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Zynex Hints At Being Less Than Forthcoming With New Auditor

After nearly doubling what it pays its new auditor, the medical device maker hints at being less than forthcoming about financial statement revisions.

April 1, 2024

While reiterating control deficiencies identified the prior year Zynex Inc. (ZYXI), a maker of medical devices to treat chronic and acute pain, inserted new language in its latest annual report hinting at trouble between the firm and its auditor.

Though the disclosure is vague, it appears to us Zynex has been less than transparent regarding or belated in notifying its auditor or certain financial statement revisions:

“Also as of December 31, 2023, we identified a material weakness in our communications with our independent auditors as it relates to open or pending financial statement adjustments and the timing of decisions to take write-offs.”

In June 2022, Zynex fired its auditor Plante Moran and hired Marcum LLP.

Without explanation, Zynex nearly doubled what it paid its auditors in 2022.

Later, when detailing its revenue recognition practices, Zynex inserted new language warning of potential revenue reversals in the future:

“Inherent in these estimates is the risk that they will have to be revised as additional information becomes available and constraints are released. If initial estimates are updated these changes are accounted for as increases or decreases in the transaction price. Assuming the underlying performance obligation to which the change in price relates has already been satisfied, those changes in transaction price are immediately recognized as increases or decreases in revenue (not credit losses (bad debt expense)) in the period in which the estimate changes.”

In the fourth quarter of 2023, Zynex placed an allowance of $6.2 million on receivables which were determined to be uncollectible. The allowance was recorded to net revenue during the period.

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