As of mid-2019, the company had $10.1 million in cash. Cash generated from
operations during 2Q19 was $2.4 million. The company has no outstanding debt.

Cash flow. We project that the company’s operations should be cash flow positive in the
foreseeable future.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 15

Zynex, Inc. September 23, 2019

Investment Risks

Financial outlook. Zynex has been profitable for the past 12 quarters. However, profitability is
not guaranteed for future periods. The company may require additional capital in the future in
order to drive the development of its pipeline or finance the acquisition of other products and
pipeline candidates. The company’s stock could experience average risk and volatility.

Regulatory unpredictability. The company requires regulatory authorization from multiple

agencies in various countries in order to introduce its products into the market. Regulatory
parameters promulgated by the U.S. Food and Drug Administration (FDA) or European Medicines
Agency (EMA), among others, may be difficult to comply with or might evolve in inherently
unpredictable ways.

Competitive landscape. The medical device market is highly competitive. Specifically, the
muscle stimulation device market is crowded with competitors with FDA clearance. The
company’s principal competitors include International Rehabilitative Sciences, Inc. (d/b/a RS
Medical), EMSI, and H-Wave, among all TENS, IFC and NMES devices. For pain management,
the company’s products may also compete with other non-pharmaceutical and pharmaceutical
products, including opioids.

Partnership risk. Zynex may rely on partners for manufacturing and distribution of its products
outside the U.S. No assurance can be given that the partner could market the products effectively,
or that Zynex could establish new collaboration agreements on acceptable terms, if at all.

Intellectual property risk. Zynex relies on patents and trade secrets to protect its products from
competition. Competition is rife, and in extreme cases, may lead to lawsuits in the pursuit of the
protection of intellectual property. There can be no guarantee that Zynex, if a party to such
litigation, would prevail against potential opponents.

Industry risks. Securities issued by emerging healthcare companies are inherently volatile and
increasingly subject to development and regulatory risk. Meeting or missing development and
commercial milestones may result in changes in the perception of the firm and the stock price.
We do not anticipate volatility to subside in the near term.

For additional risk considerations, please refer to the company's SEC filings.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 16

Zynex, Inc. September 23, 2019

Public companies mentioned in this report:

ITT Inc. (ITT; not rated)

Koninklijke Philips N.V. (PHG; not rated)
Siemens AG (SIEGY; not rated)

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 17

Zynex, Inc. September 23, 2019

Table 4. Zynex, Inc. (ZYXI)—Historical Income Statements, Financial Projections

FY end December 31
$ in thousands, except per share data
2018A 2019E
2017A 1QA 2QA 3QA 4QA 2018A 1QA 2QA 3QE 4QE 2019E 2020E
Revenues
Devices 5,020 1,588 1,673 1,811 1,750 6,822 1,975 2,288 2,450 2,400 9,113 11,900
Supplies 18,412 5,288 5,900 6,320 7,587 25,095 7,221 8,009 8,575 10,080 33,885 44,375

Total revenue 23,432 6,876 7,573 8,131 9,337 31,917 9,196 10,297 11,025 12,480 42,998 56,275

Expenses
Cost of revenue 4,819 1,236 1,330 1,641 1,831 6,038 1,784 1,948 2,084 2,359 8,174 10,636
Research and development - - - -
Sales and marketing 9,669 1,307 1,457 3,670 4,625 11,059 2,473 3,081 3,650 4,300 13,504 18,900
General and administrative - 2,379 2,071 4,450 2,683 2,684 2,685 2,685 10,737 10,900

Total expenses 14,488 4,922 4,858 5,311 6,456 21,547 6,940 7,713 8,419 9,344 32,415 40,436

Gain (loss) from operations 8,944 1,954 2,715 2,820 2,881 10,370 2,256 2,584 2,606 3,136 10,583 15,839

Other income
Interest expense (1,450) (115) (37) (1) (1) (154) - -
Deferred insurance reimbursement - - 880 880 -

Total investment income and other (1,450) (115) (37) (1) (1) (154) 880 - - - 880 -

Net income (loss) before provision for income taxes 7,494 1,839 2,678 2,819 2,880 10,216 3,136 2,584 2,606 3,136 11,463 15,839

Provision for income taxes (129) 81 (260) (228) (257) (664) (786) (422) (678) (815) (2,701) (4,118)

Net income (loss) 7,365 1,920 2,418 2,591 2,623 9,552 2,350 2,162 1,929 2,321 8,761 11,721

Net income (loss) per share (basic) 0.23 0.06 0.07 0.08 0.08 0.29 0.07 0.07 0.06 0.07 0.27 0.35
Net income (loss) per share (diluted) 0.22 0.06 0.07 0.08 0.08 0.28 0.07 0.06 0.06 0.07 0.26 0.34

Weighted average number of shares outstanding (basic) 32,156 32,601 32,620 32,521 32,328 32,503 32,233 32,326 32,623 32,973 32,539 33,723
Weighted average number of shares outstanding (diluted) 33,196 34,414 34,169 33,931 32,328 34,043 33,721 33,953 33,973 33,983 33,908 34,008

Adjusted EBITDA 9,525 2,043 2,810 2,955 3,121 10,929 2,461 2,818 2,842 3,372 11,494 16,831

Source: Company reports and H.C. Wainwright & Co. estimates.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 18

Zynex, Inc. September 23, 2019

Table 5. Zynex, Inc. (ZYXI)—Historical Balance Sheets, Financial Projections

FY end December 31
$ in thousands, except per share data
2018A 2019E
12/31/17A 3/31A 6/30A 9/30A 12/31A 12/31/18A 3/31A 6/30A 9/30E 12/31E 12/31/19E 12/31/20E
Assets

Current assets:
Cash and cash equivalents 5,565 4,366 6,285 8,096 10,128 10,128 9,419 10,054 12,119 14,575 14,575 26,888
Accounts receivable 2,185 2,668 2,863 2,898 2,791 2,791 3,147 3,540 3,540 3,540 3,540 3,540
Inventories 423 710 518 796 837 837 968 1,325 1,325 1,325 1,325 1,325
Prepaid expenses and other current assets 198 615 579 364 568 568 738 833 833 833 833 833
-
Total current assets 8,371 8,359 10,245 12,154 14,324 14,324 14,272 15,752 17,817 20,273 20,273 32,586
-
Property and equipment, net 188 575 778 829 819 819 791 822 846 870 870 958
Operating lease asset - 3,050 3,050 2,900 4,323 4,323 4,323 4,323 4,323
Financing lease asset - 19 19 16 9 9 9 9 9
Deposits 370 375 370 314 314 314 314 342 342 342 342 342
Long term deferred income taxes - 725 725 572 591 591 591 591 591

Total Assets 8,929 9,309 11,393 13,297 19,251 19,251 18,865 21,839 23,928 26,408 26,408 38,809

Liabilities and shareholder equity

Current liabilities
Accounts payable and accrued expenses 2,243 2,112 1,631 1,842 1,552 1,552 1,561 1,829 1,829 1,829 1,829 1,829
Lease liability - operating leases 123 93 64 34 671 671 689 965 965 965 965 965
Lease liability - financing leases 231 7 14 14 14 14 14 14 14 14
Income taxes payable - 688 688 1,321 - - - -
Dividends payable - 2,270 2,270 11 11 11 11 11 11
Accrued payroll and related taxes 538 661 692 766 908 908 857 1,009 1,009 1,009 1,009 1,009
Deferred insurance reimbursement 880 880 880 880 880 880 - - - -
-
Total current liabilities 4,015 3,753 3,267 3,522 6,983 6,983 4,453 3,828 3,828 3,828 3,828 3,828

Lease liability - operating leases - 2,967 2,967 2,787 3,940 3,940 3,940 3,940 3,940
Lease liability - financing leases - 10 10 7 4 4 4 4 4
Deferred rent - 329 443 559 - - - - -
Deferred income taxes - 129 51 - - - - -
Warranty liability 12 12 12 12 - - - - -

Total Liabilities 4,027 4,094 3,851 4,144 9,960 9,960 7,247 7,772 7,772 7,772 7,772 7,772

Shareholder's equity

Common stock 33 33 33 34 34 34 34 34 34 35 35 36
Additional paid-in capital 7,612 7,761 7,881 7,978 8,157 8,157 8,305 8,592 8,592 8,591 8,591 8,590
Treasury stock (243) (2,000) (2,211) (3,289) (3,675) (3,675) (3,846) (3,846) (3,846) (3,846) (3,846) (3,846)
Accumulated earnings (2,411) (490) 1,928 4,519 4,864 4,864 7,214 9,376 11,465 13,945 13,945 26,346
Total Zynex shareholder's equity 4,991 5,304 7,631 9,242 9,380 9,380 11,707 14,156 16,245 18,725 18,725 31,126

Non-controlling interest (89) (89) (89) (89) (89) (89) (89) (89) (89) (89) (89) (89)
Total stockholders' equity 4,902 5,215 7,542 9,153 9,291 9,291 11,618 14,067 16,156 18,636 18,636 31,037
-
Total liability and shareholder's equity 8,929 9,309 11,393 13,297 19,251 19,251 18,865 21,839 23,928 26,408 26,408 38,809

Source: Company reports and H.C. Wainwright & Co. estimates.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 19

Zynex, Inc. September 23, 2019

Table 6. Zynex, Inc. (ZYXI)—Historical Statements of Cash Flows, Financial Projections

FY end December 31
$ in thousands, except per share data
2018A 2019E
2017A 1QA 2QA 3QA 4QA 2018A 1QA 2QA 3QE 4QE 2019E 2020E

Cash flows from operating activities

Net loss 7,365 1,920 2,418 2,591 2,623 9,552 2,350 2,162 1,929 2,321 8,761 11,721
Adjustments for:
Depreciation 252 448 66 76 76 76 294 312
Amortization of intangible assets 34 - -
Amortization of debt issuance costs 511 153 - -
Stock based compensation 66 370 139 158 160 160 617 680
Non-cash compensation to consultant 228 - -
Gain on disposal of asset 3 - -
Loss on disposal of product inventory 227 - -
Cash received for leasehold improvements 214 - -
Benefit for deferred income taxes (725) - -
Interest expense related to common stock issued in connection with our
739private placement - -
Change in working capitals:
Accounts receivable 843 (606) - -
Prepaid and other assets (158) (372) - -
Inventory (316) (414) - -
Deposits (315) 55 - -
Accounts payable and accrued expenses (1,063) (515) - -
Accrued Payroll and related taxes (193) 370 - -
Deferred Revenue (54) - -
Income taxes payable 40 554 - -
Other long-term obligations 375 - -
Total change in operating assets & liabilities (1,162) - - - - (607) - - - - - -
Cash flows from operating activities 8,260 993 2,647 3,127 2,641 9,408 1,764 600 2,165 2,557 7,085 12,713
Cash flows from investing activities
Purchase of Property and Equipment (87) (160) (501) (230) (191) (1,082) (46) (95) (100) (100) (341) (400)
Other - -
Cash flows from investing activities (87) (160) (501) (230) (191) (1,082) (46) (95) (100) (100) (341) (400)
Cash flows from financing activities
Proceeds from the issuance of stock (option and warrant exercises) 39 86 67 21 2 176 7 130 - - 137 -
Payment of commission and placement agent fees and related expenses(155) - - - - - - -
Proceeds from unsecured subordinated promissory notes 1,035 - - - - - - -
Principal payments on subordinated notes payable (650) (331) (54) - 1 (384) - - -
Net (repayments) borrowings on line of credit (2,771) - - - - - - -
Payments on capital lease obligations (131) (30) (29) (30) (34) (123) (4) - (4) -
Purchase of treasury stock (222) (1,757) (211) (1,077) (387) (3,432) (171) - (171) -
Common stock cash dividends - - - - (2,259) - (2,259) -
Cash flows from financing activities (2,855) (2,032) (227) (1,086) (418) (3,763) (2,427) 130 - - (2,297) -

Net increase/ decrease in cash and cash equivalents 5,318 (1,199) 1,919 1,811 2,032 4,563 (709) 635 2,065 2,457 4,447 12,313
Cash and cash equivalents, beginning of period 247 5,565 4,366 6,285 8,096 5,565 10,128 9,419 10,054 12,119 10,128 14,575
Cash and cash equivalents, end of period 5,565 4,366 6,285 8,096 10,128 10,128 9,419 10,054 12,119 14,575 14,575 26,888

Source: Company reports and H.C. Wainwright & Co. estimates.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 20

Zynex, Inc. September 23, 2019
Important Disclaimers
This material is confidential and intended for use by Institutional Accounts as defined in FINRA Rule 4512(c). It may also be
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H.C. WAINWRIGHT & CO, LLC RATING SYSTEM: H.C. Wainwright employs a three tier rating system for evaluating both
the potential return and risk associated with owning common equity shares of rated firms. The expected return of any given
equity is measured on a RELATIVE basis of other companies in the same sector. The price objective is calculated to estimate
the potential movements in price that a given equity could reach provided certain targets are met over a defined time horizon.
Price objectives are subject to external factors including industry events and market volatility.

RETURN ASSESSMENT
Market Outperform (Buy): The common stock of the company is expected to outperform a passive index comprised of all the
common stock of companies within the same sector.
Market Perform (Neutral): The common stock of the company is expected to mimic the performance of a passive index
comprised of all the common stock of companies within the same sector.
Market Underperform (Sell): The common stock of the company is expected to underperform a passive index comprised of
all the common stock of companies within the same sector.

Rating and Price Target History for: Zynex, Inc. (ZYXI-US) as of 09-20-2019
12
10
8
6
4
2
0
Q2 Q3 2017 Q1 Q2 Q3 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3

Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement
of securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company
or one of its affiliates or subsidiaries within the past 12 months.
Distribution of Ratings Table as of September 20, 2019
IB Service/Past 12 Months
Ratings Count Percent Count Percent
Buy 358 92.27% 125 34.92%
Neutral 30 7.73% 3 10.00%
Sell 0 0.00% 0 0.00%
Under Review 0 0.00% 0 0.00%
Total 388 100% 128 32.99%

H.C. Wainwright & Co, LLC (the “Firm”) is a member of FINRA and SIPC and a registered U.S. Broker-Dealer.

I, Yi Chen, Ph.D. CFA and Raghuram Selvaraju, Ph.D. , certify that 1) all of the views expressed in this report accurately reflect
my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or
will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither
myself nor any members of my household is an officer, director or advisory board member of these companies.

None of the research analysts or the research analyst’s household has a financial interest in the securities of Zynex, Inc.
(including, without limitation, any option, right, warrant, future, long or short position).
As of August 31, 2019 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities
of Zynex, Inc..
Neither the research analyst nor the Firm knows or has reason to know of any other material conflict of interest at the time
of publication of this research report.

The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any
specific investment banking services or transaction but is compensated based on factors including total revenue and profitability
of the Firm, a substantial portion of which is derived from investment banking services.

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 21

Zynex, Inc. September 23, 2019

The firm or its affiliates received compensation from Zynex, Inc. for non-investment banking services in the previous 12 months.

The Firm or its affiliates did not receive compensation from Zynex, Inc. for investment banking services within twelve months
before, but will seek compensation from the companies mentioned in this report for investment banking services within three
months following publication of the research report.

The Firm does not make a market in Zynex, Inc. as of the date of this research report.

The securities of the company discussed in this report may be unsuitable for investors depending on their specific investment
objectives and financial position. Past performance is no guarantee of future results. This report is offered for informational
purposes only, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction
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H.C. WAINWRIGHT & CO. EQUITY RESEARCH 22