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<SEC-DOCUMENT>0001079974-09-000680.txt : 20091113
<SEC-HEADER>0001079974-09-000680.hdr.sgml : 20091113
<ACCEPTANCE-DATETIME>20090918175150
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001079974-09-000680
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20090918

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ZYNEX INC
		CENTRAL INDEX KEY:			0000846475
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
		IRS NUMBER:				870403828
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		8022 SOUTHPARK CIRCLE
		STREET 2:		SUITE 100,
		CITY:			LITTLETON
		STATE:			CO
		ZIP:			80120
		BUSINESS PHONE:		(303) 703-4906

	MAIL ADDRESS:	
		STREET 1:		8022 SOUTHPARK CIRCLE
		STREET 2:		SUITE 100,
		CITY:			LITTLETON
		STATE:			CO
		ZIP:			80120

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ZYNEX MEDICAL HOLDINGS INC
		DATE OF NAME CHANGE:	20050812

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ZYNEX MEDICAL HOLDINGS   INC
		DATE OF NAME CHANGE:	20040120

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FOX RIVER HOLDINGS  INC
		DATE OF NAME CHANGE:	20031126
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Mr. Kevin L. Vaughn</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Accounting Branch Chief</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">100 F Street, N.E.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Washington, DC&#160;&#160;20549</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 12pt"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>Re:</font></div></td>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">Zynex, Inc.</font></div></td></tr><tr>
<td valign="top" width="8%"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160; </font></td>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">Form 10-K for Year Ended December 31, 2008</font></div></td></tr><tr>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">Filed April 15, 2009</font></div></td></tr><tr>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">File No. 033-26787-D</font></div></td></tr></table></div>
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<br></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Dear Mr. Vaughn:</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">This letter responds to the comment of the staff of the Securities and Exchange Commission in its letter dated September 8, 2009 with respect to the Form 10-K Report listed above.&#160;&#160;The text of the staff&#8217;s comment is set forth below in bold followed by the response.</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Form 10-K as of December 31, 2008</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Consolidated Financial Statements, page F-1</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Note (2) Significant Accounting Policies, page F-7</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Revenue Recognition and Allowances for Provider Discounts and Uncollectibility, page F-7</font></font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">1.&#160;&#160;</font></div></td>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt; FONT-WEIGHT: bold">We note your response to prior comment 6 in which you state that the use of an estimate of provider discounts applied against the claims sent to the providers for goods and services performed during the period is appropriate because there is sufficient historical information available within Zynex to serve as a basis for making the estimate.&#160;&#160;Please
tell us in more detail what types of historical information are available, how it is utilized in making your estimates for provider discounts and how the 2008 restatements impacted your ability to make estimates for provider discounts.</font></div></td></tr></table></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Mr. Kevin L. Vaughn</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">September 18, 2009</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Response:</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">What types of historical information are available</font> - The Company has two sources of historical data, an accounting system and a patient tracking/insurance billing database. The Company implemented the current accounting system, Sage BusinessWorks (Sage BW), effective September
2007. From Sage BW, the Company is able to extract invoices issued and the related payments as well as an aging report for open accounts receivable.&#160;&#160;The Company also runs an accounts receivable aging from Sage BW. From the patient tracking/insurance billing database, the Company extracts the type of insurance coverage, the insurance claim amounts and the date the patient was prescribed the device. The Company also maintains a &#8220;Receivable and Allowance Movement&#8221; spreadsheet summarizing the
movements in the Accounts Receivable and Allowance for Provider Discounts and Collectability accounts.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">How the information is utilized in making estimates</font> &#8211; The Company utilizes the various reports in the following manner:</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">To determine the provision rate to be applied against the claims sent to the insurance providers, the Company maintains a &#8220;Summary Collected History&#8221; spreadsheet. Use of this spreadsheet commenced in 2009 for preparation of the December 31, 2008 financial statements, the restatements of the 2008 quarterly financial statements and the 2009 quarterly
financial statements. To prepare this spreadsheet, the Company extracts, from Sage BW, invoices by the month they were issued. The Company also extracts, from Sage BW, the payments received. The payments are then matched to the applicable invoices. The &#8220;Summary Collected History&#8221; spreadsheet shows, for each month and quarter total, the billed amount and the collected-to-date against the billed amount. The Company uses this &#8220;Summary Collected History&#8221; spreadsheet to review collection trends
and estimate what rate to use as a provision against the claims sent to the insurance providers in the current period.</font></div></td></tr></table></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">To analyze the appropriateness of the allowance account on the balance sheet, the Company runs an Accounts Receivable Aging from Sage BW which is broken into 90 day buckets (0 &#8211; 90 days, 91 &#8211; 180 days, 181 &#8211; 270 days), based on date of invoice. The Company inserts the totals into the &#8220;Allowance Aging&#8221; spreadsheet which applies
a specific percentage to each aging category to determine the allowance needed based on historical payment patterns.</font></div></td></tr></table></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Mr. Kevin L. Vaughn</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">The Company uses the &#8220;Receivable and Allowance Movement&#8221; spreadsheet to review the percentage applied to the allowance account versus the percentage collected in each month and on a quarterly summary. The Company also uses this spreadsheet to evaluate the ending allowance balance as a percentage of the open receivables.</font></div></td></tr></table></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">The Company runs various reports from the patient tracking/insurance billing database including the &#8220;Less than 3 Month Collection after Rx Date&#8221; by insurance payor type. The Company uses these reports to evaluate the pool of receivables for completeness and the types of insurance companies being billed. These reports allow the Company to review
whether groups of patients have been billed in the correct period and that the mix of insurance providers in the pool is consistent.</font></div></td></tr></table></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) of the Company meet on a quarterly basis and review all of the reports identified above plus any known outside factors or trends in the industry. The CEO and the CFO make a determination if the allowance is appropriate or if an adjustment is necessary based on all available information.
The CEO and CFO then present their conclusions to the Audit Committee as part of each quarterly close.</font></div></td></tr></table></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">How the 2008 restatements impacted the ability to make estimates</font> &#8211; When analyzing the accounts receivable as of December 31, 2008, it became apparent that because of changes during the year largely related to changes in payor patterns in 2008 and the Company&#8217;s significant
growth in 2007 and 2008, the Company needed more information in order to better estimate the total allowance. The indication of a need to restate each of the first three quarters of 2008 arose from the information the Company developed from that analysis of accounts receivable.</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">The 2007-2008 growth in the number of patients in the database and the increased number of employees using the database affected the performance of the patient tracking/insurance billing database during the first three quarters of 2008.&#160;&#160;The Company implemented enhancements to the patient tracking/insurance billing database beginning
in September 2008 and has continued making enhancements since then. The initial enhancement was to increase the response performance to employees inquiring about patient records, allowing the Company to evaluate the status of claims with insurance companies on a timelier basis.</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">September 18, 2009</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">Mr. Kevin L. Vaughn</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 12pt">September 18, 2009</font></div>
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