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STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2022

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

(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, 2022, there were 3.8 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, 2022, 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		211			211
2017 Stock Option Plan		582			346
Total		793			557

The Company received $0.1 million cash proceeds related to option exercises during the year ended December 31, 2022. The Company received cash proceeds of $0.2 million related to option exercises during the year ended December 31, 2021.

During the year ended December 31, 2022, 0.2 million performance based stock option awards were granted under the 2017 Stock Plan. During the year ended December 31, 2021, no stock option awards were granted under the 2017 Stock Plan. The Company used the Black Scholes option pricing model to determine the fair value of stock option grants, using the following assumptions during the year ended December 31, 2022.


Weighted average expected term		3 years
Weighted average volatility		73	%
Weighted average risk-free interest rate		2.81	%
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,
		2022			2021
Cost of Revenue		$	47		$	56
Sales and marketing expense			2,104			155
General, and administrative			191			1,419
Total stock based compensation expense		$	2,342		$	1,630

The excess tax benefit associated with our stock-based compensation plans for the years ended December 31, 2022 and 2021, was approximately $0.0 million and $0.2 million, respectively.

A combined summary of stock option activity for all plans for the years ended December 31, 2022 and 2021 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, 2020		1,107		$	2.76
Granted		—		$	—
Exercised		(116)		$	4.87
Forfeited		(226)		$	6.45
Outstanding at December 31, 2021		765		$	1.36		4.68		$

Granted		200		$	6.23
Exercised		(157)		$	0.66
Forfeited		(15)		$	4.18
Outstanding at December 31, 2022		793		$	2.67		5.03		$
Exercisable at December 31, 2022		557		$	1.31		3.40		$


		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		354		2.31		$	0.30		354		2.31		$	0.30

$2.01 to $4.00		217		5.56		$	2.69		187		5.48		$	2.65

$4.01 to $10.00		222		8.86		$	6.45		15		3.23		$	8.33

		793		5.03		$	2.67		557		3.40		$	1.31

A summary of our unvested stock options as of December 31, 2022 and 2021 and related activity is presented below:


		Non-vested
		Shares		Weighted
		Under		Average
		Option		Grant Date
		(in thousands)		Fair Value
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
Granted		200			6.23
Vested		(49)			4.12
Forfeited		(9)			5.49
Non-vested at December 31, 2022		237		$	5.90

A summary of restricted stock award activity under the 2017 Stock Plan for the years ended December 2022 and 2021 are presented below:


		Number of Shares		Weighted Average
		(in thousands)		Grant Date Fair Value
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
Granted		186		$	8.52
Vested		(165)		$	12.90
Forfeited		(52)		$	10.60
Outstanding at December 31, 2022		423		$	11.94

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 employees. As of December 31, 2022, 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, 2022 and 2021 was $1.1 million and $1.0 million, respectively. The total fair value of restricted stock awards vested during the years ended December 31, 2022 and 2021 was $1.4 million and $1.3 million, respectively.