8-K: Zynex Emerges from Bankruptcy, Wiping Out Existing Equity

Zynex, Inc. has received court confirmation for its Chapter 11 reorganization plan, which will cancel existing common stock and transfer ownership to a new Plan Sponsor.

Summary

• Zynex, Inc. and certain subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code on December 15, 2025.
• The company's common stock was delisted from Nasdaq on December 17, 2025, and began trading on the Pink Limited Market under the symbol ZYXIQ on December 24, 2025.
• The Bankruptcy Court entered an order on March 19, 2026, confirming the Third Amended Combined Disclosure Statement and Joint Plan of Reorganization.
• The Effective Date of the Plan is currently expected to occur no later than March 31, 2026.
• Under the Plan, the Plan Sponsor (an entity owned by the DIP Lenders) will receive 100% of the New Common Shares of the reorganized company, subject to dilution by a Management Incentive Plan.
• DIP Lenders will also receive their pro rata share of $10 million of takeback debt.
• The existing common stock of Zynex, Inc., totaling 30,781,021 shares as of January 16, 2026, will be discharged, cancelled, released, and extinguished, becoming of no further force or effect.
• Approximately 1,000 New Common Shares are expected to be issued and outstanding, held solely by the Plan Sponsor, after giving effect to the Effective Date transactions.
• A litigation trust (GUC Trust) will be established for the benefit of holders of unsecured claims, to which certain assets, including D&O Insurance Policies and specific estate claims, will be contributed.
• The GUC Trust will be funded with at least $750,000 in New Money GUC Trust Funding, provided by the Ad Hoc Noteholder Group (if the Stalking Horse Bidder is the Plan Sponsor) or from sale proceeds.
• The Plan incorporates resolutions with the U.S. Department of Justice (DOJ) and the SEC regarding ongoing investigations.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a highly negative development for existing equity holders, as the confirmation of the Chapter 11 plan explicitly states the cancellation of existing common stock and delisting from Nasdaq, indicating a near-total loss of investment.

Positives

• The Bankruptcy Court confirmed the Plan of Reorganization, providing a clear path for Zynex to emerge from Chapter 11 protection.
• The Plan includes resolutions for ongoing investigations with the U.S. Department of Justice and the SEC, removing significant regulatory overhang.
• A GUC Trust will be established and funded to provide a mechanism for potential recovery for unsecured creditors.
• A new management team, including Steven Dyson as CEO and Vikram Bajaj as CFO, was hired in Q2 2025 to lead restructuring efforts.
• Secured $22.3 million in debtor-in-possession (DIP) financing to support operations during the Chapter 11 process.

Negatives

• The company's common stock was delisted from Nasdaq and now trades on the Pink Limited Market (ZYXIQ), indicating a significant loss of market standing.
• Existing common stock will be cancelled, resulting in a significant loss for current equity holders.
• The company commenced voluntary Chapter 11 cases due to intensifying financial challenges, including a Tricare payment suspension that historically represented 20-25% of annual revenue.
• Numerous litigations and investigations, including those by the DOJ, SEC, and private lawsuits (Allstate, Tuncel, Ayers), have created a substantial liquidity overhang and legal costs.
• Former Chairman Thomas Sandgaard was indicted by a federal grand jury for alleged health care and securities fraud offenses, leading to his removal from the Board.
• Aggressive cost-cutting and workforce reductions negatively affected sales, earnings, EBITDA, and cash flow.

Risks

• Trading in the company's securities during the Chapter 11 Cases is highly speculative and poses substantial risks, with trading prices potentially bearing little relationship to actual recovery.
• Existing equity holders are expected to experience a significant loss on their investment due to the cancellation of common stock.
• Uncertainty remains regarding the company's ability to complete the restructuring transactions on the contemplated terms or timeline, or at all.
• Risks and uncertainties relate to obtaining Court approval for motions, the effects of the Chapter 11 Cases on the company and its constituents, and the impact of Court rulings.
• The length of time the company will operate under Chapter 11 and restrictions on pursuing business strategies while cases are pending pose ongoing challenges.
• Potential adverse effects of the Chapter 11 Cases on the company's liquidity and the ability to retain key personnel and management are significant concerns.
• There is no assurance that the company's business will be successful post-sale, and the New Common Shares will be a new issuance with no established trading market.
• Reimbursement from third-party payors, including the ongoing Tricare payment suspension, significantly impacts the company's revenue and cash flow.
• Estimation risks related to revenue recognition, refund liabilities, accounts receivable, and provider discounts could materially impact operating results.
• Changes in healthcare legislation and industry spending, including potential new reforms, could further limit revenues and operating results.
• Reduced prescriptions for the company's products due to competition or other factors would result in reduced revenue.
• Reliance on third-party suppliers and manufacturers creates risks of delays, quality issues, and supply chain disruptions.
• Product liability claims are an inherent risk in the medical device business, potentially exceeding insurance limits.
• Regulatory clearance processes for new products and potential recalls of existing products could impact business and reputation.
• Intellectual property defense costs could be significant, and effective protection may not be available in all markets.
• Data privacy concerns, including compliance with HIPAA, CCPA, and other state laws, pose ongoing legal and operational risks.

Future Outlook

The company intends to implement the transactions outlined in the Plan and emerge from Chapter 11 protection, with the Effective Date expected by March 31, 2026. The Plan Sponsor, an entity owned by the DIP Lenders, will receive 100% of the New Common Shares, and DIP Lenders will also receive $10 million in takeback debt. A GUC Trust will be established for unsecured claims, and the company's corporate governance documents will be amended. A new board of directors, including Steven Dyson as Chairman and CEO, will be appointed.

Management Comments

• "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."
• "The Company expects that its equity holders will experience a significant loss on their investment if the Restructuring Transactions are implemented."
• "The Debtors, the Consenting Noteholders, and the Committee support confirmation of the Plan and recommend all Holders of Claims entitled to vote on the Plan to vote to accept the Plan."
• "The Debtors, the Consenting Noteholders, and the Committee believe that Confirmation of the Plan is desirable and in the best interests of all holders of Claims and Interests."

Industry Context

StockSavvy.ai notes that Zynex's challenges, particularly with third-party payor reimbursement and regulatory scrutiny, highlight the increasing pressures on medical device companies. The industry faces evolving healthcare legislation, intense competition, and significant risks related to product liability and data privacy, making successful navigation of these factors critical for sustained profitability and market access. The company's restructuring efforts, including a new management team and a comprehensive sale process, reflect a common strategy for distressed companies in highly regulated sectors to address financial and operational challenges.

Comparison to Industry Standards

• The delisting from Nasdaq and subsequent trading on the Pink Limited Market is a significant downgrade, typically seen in companies facing severe financial distress, unlike established medical device peers such as Medtronic (MDT) or Abbott Laboratories (ABT) which maintain strong exchange listings and robust capital structures.
• The cancellation of existing common stock and issuance of new shares to a Plan Sponsor is a common outcome in Chapter 11 reorganizations, similar to cases like Purdue Pharma or Sears Holdings, where pre-petition equity holders are wiped out, contrasting sharply with healthy industry players that maintain shareholder value through ongoing operations and growth.
• The establishment of a GUC Trust for unsecured creditors, while providing a mechanism for potential recovery, indicates a distressed scenario where direct payment of claims is not immediately feasible, unlike the routine payment practices of solvent industry leaders.
• The $10 million takeback debt for DIP Lenders and the $750,000 New Money GUC Trust Funding are relatively small figures for a medical device company, suggesting a highly leveraged and capital-constrained situation compared to industry benchmarks where companies typically raise significantly larger amounts for growth or operational stability.

Management Changes

Corporate Governance

Legal Proceedings

• Voluntary petitions filed under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (Case No. 25-90810).
• Investigations by the U.S. Department of Justice (DOJ), Department of Health and Human Services – Office of Inspector General, Defense Health Agency (DHA), California Department of Insurance, and Colorado Attorney General related to alleged fraudulent over-billing practices and consumer protection.
• Investigation by the SEC to determine whether violations of federal securities laws have occurred.
• Allstate Insurance Company, et. al., v. Zynex, Inc., case no. 1:25-CV-04815, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), the Colorado Organized Crime Control Act, fraud, and unjust enrichment.
• Tuncel v. Sandgaard, case no. 1:25-CV-00913, a securities class action suit alleging materially misleading statements related to billing and supplying practices.
• Ayers v. Sandgaard, et. al., case no. 1:25-CV-02117-TPO, a shareholder derivative suit alleging claims for breach of fiduciary duty, corporate waste, and violations of Section 14(a) of the Exchange Act.
• Former Chairman Thomas Sandgaard was indicted by a federal grand jury on January 21, 2026, for alleged health care and securities fraud offenses (the Company was not named in the indictment).
• The Plan incorporates by reference resolutions reached with the DOJ and the SEC, the terms of which are disclosed in the Plan Supplement.

Related Party Transactions

• Steven Dyson, the company's Chief Executive Officer, provided an additional $2 million of DIP financing alongside the Ad Hoc Noteholder Group.
• The Plan Sponsor, an entity owned by the DIP Lenders, will receive 100% of the New Common Shares of the reorganized company.
• The Ad Hoc Noteholder Group, whose members hold over 81% of the outstanding Convertible Notes, committed to provide $20.3 million of DIP financing and agreed to serve as the Stalking Horse Bidder.
• The GUC Trust's New Money GUC Trust Funding may include additional amounts contributed by members of the Committee.

Stakeholder Impact

• Shareholders (Existing Equity Interests): Will experience a significant loss on their investment as all outstanding shares of common stock will be cancelled, receiving no recovery under the Plan.
• DIP Lenders: Will become the new owners of the reorganized company through the Plan Sponsor and receive $10 million in takeback debt, indicating a favorable outcome for their investment.
• Convertible Noteholders and General Unsecured Creditors: Will receive GUC Trust Class B Interests, providing a pro rata share of GUC Trust Assets, offering a potential, but uncertain, recovery.
• Employees: The company implemented mass layoffs to conserve liquidity, impacting former employees. Uncertainty regarding the ability to retain key personnel and management is noted.
• Customers/Patients: The ongoing Tricare payment suspension and investigations into billing practices could impact service continuity or trust, although the company states it continues to support existing and new patients.
• Suppliers/Vendors: Continuing vendors, suppliers, or contract counterparties are generally protected from avoidance actions, suggesting an effort to maintain operational relationships with critical partners.

Next Steps

• Effect the transactions contemplated by the Plan and emerge from Chapter 11 protection.
• The Effective Date of the Plan is expected no later than March 31, 2026.
• The Plan Sponsor will receive 100% of the New Common Shares of the reorganized company.
• DIP Lenders will receive $10 million of takeback debt.
• A litigation trust (GUC Trust) will be established for unsecured claims, and certain assets will be contributed to it.
• The company's articles of incorporation and bylaws will be amended and restated in accordance with the Plan.
• A New Board of Reorganized Zynex will be appointed, including Steven Dyson as Chairman and CEO, Jacob Mercer, Keith Fischer, and David Ashley Lee, with an additional director to be selected.
• Heather Barlow will be appointed as GUC Trustee on or prior to the Effective Date.
• Professionals must file final applications for compensation and reimbursement no later than 45 days after the Effective Date.
• The Administrative Expense Claims Bar Date is 30 days after the Effective Date.
• Proofs of Claim arising from rejected Executory Contracts and Unexpired Leases must be filed no later than 30 days after the Effective Date.
• The initial Claims Objection Deadline is one year after the Effective Date.
• The GUC Trustee will file quarterly reports of disbursements until the Chapter 11 Cases are closed.
• The Reorganized Debtors or GUC Trustee will file documents to close the Chapter 11 Cases promptly after full administration.

Key Dates

Recommendation

The filing explicitly states that existing common stock will be cancelled and current equity holders will experience a significant loss on their investment, making the stock effectively worthless for current investors. The company's delisting from Nasdaq further underscores the severe financial distress.

Keywords

Zynex, Bankruptcy, Chapter 11, Reorganization Plan, SEC Filing, Medical Devices, Electrotherapy, DIP Financing, GUC Trust, Nasdaq Delisting, Equity Cancellation, Restructuring, Healthcare Industry, Regulatory Investigations