Zynex: TRICARE Suspension Drives Chapter 11 Plan Sponsor Process

Zynex, Inc., a Colorado-based medical device maker best known for pain-management electrotherapy devices, filed chapter 11 petitions on December 15, 2025 in the U.S. Bankruptcy Court for the Southern District of Texas. The filing followed TRICARE's March 2025 payment suspension affecting up to a quarter of annual revenue, a revenue decline, and ongoing DOJ and SEC investigations into billing practices. The chapter 11 cases cover Zynex and six affiliates and are funded by a $22.3 million debtor-in-possession term loan led by the company's convertible noteholders and CEO Steven Dyson.

Court filings outline a plan sponsor selection process that positions the DIP lenders to credit bid, with a February 9, 2026 bid deadline and a February 13, 2026 auction if competing proposals emerge. A bar date order sets February 10, 2026 for general claims and June 15, 2026 for governmental claims. The restructuring runs alongside securities class action litigation and an agreed stay order that pauses certain director-and-officer suits and discovery in related cases. The case remains active and is proceeding on a court-set schedule. The plan sponsor process is scheduled to conclude within roughly 105 days of the petition date. The plan filings target an effective date in late March 2026.

Debtor(s)	Zynex, Inc. and six affiliates (Zynex Management LLC; Zynex Medical, Inc.; Zynex NeuroDiagnostics, Inc.; Zynex Monitoring Solutions, Inc.; Pharmazy, Inc.; Kestrel Labs, Inc.)
Ticker	ZYXI (Nasdaq; trading suspended December 24, 2025)
Court	U.S. Bankruptcy Court, Southern District of Texas (Houston Division)
Case Number	25-90810 (ARP)
Judge	Alfredo R. Perez
Petition Date	December 15, 2025
Total Assets (9/30/2025)	$45.3 million (petition financials)
Total Debts (9/30/2025)	$86.7 million (petition financials)
Funded Debt	~$60 million senior convertible notes (maturity May 15, 2026)
Cash at Filing	~$2.3 million
DIP Facility	$22.3 million senior secured term loan
Plan Sponsor Bid Deadline	February 9, 2026
Claims Agent	Epiq Corporate Restructuring, LLC
Debtors' Counsel	Simpson Thacher & Bartlett LLP (lead); Reed Smith LLP (co-counsel)

Plan sponsor selection and DIP-backed restructuring

Zynex entered chapter 11 with a restructuring support agreement with key noteholders and a DIP commitment that supports a $22.3 million senior secured term loan. The debtors filed a combined disclosure statement and chapter 11 plan on January 14, 2026, positioning a plan sponsor selection process as the central restructuring pathway.

DIP financing terms. The DIP financing provides the company's operating liquidity and sets the economics for the noteholder credit bid. Bankruptcy filings describe the DIP as a senior secured term loan with PIK interest and a minimum return requirement, with an initial advance used to fund the early-case operating budget.

Credit bid baseline and alternative bids. The DIP economics set the minimum credit bid that the noteholder group can use to acquire the business through the plan sponsor process.

Bankruptcy filings set a floor for competing proposals: alternative bidders must submit at least $49.85 million in cash or committed financing, without contingencies. If multiple qualified bids emerge, the debtors will hold an auction; if no competing bids are received, the noteholder group will be designated plan sponsor.

The plan sponsor selection order set the bid deadline at 5:00 p.m. CT on February 9, 2026 and scheduled an auction for February 13, 2026 if more than one qualified bid is received. The order also required bids to be fully financed and free of contingencies, reflecting the court's goal of running a short, high-certainty process.

The final DIP order granted the DIP lenders superpriority administrative expense status and liens on DIP collateral, subject to customary carve-outs. The carve-outs include U.S. Trustee and clerk fees, trustee fees capped at $75,000, and a post-trigger professional fee cap of $200,000, which are designed to preserve a minimum pool of funds for estate administration even in a default scenario.

Case milestones and court-approved timetable. The plan sponsor selection order and related filings set a calendar that runs through mid-February 2026.

The timetable targets an effective date roughly 105 days after the petition date, reflecting the pace contemplated in the DIP and plan filings.

Claims process and bar dates. The bar date order set February 10, 2026 at 5:00 p.m. CT as the general bar date for non-governmental creditors and June 15, 2026 at 5:00 p.m. CT as the governmental bar date. The order also sets a 30-day clock for amended schedule claims and for rejection damages claims following entry of a rejection order.

Automatic stay enforcement. An agreed order enforcing the automatic stay stayed three director-and-officer suits through plan effectiveness and stayed discovery directed at the debtors and management in Allstate-related litigation through March 31, 2026. Discovery in the federal securities class action is stayed for 60 days from the order's entry (or longer if the PSLRA stay applies).

Case administration, professionals, and operational continuity

The court granted joint administration of the seven debtor entities and entered a complex case designation early in the case. Orders extended the deadline to file schedules and statements of financial affairs to January 12, 2026 and authorized consolidated lists of creditors. A stock transfer procedures order imposed restrictions on trading activity to preserve potential tax attributes, and an amended cash management order allowed continued use of existing bank accounts and corporate credit cards.

Professional retention and case oversight. The debtors retained Simpson Thacher & Bartlett LLP as lead counsel and Reed Smith LLP as co-counsel, with Province, LLC serving as financial advisor and Epiq Corporate Restructuring, LLC as claims and noticing agent. The U.S. Trustee appointed an Official Committee of Unsecured Creditors on January 7, 2026, with Allstate Insurance Company listed among the members.

First-day relief and vendor payments. The court approved first-day relief for cash management, payroll, insurance, utilities, taxes, and critical vendor programs. Interim payment caps authorized the following amounts for vendor and tax claims:

The debtors also proposed a Key Employee Retention Plan with a maximum payout of $662,500 and a Key Employee Incentive Plan with a maximum payout of $690,000. A separate motion seeks to reject three nonresidential real property leases and abandon personal property at those locations.

Stakeholder dynamics and governance actions

The chapter 11 process is anchored by the convertible noteholder group, which holds $60 million of senior notes maturing in May 2026 and now provides the DIP facility. The lenders' position gives them the ability to credit bid their claims through the plan sponsor selection process, while the company continues to operate under court supervision. CEO Steven Dyson participates in the DIP lender group, aligning management with the financing coalition driving the restructuring.

Zynex's prepetition governance actions also reflect the mounting pressure on liquidity and compliance. Company disclosures in 2025 noted the formation of a Special Committee of the board and the engagement of Province, LLC as restructuring advisor while the company evaluated options with noteholders and navigated the TRICARE suspension. Those steps preceded the restructuring support agreement referenced in the DIP and plan sponsor filings.

The U.S. Trustee's appointment of an Official Committee of Unsecured Creditors added another layer of stakeholder oversight. The committee's notice listed Allstate Insurance Company as a member, highlighting the involvement of insurance-related counterparties in the case. The committee will be positioned to evaluate the plan sponsor process, the DIP milestones, and any plan treatment for unsecured claims.

The agreed order enforcing the automatic stay provides a further signal of how litigation intersects with the restructuring. The order stayed director-and-officer actions (Ayers v. Sandgaard, Graziano v. Sandgaard, and Arbel v. Sandgaard) through plan effectiveness and paused discovery directed at the debtors or management in Allstate-related litigation through March 31, 2026. Discovery in the federal securities class action was stayed for 60 days, reducing near-term litigation expense while the plan sponsor process proceeds.

Shareholders were separately warned about the risk of impairment. Zynex stated that equity holders should expect significant losses as part of the restructuring, and market coverage noted the company's decision not to appeal Nasdaq's delisting determination. Another investor notice reported that management warned existing shareholders they faced a significant risk of losing their entire investment, reinforcing the likelihood that equity will be out of the money under the plan sponsor structure.

TRICARE payment suspension and reimbursement concentration

Zynex's filing followed a loss of revenue from TRICARE, the federal health insurer that covers military service members, retirees, and dependents. Zynex disclosed that TRICARE represented 20-25% of annual revenue, creating a single-payer concentration risk once payments were paused.

The suspension became central to the company's 2025 disclosures. STAT reported that insurers were applying pressure on Zynex as questions arose about billing practices and reimbursement levels, and the company disclosed the suspension in SEC filings as a material risk to operating cash flow. With a quarter of revenue tied to a single federal payer, Zynex had limited ability to offset the shortfall through other channels in the near term.

TRICARE characterized the suspension as temporary while it reviewed prior claims. Zynex said it appealed the suspension and met with officials in April 2025, but TRICARE continued the payment suspension on July 2, 2025. The company also reported that it presented additional data supporting the lifting of the suspension, yet payments remained paused pending further review.

The suspension was extended through the summer, and the pause remained in place as the company approached the May 2026 maturity on its convertible notes.

Billing volume changes. Capitol Forum reporting highlighted an increase in Zynex's billed electrode claims to TRICARE, with the annual amount increasing from $1.7 million in 2015 to $90.5 million in 2022, a 5,223% increase. The same reporting said TRICARE paid roughly 83% of these claims at reduced fees, totaling over $42 million in payments during the period.

The increase in billed electrodes drew scrutiny and intersected with broader allegations about the delivery of supplies to federal beneficiaries. Zynex's financial results and guidance decisions in 2025 reflected the uncertainty around TRICARE reimbursement and the resulting liquidity shortfall.

Regulatory investigations and False Claims Act exposure

Bankruptcy filings describe ongoing investigations by the Department of Justice and the Securities and Exchange Commission into historical billing and disclosure practices. The company reported negotiations with the DOJ, and the DIP credit agreement includes provisions addressing potential settlement terms. The scope and timing of any resolution remains uncertain as the chapter 11 process moves forward.

The investigations overlap with the restructuring timeline because they affect cash flow, legal expense, and the potential valuation of the business. Court filings indicate the debtors are continuing discussions with regulators while pursuing the plan sponsor process, and the DIP credit agreement contemplates a pathway for resolving federal claims if an agreement is reached.

Capitol Forum reporting drew parallels to competitor Empi's 2018 False Claims Act settlement, which involved allegations that the company sent unnecessary supplies to TRICARE beneficiaries. The same outlet reported that Zynex's billing patterns mirrored conduct at issue in the Empi matter, and that the DOJ-coordinating with the Department of Defense Office of Inspector General-resolved that case through a settlement. These allegations elevate the stakes for any sale process, because potential False Claims Act liabilities can complicate due diligence, valuation, and post-closing risk allocation.

The regulatory exposure extends beyond TRICARE. Capitol Forum also reported that Zynex improperly billed workers' compensation funds for TENS devices, with practices it compared to a competitor being sued by 28 Liberty Mutual insurers. Those allegations introduce a second reimbursement channel subject to scrutiny, adding another layer to the company's legal overhang.

Securities class action and equity market fallout

The reimbursement dispute and regulatory scrutiny triggered shareholder litigation. The securities class action Tuncel v. Zynex, Inc. was filed on March 20, 2025 in the U.S. District Court for the District of Colorado. The action alleges false and misleading statements regarding revenue recognition practices during the class period from March 13, 2023 to March 11, 2025.

Investor notices from Hagens Berman and The Gross Law Firm highlighted the May 19 lead plaintiff deadline and invited shareholders to participate in the case. A separate May 19 investor alert reiterated the deadline as the company evaluated restructuring options.

The complaint asserts that Zynex's revenue recognition practices overstated results and that the company failed to disclose billing irregularities tied to federal reimbursement. A related investor notice stated that the stock fell 51% overnight after the allegations became public. Separate investor notices allege that Zynex engaged in "oversupplying" customers to inflate revenue.

RBC Capital cut its price target from $11.00 to $5.50 in April 2025. After the chapter 11 filing, Nasdaq issued a delisting notice on December 17, 2025 and suspended trading on December 24, 2025. The company stated it does not plan to appeal the delisting and expects its shares may trade on an OTC Markets venue. In a related company announcement, management warned that existing equity holders face a significant loss on their investment.

Financial performance, liquidity, and capital structure

Zynex's liquidity crisis unfolded in parallel with the TRICARE suspension. The company reported a revenue contraction in 2025 as reimbursements slowed and legal scrutiny increased. In Q2 2025, net revenue declined to $22.3 million from $49.9 million year-over-year, and the company posted a net loss of $20.0 million versus $1.2 million of net income a year earlier. Q3 2025 revenue fell to $13.4 million from $50.0 million, with a reported net loss of $42.9 million.

The company also withheld full-year guidance due to uncertainty surrounding TRICARE and implemented a 15% workforce reduction to reduce costs.

Zynex issued muted guidance for the second quarter of 2025, projecting revenue of about $27 million and an EPS loss of $0.20, and subsequently withheld full-year guidance as reimbursement uncertainty deepened. Independent research coverage described the period as one of deteriorating fundamentals and reimbursement pressure, underscoring the operational impact of the TRICARE payment pause.

Zynex's capital structure included $60 million in senior convertible notes maturing May 15, 2026. The company missed a $1.5 million interest payment in May 2025 and entered a 30-day grace period while it pursued restructuring options. The same disclosures noted that Zynex engaged Province, LLC as financial advisor and formed a Special Committee of the board to evaluate restructuring alternatives.

Petition financials in the voluntary petition reflect consolidated results as of September 30, 2025, listing total assets of $45.3 million and total debts of $86.7 million. The petition data, which cite the company's September 30, 2025 Form 10-Q, underscores the balance-sheet pressure heading into the filing.

Other market indicators followed the filing. Solactive issued a bankruptcy notice on December 29, 2025, signaling index treatment for the issuer. Commentary pieces also framed the case as part of a wider medical technology sector under pressure, with one analysis describing heightened restructuring risk and reimbursement stress for device makers facing payer scrutiny and litigation costs. The external coverage underscored how quickly a reimbursement disruption can translate into a capital markets event for publicly traded healthcare manufacturers.

Business overview and product portfolio

Zynex was founded in 1996 and is headquartered in Englewood, Colorado. The company designs, manufactures, markets, and sells medical devices used for pain management, rehabilitation, and hospital monitoring. Its operating structure includes Zynex Medical, Inc. (pain management devices), Zynex NeuroDiagnostics, Inc. (neurodiagnostic equipment), and Zynex Monitoring Solutions, Inc. (hospital monitoring systems).

Zynex's flagship product, the NexWave, combines IFC, TENS, and NMES modalities in a single device used for non-invasive pain management and rehabilitation. The company also markets monitoring devices focused on fluid status, sepsis detection, and laser-based pulse oximetry for hospital settings.

In September 2024, Zynex obtained FDA clearance for its TensWave device, a TENS unit designed to meet insurer reimbursement criteria. The clearance was also covered by Yahoo Finance and Medical Device Network, reflecting the company's efforts to expand its product line amid reimbursement scrutiny.

Zynex also publishes a billing guide and FAQ outlining coding and reimbursement considerations for its devices, illustrating how closely the business model depends on third-party payer coverage. That dependency made the TRICARE suspension especially consequential, since a large portion of sales are tied to successful claims submission and payment.

Electrotherapy market and reimbursement context

Industry reports put the global transcutaneous electrical nerve stimulation (TENS) market at about $321.1 million in 2023 and project growth to $419.5 million by 2030, a 3.9% CAGR. A broader electrotherapy market study projected the global electrotherapy system market could reach $1.65 billion by 2030, with TENS devices comprising a dominant segment.

The same market research highlighted demand tied to chronic pain management, reinforcing why device makers emphasize reimbursement eligibility and clinical use cases for TENS products. Zynex's strategy of expanding its portfolio with FDA-cleared devices such as TensWave aligns with that market focus and shows how regulatory clearance and payer coverage intersect in this segment of the medical device industry.

Zynex's pre-crisis commercial performance reflected those market dynamics. A 2024 company profile highlighted a 13% increase in pain-management orders and estimated revenue per sales representative of roughly $530,000. The company's exposure to reimbursement regimes, however, meant that payer scrutiny could quickly reverse growth trends-an outcome that played out once TRICARE suspended payments.

Frequently Asked Questions

Why did Zynex file for chapter 11 bankruptcy?

Zynex faced a liquidity squeeze after TRICARE suspended payments representing 20-25% of annual revenue. The company also had $60 million in convertible notes maturing in May 2026, ongoing DOJ and SEC investigations, and securities litigation. Bankruptcy filings reported roughly $2.3 million of cash at the petition date, leaving limited runway.

What is the plan sponsor selection process?

The court approved bidding procedures that allow the DIP lender group to serve as the stalking horse plan sponsor through a credit bid. The bid deadline is February 9, 2026, and an auction will be held on February 13, 2026 if qualified competing bids are received. If no competing bids emerge, the noteholder group will be designated plan sponsor under the filed chapter 11 plan.

What are the key bar dates for creditors?

The general bar date for non-governmental claims is February 10, 2026 at 5:00 p.m. CT. The governmental bar date is June 15, 2026 at 5:00 p.m. CT. Additional deadlines apply to claims arising from amended schedules or the rejection of executory contracts and unexpired leases.

What is the TRICARE payment suspension?

TRICARE, the federal military health insurer, temporarily stopped paying Zynex claims in March 2025 while it reviewed prior billing practices. Zynex appealed and met with TRICARE officials, but the suspension continued as of July 2, 2025 pending further review.

What are the DOJ and SEC investigating?

The DOJ is investigating historical billing practices and potential False Claims Act exposure, while the SEC is examining disclosure and accounting practices. Bankruptcy filings describe ongoing negotiations with regulators and include DIP provisions for a potential DOJ settlement.

What is the securities class action lawsuit?

Tuncel v. Zynex, Inc. was filed March 20, 2025 in the District of Colorado. The suit alleges false statements regarding revenue recognition and disclosure of billing risks. The class period runs from March 13, 2023 to March 11, 2025, and the lead plaintiff deadline was May 19, 2025.

What happened to Zynex's stock?

Zynex's stock fell 51% after the initial disclosures tied to the TRICARE suspension. Nasdaq notified the company of delisting on December 17, 2025 and suspended trading on December 24, 2025. The company said it does not plan to appeal and expects its shares may trade on an OTC Markets venue.

What is the DIP financing structure?

The DIP is a $22.3 million senior secured term loan with 10% PIK interest, 3% upfront and exit fees, a $5 million back-stop fee, and a 2.00x minimum return payment. The lenders are the convertible noteholder group and CEO Steven Dyson, and the facility provides a $10.15 million initial advance.

Will there be recovery for equity holders?

Management stated that equity holders face a significant loss on their investment. The plan sponsor process is structured around a credit bid from the noteholder group, and competing bids must exceed $49.85 million in cash or committed financing.

Who is the claims agent for Zynex?

Epiq Corporate Restructuring, LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more analysis of chapter 11 cases and restructuring developments, explore the ElevenFlo bankruptcy blog.