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STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2020

(5) STOCK-BASED COMPENSATION PLANS

Zynex, Inc. 2017 Stock Incentive Plan

The Company currently has one active long-term incentive plan. The Company’s 2017 Stock Incentive Plan (the “2017 Stock Plan”) is the Company’s equity compensation plan and provides for grants of stock-based awards to employees, directors and other individuals providing services to the Company. Awards issued under the 2017 Stock Plan are at the discretion of the Board of Directors. The 2017 Stock Plan mandates a maximum award term of 10 years and stipulates that stock options be granted with prices not less than fair market value on the date of grant. Stock option awards generally vest over four years. Restricted stock awards typically vest quarterly over three years for grants issued to members of our Board of Directors and quarterly or annually over two to four years for grants issued to employees. For stock option awards, all awards granted under the 2017 Stock Plan are stock-settled with common stock issued upon exercise. For restricted stock awards, shares are issued to the recipient upon grant with a restrictive legend and are not included in the calculation of outstanding shares until vesting occurs. At December 31, 2020, there were 3.6 million shares available for future grants under the 2017 Stock Plan.

The 2005 Stock Plan expired as of December 31, 2014. Vesting provisions of the expired plan were to be determined by the Board of Directors. All stock options under the 2005 Stock Plan expire no later than ten years from the date of grant. Options granted in 2015, 2016 and through May 2017 prior to the approval of the 2017 Stock Incentive Plan were approved and certified by the board of directors on September 6, 2017 under the existing 2005 stock option plan.

As of December 31, 2020, the Company had 1.0 million stock options outstanding and 0.6 million stock options exercisable under the following plans:


	Outstanding Number of Options	Exercisable Number of Options
	(in thousands)	(in thousands)
Plan Category
2005 Stock Option Plan	299		299
Equity Compensation Plans not approved by Shareholders	37		25
2017 Stock Option Plan	670		251
Total	1,006	$	575

The Company estimates the grant-date fair value of stock option awards using the Black-Scholes option pricing model and restricted stock awards at intrinsic value on the date of grant. The following assumptions were used in estimating the grant date fair value of stock options granted during the years ended December 31, 2020 and 2019:


	2020		2019
Weighted average expected term	6.79 years		6.25 years
Weighted average volatility	117	%	122	%
Weighted average risk-free interest rate	1.59	%	2.30	%
Dividend yield	0	%	0	%

The weighted average expected term of stock options represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends. The weighted average expected volatility is based on the historical price volatility of the Company’s common stock. The weighted average risk-free interest rate represents the U.S. Treasury bill rate for the expected term of the related stock options. The dividend yield represents the Company’s anticipated cash dividend over the expected term of the stock options. Forfeitures are accounted for as they occur.

The following table summarizes stock-based compensation expenses recorded in the condensed consolidated statements of operations (in thousands):


	For the Years Ended December 31,
	2020		2019
Cost of Revenue	$	37	$	21
Sales and marketing expense		424		205
General, and administrative		2,220		594
Total stock based compensation expense		2,681		820

The excess tax benefit associated with our stock-based compensation plans for the years ended December 31, 2020 and 2019, was approximately $1.7 million and $0.8 million, respectively.

A combined summary of stock option activity for all plans for the years ended December 31, 2020 and 2019 is presented below:


				Weighted
		Weighted		Average	Aggregate
	Number of	Average		Remaining	Intrinsic
	Shares	Strike		Contractual	Value
	(in thousands)	Price		Life (Years)	(in thousands)
Outstanding at December 31, 2018	1,885	$	0.80
Granted	653	$	5.81
Exercised	(503)	$	0.44
Expired	(6)	$	1.00
Forfeited	(174)	$	2.64
Outstanding at December 31, 2019	1,855	$	2.48	6.42	$	10,032

Outstanding at December 31, 2019	1,855	$	2.48
Granted	14	$	10.15
Exercised	(622)	$	0.90
Forfeited	(241)	$	4.68
Outstanding at December 31, 2020	1,006	$	3.04	6.47	$	10,483

Exercisable at December 31, 2020	575	$	1.62	5.35	$	6,807


	Outstanding	Weighted average
	Number of	Remaining					Weighted Average
	Options	Contractual	Weighted Average		Exercisable Number of	Remaining Exercisable	Exercisable
Range	(in thousands)	Life (years)	Strike Price		Options (in thousands)	Contractual Life (years)	Strike Price

$0 to $2.00	473	4.60	$	0.35	401	4.28	$	0.33

$2.01 to $4.00	270	7.66	$	3.05	116	7.43	$	2.87

$4.01 to $6.00	19	8.25	$	4.45	—	—	$	—

$6.01 to $8.00	200	8.56	$	7.87	50	8.56	$	7.87

$8.01 to $10.00	41	8.92	$	9.22	8	8.86	$	8.98

$10.01 to $12.00	3	9.04	$	10.60	—	—	$	—

	1,006	6.47	$	3.04	575	5.35	$	1.62

A summary of our unvested stock options as of December 31, 2020 and 2019 and related activity is presented below:


	Non-vested
	Shares	Weighted
	Under	Average
	Option	Grant Date
	(in thousands)	Fair Value
Non-vested at December 31, 2018	569	$	1.44
Granted	653	$	5.12
Vested	(169)	$	1.24
Forfeited	(163)	$	2.44
Non-vested at December 31, 2019	890	$	4.03
Non-vested at December 31, 2019	890	$	4.03
Granted	14	$	8.88
Vested	(251)	$	3.34
Forfeited	(222)	$	4.36
Non-vested at December 31, 2020	431	$	4.35

A summary of restricted stock award activity under the 2017 Stock Plan for the years ended December 2020 and 2019 are presented below:


	Number of Shares	Weighted Average
	(in thousands)	Grant Date Fair Value
Outstanding at December 31, 2018	76	$	3.19
Granted	55	$	8.10
Vested	(29)	$	3.24
Outstanding at December 31, 2019	102	$	5.81

Outstanding at December 31, 2019	102	$	5.81
Granted	320	$	12.92
Vested	(154)	$	8.54
Outstanding at December 31, 2020	268	$	12.64

As of December 31, 2020, there was approximately $4.3 million of total unrecognized compensation costs related to unvested stock options and restricted stock. These costs are expected to be recognized over a weighted average period of 2.3 years.

The total intrinsic value of stock option exercises for the years ended December 31, 2020 and 2019 was $9.6 million and $4.4 million, respectively. The total fair value of restricted stock awards vested during the years ended December 31, 2020 and 2019 was $1.3 million and $0.1 million, respectively.