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STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2021

(8) 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, 2021, there were 3.9 million shares available for future grants under the 2017 Stock Plan.

Zynex, Inc. 2005 Stock Option Plan

The 2005 Stock Option 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 Plan.

As of December 31, 2021, the Company had the following stock options outstanding and exercisable:


	Outstanding Number of Options	Exercisable Number of Options
	(in thousands)	(in thousands)
Plan Category
2005 Stock Option Plan	325		325
Equity Compensation Plans not approved by Shareholders	28		28
2017 Stock Option Plan	412		317
Total	765		670

The Company received $0.2 million cash proceeds related to option exercises during the year ended December 31, 2021. The Company received cash proceeds of $0.6 million related to option exercises during the year ended December 31, 2020.

The Company did not grant any stock options during the year ended December 31, 2021. The Company granted 14,000 stock options during the year ended December 31, 2020. The Company used the Black Scholes option pricing model to determine the fair value of stock option grants, using the following assumptions for the year ended December 31, 2020:


Weighted average expected term	6.79 years
Weighted average volatility	117	%
Weighted average risk-free interest rate	1.59	%
Dividend yield	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,
	2021		2020
Cost of revenue	$	56	$	37
Sales and marketing expense		155		424
General, and administrative		1,419		2,220
Total stock based compensation expense	$	1,630	$	2,681

The excess tax benefit associated with our stock-based compensation plans for the years ended December 31, 2021 and 2020, was approximately $0.2 million and $1.7 million, respectively.

A combined summary of stock option activity for all plans for the years ended December 31, 2021 and 2020 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, 2019	2,041	$	2.25
Granted	15	$	9.23
Exercised	(684)	$	0.82
Forfeited	(265)	$	4.25
Outstanding at December 31, 2020	1,107	$	2.76	6.47	$	10,483

Outstanding at December 31, 2020	1,107	$	2.76
Granted	—	$	—
Exercised	(116)	$	4.87
Forfeited	(226)	$	6.45
Outstanding at December 31, 2021	765	$	1.36	4.68	$	5,896
Exercisable at December 31, 2021	670	$	0.99	4.33	$	5,412


	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	495	3.54	$	0.31	495	3.54	$	0.31

$2.01 to $4.00	244	6.65	$	2.72	167	6.48	$	2.62

$4.01 to $10.00	26	7.92	$	8.51	8	7.82	$	8.21

	765	4.68	$	1.36	670	4.33	$	0.99

A summary of our unvested stock options as of December 31, 2021 and 2020 and related activity is presented below :


	Non-vested			Weighted
	Shares	Weighted		Average	Aggregate
	Under	Average		Remaining	Intrinsic
	Option	Grant Date		Contractual	Value
	(in thousands)	Fair Value		Life (Years)	(in thousands)
Non-vested at December 31, 2019	979	$	4.03
Granted	15		8.88
Vested	(276)		3.34
Forfeited	(244)		4.36
Non-vested at December 31, 2020	474	$	4.35	7.97	$	3,677

Non-vested at December 31, 2020	474	$	4.35
Granted	—		—
Vested	(167)		1.93
Forfeited	(212)		6.48
Non-vested at December 31, 2021	95	$	3.85	7.17	$	484

A summary of restricted stock award activity under the 2017 Stock Plan for the years ended December 2021 and 2020 are presented below:


	Number of Shares	Weighted Average
	(in thousands)	Grant Date Fair Value
Outstanding at December 31, 2019	112	$	5.28
Granted	352	$	11.75
Vested	(169)	$	7.76
Outstanding at December 31, 2020	295	$	11.53

Outstanding at December 31, 2020	295	$	11.53
Granted	381	$	14.15
Vested	(119)	$	10.92
Forfeited	(103)	$	12.40
Outstanding at December 31, 2021	454	$	13.69

The fair market value of restricted shares for share-based compensation expensing is equal to the closing price of our common stock on the date of grant. The vesting on the Restricted Stock Awards typically occurs quarterly over three years for the Board of Directors and quarterly or annually over two to four years for management. As of December 31, 2021, there was approximately $5.5 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 2.7 years.

The total intrinsic value of stock option exercises for the years ended December 31, 2021 and 2020 was $1.0 million and $9.6 million, respectively. The total fair value of restricted stock awards vested during the years ended December 31, 2021 and 2020 was $1.3 million.