8-K: Zynex Files Chapter 11 for Financial Restructuring

Zynex, Inc. announced it has voluntarily entered Chapter 11 bankruptcy for financial restructuring with new financing from its lenders, aiming for long-term success.

Summary

• Zynex, Inc. and certain of its subsidiaries filed voluntary petitions under chapter 11 of the United States Bankruptcy Code on December 15, 2025.
• The company entered into a Restructuring Support Agreement (RSA) with Consenting Noteholders, representing approximately 80% of the outstanding principal amount of its 5.00% Convertible Senior Notes due 2026, and certain Debtor-in-Possession (DIP) Lenders.
• The RSA outlines a $22.3 million DIP financing facility to maintain stable operations during the Chapter 11 process.
• The restructuring plan includes a competitive sale process for all or substantially all of the company's assets or equity interests, with the DIP Lenders and CEO Steven Dyson (or an entity controlled by him) serving as the stalking horse bidder.
• The Chapter 11 filing constitutes an event of default under the company's approximately $60.0 million 5.00% Convertible Senior Notes due 2026, making the principal and interest immediately due and payable.
• The company expects its equity holders to experience a significant loss on their investment if the Restructuring Transactions are implemented.
• A press release was issued on December 16, 2025, announcing the Chapter 11 filing and the entry into the RSA.
• Discussion materials, referred to as 'Cleansing Material' and dated November 13, 2025, were furnished, outlining a two-phase plan for business turnaround and transformation, including projected financial improvements.

Sentiment

Score: 3

Explanation: The voluntary Chapter 11 filing is a highly negative event, indicating severe financial distress and expected significant loss for equity holders. However, the secured DIP financing and a clear restructuring plan with support from key noteholders provide a structured path forward and a potential for future operational improvements and profitability, mitigating the absolute worst-case scenario.

Positives

• A $22.3 million Debtor-in-Possession (DIP) financing facility has been secured to fund working capital and Chapter 11 costs, ensuring stable operations.
• The Restructuring Support Agreement (RSA) has significant backing from approximately 80% of the Convertible Noteholders, indicating a consensual path forward.
• Management expresses confidence in the business and recent positive changes, aiming for long-term success through the restructuring.
• Operations are expected to continue without impact on patients, customers, or employees during the Chapter 11 process.
• The company has outlined a '2-phase plan' to execute a business turnaround (2025-2027) and transform the business (2027 onwards), focusing on compliance, commercial function improvements, payor relations, and cash conservation.
• Projected revenue growth is significant: 18% in 2026, 45% in 2027, and 23% in 2028, reaching $110.655 million by 2028.
• EBITDA is projected to turn around from a negative $(8.72) million in 2026 to a positive $10.943 million in 2027 and $21.261 million in 2028.
• Gross margins are forecasted to improve substantially from 69% (Q4 2025 annualized) to 81% in 2026 and 84% in 2027-2028.
• Strategic initiatives include phasing out the low-margin Distribution business (expected to be EBITDA accretive by approximately $4 million), optimizing the sales force structure (from ~380 to ~150 reps with a 10:1 manager ratio), improving VA and Tricare processes, automating patient enrollment and benefit verification, and reducing NexWave's cost of goods sold.
• Long-term transformation opportunities include international expansion, product innovation, and entering adjacent markets like orthopedic/post-surgical applications (e.g., rotator cuff with an estimated addressable market of ~$200 million).

Negatives

• The voluntary filing for Chapter 11 bankruptcy signifies severe financial distress and a need for fundamental restructuring.
• Existing equity holders are explicitly expected to experience a significant loss on their investment, with the likelihood of common stock cancellation.
• The Chapter 11 filing triggered an immediate event of default on the company's $60.0 million 5.00% Convertible Senior Notes due 2026.
• The Zynex Monitoring Solutions (ZMS) business, acquired for $31 million in 2021, was not FDA approved and incurred a monthly cash burn of over $500,000, leading to the reduction of its entire 24-person workforce.
• The Distribution business had low gross margins (35% in Q3 2025) and negative EBITDA margins post-commissions, necessitating its phase-out.
• Historical commercial function issues included an unproductive sales force structure (~380 sales reps with a 55:1 manager-to-rep ratio), a confusing commission structure, and a lack of prescriber-level data for sales representatives.
• Challenges were noted in the VA and Tricare segments due to a lack of dedicated leadership, complex order generation processes, and a payment suspension for Tricare.
• Patient enrollment and conversion processes suffered from manual order entry, a shift to text messaging that resulted in a dramatic drop in conversions, and manual benefit verification.
• New compliance policies are expected to initially reduce supplies revenue in Q1 2026.
• The company projects a negative EBITDA of $(8.72) million for the year ending December 31, 2026.

Risks

• Trading in the company's securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks.
• Trading prices for the company's securities may bear little or no relationship to the actual recovery, if any, by the holders of the company's securities in the Chapter 11 Cases.
• Equity holders are expected to experience a significant loss on their investment if the Restructuring Transactions are implemented.
• Risks and uncertainties relating to the Chapter 11 Cases, including the company's ability to obtain Court approval for motions and the Plan, the effects of the Chapter 11 Cases on the company and its various constituents, and the impact of Court rulings.
• Uncertainty regarding the ultimate outcome and the length of time the company will operate under the Chapter 11 Cases.
• Attendant risks associated with restrictions on the company's ability to pursue its business strategies while the Chapter 11 Cases are pending.
• Risks associated with third-party motions in the Chapter 11 Cases.
• The potential adverse effects of the Chapter 11 Cases on the company's liquidity.
• The likelihood of the cancellation of the company's common stock in the Chapter 11 Cases.
• Uncertainty regarding the company's ability to retain key personnel and management.
• Uncertainty and continuing risks associated with the company's ability to achieve its goals and continue as a going concern.
• The company's ability to identify and complete a transaction as a result of the strategic alternative process.
• The company's ability to raise capital or otherwise improve its liquidity position and continue as a going concern.
• The need to obtain CE marking of new products.
• The acceptance of new products as well as existing products by doctors and hospitals.
• Competition from larger competitors with greater financial resources.
• The need to keep pace with technological changes.
• Dependence on the reimbursement for products from health insurance companies.
• The outcome of the Tricare payment suspension.
• Dependence on third-party manufacturers to produce products on time and to specifications.
• Market conditions and economic factors, such as interest rate fluctuations.
• The risk that the company is unable to deliver any anticipated cost savings or re-alignment of strategy (or recognize the expected benefits therefrom) due to an inability to identify appropriate opportunities, anticipate implementation costs, delays in implementation, or other factors.

Future Outlook

The company anticipates a financial restructuring will put it on a path to long-term success, with operations continuing as usual. It projects a return to growth and profitability through a two-phase plan: executing a business turnaround (2025-2027) and transforming the business (2027 onwards). This includes significant revenue growth and a positive EBITDA turnaround by 2027, driven by commercial initiatives, operational efficiencies, and strategic investments in R&D and marketing for new products and markets.

Management Comments

• "Today we take the next step in creating a new future for Zynex." Steven Dyson, CEO.
• "This financing demonstrates the confidence our lenders have in our business and the extensive positive changes we have made in recent months." Steven Dyson, CEO.
• "Paired with our renewed commitment to the highest integrity in our business practices, a financial restructuring puts Zynex on the path to long-term success." Steven Dyson, CEO.
• "We look forward to sharing our progress as we fulfill our mission to improve the quality of life for patients suffering from debilitating pain." Steven Dyson, CEO.

Industry Context

The company operates in the large and underpenetrated pain management market, which is experiencing a high desire for non-opioid pain relief solutions. Electro-stimulation therapy, like Zynex's NexWave device, is presented as an effective, portable, and versatile solution. The restructuring aims to capitalize on this market opportunity by addressing internal operational inefficiencies and expanding into adjacent markets such as orthopedics/post-surgical applications, aligning with broader healthcare trends towards non-pharmacological pain management and value-based care.

Comparison to Industry Standards

• Specific comparable companies, projects, or results to global benchmarks are not provided in the filing. The focus is on internal restructuring and projected improvements.

Corporate Governance

Legal Proceedings

• Voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code were filed by Zynex, Inc. and certain subsidiaries in the United States Bankruptcy Court for the Southern District of Texas.
• The company intends to enter into binding settlement agreements with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to resolve all claims and causes of action brought by these entities against the Debtors.

Related Party Transactions

• Steven Dyson, the chief executive officer, or an entity controlled by Mr. Dyson (the Affiliated Lender), has indicated agreement to serve as a DIP Lender and fund $2.0 million of the total $22.3 million DIP Facility in the first draw.

Stakeholder Impact

• Shareholders: Existing equity holders are expected to experience a significant loss on their investment, and their common stock is likely to be cancelled. Trading in the company's securities during Chapter 11 is highly speculative.
• Creditors (Convertible Noteholders): The $60.0 million notes are in default. Holders will receive a pro rata share of 'Excess Sale Proceeds,' if any, along with general unsecured claims, implying a potential recovery significantly less than face value. Approximately 80% of these noteholders are supporting the RSA.
• Creditors (DIP Lenders): Providing $22.3 million in new financing with super-priority claims, a 10% interest rate, significant fees (upfront, exit, back-stop), and a minimum 2.00x return on invested capital. They also serve as the stalking horse bidder in the asset sale process.
• Employees: Operations are expected to continue as usual with no impact. A Key Employee Incentive Program (KEIP) and Key Employee Retention Program (KERP) are being sought for approval to retain key personnel.
• Customers/Patients: Operations will continue as usual with no impact on service or product availability.
• Suppliers: The company has requested authority to pay certain vendor obligations in the ordinary course of business to maintain relationships.

Next Steps

• Obtain an interim order approving the DIP Facility (no later than 3 business days after the Petition Date).
• Obtain a final order approving the DIP Facility (no later than 30 days after the Petition Date).
• Meet the bid deadline for the competitive sale process (no later than 75 days after the Petition Date).
• Conduct an auction for assets/equity interests (if any) (no later than 90 days after the Petition Date).
• Achieve confirmation of the Chapter 11 Plan (no later than 95 days after the Petition Date).
• Emerge from Chapter 11 (no later than 105 days after the Petition Date).
• Implement a 2-phase plan: execute business turnaround (2025-2027) and transform the business (2027 onwards).
• Phase out the Distribution business in Q1 2026.
• Implement new compliant policies for supplies, expected to initially reduce supplies revenue in Q1 2026, with growth resuming in Q2 2026.
• Invest in Strategic Marketing and R&D starting 2027 to drive product innovation and market expansion.
• Appoint a new Board of Directors for Reorganized Zynex on the Plan Effective Date.
• Establish a post-emergence management incentive plan (MIP) on the Plan Effective Date.

Key Dates

Recommendation

The company has filed for Chapter 11 bankruptcy, and the filing explicitly states that 'equity holders will experience a significant loss on their investment if the Restructuring Transactions are implemented' and that common stock is likely to be cancelled. This indicates a near-total loss for existing shareholders. While a restructuring plan is in place, the terms heavily favor secured creditors and new DIP lenders, leaving little to no value for existing equity.

Keywords

Chapter 11, Bankruptcy, Restructuring, DIP Financing, Convertible Notes, Medical Devices, Pain Management, Zynex, ZYXI, SEC Filing, Financial Restructuring, Corporate Governance, Risk Management, Strategic Business Analysis, Debtor-in-Possession, Asset Sale, Equity Loss, Financial Distress