Electromed (ELMD) 10-Q 12 Nov 14 2015 Q1 Quarterly report Financial data

Document_And_Entity_Informatio

Document And Entity Information	3 Months Ended
	Sep. 30, 2014	Nov. 07, 2014
Document And Entity Information [Abstract]	'	'
Document Type	'10-Q	'
Amendment Flag	'false	'
Document Period End Date	30-Sep-14	'
Document Fiscal Year Focus	'2015	'
Document Fiscal Period Focus	'Q1	'
Entity Registrant Name	'Electromed, Inc.	'
Entity Central Index Key	'0001488917	'
Current Fiscal Year End Date	'--06-30	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Common Stock, Shares Outstanding	'	8,114,252

Condensed_Consolidated_Balance

Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2014	Jun. 30, 2014
Current Assets	'	'
Cash and cash equivalents	$2,280,126	$1,502,702
Accounts receivable (net of allowances for doubtful accounts of $45,000)	6,361,689	6,487,267
Inventories	2,243,198	2,235,496
Prepaid expenses and other current assets	485,674	397,853
Total current assets	11,370,687	10,623,318
Property and equipment, net	3,944,975	3,935,802
Finite-life intangible assets, net	899,559	930,451
Other assets	299,902	302,595
Total assets	16,515,123	15,792,166
Current Liabilities	'	'
Current maturities of long-term debt	47,003	46,375
Accounts payable	781,823	380,582
Accrued compensation	447,354	391,040
Warranty reserve	720,000	700,000
Other accrued liabilities	166,497	302,482
Total current liabilities	2,162,677	1,820,479
Long-term debt, less current maturities	1,239,333	1,251,192
Total liabilities	3,402,010	3,071,671
Commitments and Contingencies	'	'
Equity	'	'
Common stock, $0.01 par value; authorized: 13,000,000; shares; 8,114,252 issued and outstanding	81,143	81,143
Additional paid-in capital	13,232,256	13,217,166
Accumulated deficit	-200,286	-577,814
Total equity	13,113,113	12,720,495
Total liabilities and equity	$16,515,123	$15,792,166

Condensed_Consolidated_Balance1

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2014	Jun. 30, 2014
Condensed Consolidated Balance Sheets [Abstract]	'	'
Accounts receivable, allowance for doubtful accounts	$45,000	$45,000
Common stock, par value	$0.01	$0.01
Common stock, shares authorized	13,000,000	13,000,000
Common stock, shares issued	8,114,252	8,114,252
Common stock, shares outstanding	8,114,252	8,114,252

Condensed_Consolidated_Stateme

Condensed Consolidated Statements Of Operations (USD $)	3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Condensed Consolidated Statements Of Operations [Abstract]	'	'
Net revenues	$4,770,539	$3,418,178
Cost of revenues	1,475,797	1,062,346
Gross profit	3,294,742	2,355,832
Operating expenses	'	'
Selling, general and administrative	2,821,495	2,723,927
Research and development	75,265	209,108
Total operating expenses	2,896,760	2,933,035
Operating income (loss)	397,982	-577,203
Interest expense, net of interest income of $1,212 and $7,398 respectively	20,453	15,202
Net income (loss) before income taxes	377,529	-592,405
Income tax benefit	0	257,000
Net income (loss)	$377,529	($335,405)
Earnings (loss) per share:	'	'
Basic and diluted	$0.05	($0.04)
Weighted-average common shares outstanding:	'	'
Basic	8,114,252	8,114,252
Diluted	8,114,252	8,114,252

Condensed_Consolidated_Stateme1

Condensed Consolidated Statements Of Operations (Parenthetical) (USD $)	3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Condensed Consolidated Statements Of Operations [Abstract]	'	'
Interest income	$1,212	$7,398

Condensed_Consolidated_Stateme2

Condensed Consolidated Statements Of Cash Flows (USD $)	3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash Flows From Operating Activities	'	'
Net income (loss)	$377,529	($335,405)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	'	'
Depreciation	155,341	122,923
Amortization of finite-life intangible assets	30,892	31,619
Amortization of debt issuance costs	4,942	2,314
Share-based compensation expense	15,089	39,460
Loss on disposal of property and equipment	18,824	18,134
Changes in operating assets and liabilities:	'	'
Accounts receivable	125,578	1,024,688
Inventories	-7,702	-52,628
Prepaid expenses and other assets	-90,070	-270,260
Accounts payable and accrued liabilities	314,901	161,138
Net cash provided by operating activities	945,324	741,983
Cash Flows From Investing Activities	'	'
Expenditures for property and equipment	-156,669	-148,915
Cash Flows From Financing Activities	'	'
Principal payments on long-term debt including capital lease obligations	-11,231	-19,250
Net increase (decrease) in cash and cash equivalents	777,424	573,818
Cash and cash equivalents	'	'
Beginning of period	1,502,702	503,564
End of period	$2,280,126	$1,077,382

Nature_Of_Business_And_Summary

Nature Of Business And Summary Of Significant Accounting Policies	3 Months Ended
	Sep. 30, 2014
Nature Of Business And Summary Of Significant Accounting Policies [Abstract]	'
Nature Of Business And Summary Of Significant Accounting Policies	'
	Note 1.	Interim Financial Reporting
	Basis of presentation: Electromed, Inc. (the Company) develops, manufactures and markets innovative airway clearance products which apply High Frequency Chest Wall Oscillation (HFCWO) therapy in pulmonary care for patients of all ages. The Company markets its products in the United States to the home health care and institutional markets for use by patients in personal residences, hospitals and clinics. The Company also sells internationally both directly and through distributors. International sales were approximately $399,000 and $149,000 for the three months ended September 30, 2014 and 2013, respectively. Since its inception, the Company has operated in a single industry segment: developing, manufacturing and marketing medical equipment.
	The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the Companys financial position and results of operations as required by Regulation S-X, Rule 10-01. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This interim report should be read in conjunction with the consolidated financial statements included in the Companys annual report on Form 10-K for the year ended June 30, 2014.
	Principles of consolidation: The accompanying condensed consolidated financial statements include the accounts of Electromed, Inc. and its subsidiary, Electromed Financial, LLC. Operating activities and net assets in Electromed Financial, LLC were insignificant as of and for the three months ended September 30, 2014 and the year ended June 30, 2014.
	A summary of the Companys significant accounting policies follows:
	Use of estimates: Management uses estimates and assumptions in preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. The Company believes the critical accounting policies that require the most significant assumptions and judgments in the preparation of its condensed consolidated financial statements include revenue recognition and the related estimation of selling price adjustments, allowance for doubtful accounts, inventory obsolescence, share-based compensation, income taxes and the warranty reserve.
	Net income (loss) per common share: Net income (loss) is presented on a per share basis for both basic and diluted common shares. Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding during the period. The diluted net income (loss) per common share calculation assumes that all stock warrants were exercised and converted into common stock at the beginning of the period, unless their effect would be anti-dilutive. Common stock equivalents of 684,900 and 614,900 were excluded from the calculation of diluted earnings per share for the three months ended September, 2014 and 2013, respectively, as their impact was antidilutive.

Inventories

Inventories	3 Months Ended
	Sep. 30, 2014
Inventories [Abstract]	'
Inventories	'
	Note 2.	Inventories
	The components of inventory were approximately as follows:
			September 30,			June 30,
			2014			2014
	Parts inventory		$	1,439,000		$	1,491,000
	Work in process			194,000			264,000
	Finished goods			640,000			510,000
	Less: Reserve for obsolescence			(30,000	)		(30,000	)
	Total		$	2,243,000		$	2,235,000

FiniteLife_Intangible_Assets

Finite-Life Intangible Assets	3 Months Ended
	Sep. 30, 2014
Finite-Life Intangible Assets [Abstract]	'
Finite-Life Intangible Assets	'
	Note 3.	Finite-Life Intangible Assets
	The carrying value of patents and trademarks includes the original cost of obtaining the patents, periodic renewal fees, and other costs associated with maintaining and defending patent and trademark rights. Patents and trademarks are amortized over their estimated useful lives, generally 15 and 12 years, respectively. Accumulated amortization was $607,000 and $576,000 at September 30, 2014 and June 30, 2014, respectively.
	The activity and balances of finite-life intangible assets were approximately as follows:
			Three Months			Year Ended
			Ended			30-Jun-14
			September 30,
			2014
	Balance, beginning		$	930,000		$	1,081,000
	Additions						41,000
	Abandonments						(63,000	)
	Amortization expense			(30,000	)		(129,000	)
	Balance, ending		$	900,000		$	930,000

Warranty_Liability

Warranty Liability	3 Months Ended
	Sep. 30, 2014
Warranty Liability [Abstract]	'
Warranty Liability	'
	Note 4.	Warranty Liability
	The Company provides a lifetime warranty on its products to the prescribed patient for sales within the United States and a three-year warranty for all institutional sales and sales to individuals outside the United States. The Company estimates the costs that may be incurred under its warranty and records a liability in the amount of such costs at the time the product is shipped. Factors that affect the Companys warranty liability include the number of units shipped, historical and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.
	Changes in the Companys warranty liability were approximately as follows:
			Three Months			Year Ended
			Ended			30-Jun-14
			September 30,
			2014
	Balance warranty reserve		$	700,000		$	680,000
	Accrual for products sold			71,000			196,000
	Expenditures and costs incurred for warranty claims			(51,000	)		(176,000	)
	Ending warranty reserve		$	720,000		$	700,000

Income_Taxes

Income Taxes	3 Months Ended
	Sep. 30, 2014
Income Taxes [Abstract]	'
Income Taxes	'
	Note 5.	Income Taxes
	On a quarterly basis, the Company estimates what its effective tax rate will be for the full fiscal year and records a quarterly income tax provision based on the anticipated rate. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. The effective tax rate for the three months ended September 30, 2014 and 2013 was 0.0% and 43.4%, respectively. For the three months ended September 30, 2014, the Company recorded zero tax expense. As income is earned the Companys net operating loss carryforward is applied to reduce taxable income to zero. Accordingly, the application of the net operating losses to reduce taxable income reduces the Companys gross deferred tax assets. This reduction of the Companys gross deferred tax assets will cause a corresponding decrease in respective valuation allowance. For the three months ended September 30, 2014, the Company recorded an income tax expense of zero and the decrease in the Companys deferred tax assets and corresponding reduction in its deferred tax asset valuation allowance would be approximately $155,000.
	During fiscal 2014 the Company recorded a full valuation allowance against all of its net US federal and state deferred tax assets. The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a more likely than not standard.In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets.In making such assessments, more weight was given to evidence that could be objectively verified. Under this approach the recent cumulative losses is a significant piece of significant negative evidence. This factor impairs the Companys ability to rely on future taxable income projections in determining whether a valuation allowance is appropriate.Future sources of taxable income considered in determining the amount of recorded valuation allowance include:
			Taxable income in prior carryback years, if carryback is permitted under the tax law;
			Future reversals of existingtaxable temporary differences, excluding those related to indefinite-lived intangible assets;
			Tax planning strategies; and
			Future taxable income exclusive of reversing temporary differences and carryforwards.
	On a quarterly basis, the Company evaluates all positive and negative evidence, as discussed above, in determining if the valuation allowance is fairly stated. Based the Companys review of this evidence, management believes that a full valuation allowance against all of the Companys deferred tax assets at September30, 2014 is appropriate.

Financing_Arrangements

Financing Arrangements	3 Months Ended
	Sep. 30, 2014
Financing Arrangements [Abstract]	'
Financing Arrangements And Subsequent Events	'
	Note 6.	Financing Arrangements
	The Company has a credit facility which provides for a $2,500,000 revolving line of credit. There was no outstanding principal balance on the line of credit as of September 30, 2014. Interest on the line of credit accrues at the prime rate plus 1.50%, with a floor of 4.50% (4.75% at September 30, 2014) and is payable monthly. The amount eligible for borrowing on the line of credit is limited to the lesser of $2,500,000 or 57.75% of eligible accounts receivable and the line of credit expires on December 18, 2014, if not renewed. The line of credit is secured by a security interest in substantially all of the tangible and intangible assets of the Company.
	As a part of the credit facility, the Company also has a term loan which had an outstanding principal balance of approximately $1,268,000 at September 30, 2014. The term loan bears interest at 5.00%, with monthly payments of principal and interest of approximately $8,600 and a final payment of principal and interest of approximately $1,095,000 due on the maturity date of December 18, 2018. The term loan is secured by a mortgage on the Companys real property.
	The Companys credit facility contains certain financial and nonfinancial covenants which include a minimum tangible net worth covenant of not less than $10,125,000 and restrictions on the Companys ability to incur certain additional indebtedness or pay dividends.

Commitments_And_Contingencies

Commitments And Contingencies	3 Months Ended
	Sep. 30, 2014
Commitments And Contingencies [Abstract]	'
Commitments And Contingencies	'
	Note 7.	Commitments and Contingencies
	The Company is occasionally involved in claims and disputes arising in the ordinary course of business. The Company insures its business risks where possible to mitigate the financial impact of individual claims, and establishes reserves for an estimate of any probable cost of settlement or other disposition.

Related_Parties

Related Parties	3 Months Ended
	Sep. 30, 2014
Related Parties [Abstract]	'
Related Parties	'
	Note 8.	Related Parties
	The Company uses a parts supplier whose founder and president is a director of the Company. For the three months ended September 30, 2014 and 2013, the Company made payments to the supplier of approximately $19,000 and $14,000, respectively.

Nature_Of_Business_And_Summary1

Nature Of Business And Summary Of Significant Accounting Policies (Policy)	3 Months Ended
	Sep. 30, 2014
Nature Of Business And Summary Of Significant Accounting Policies [Abstract]	'
Nature Of Business	'
	Electromed, Inc. (the Company) develops, manufactures and markets innovative airway clearance products which apply High Frequency Chest Wall Oscillation (HFCWO) therapy in pulmonary care for patients of all ages. The Company markets its products in the United States to the home health care and institutional markets for use by patients in personal residences, hospitals and clinics. The Company also sells internationally both directly and through distributors. International sales were approximately $399,000 and $149,000 for the three months ended September 30, 2014 and 2013, respectively. Since its inception, the Company has operated in a single industry segment: developing, manufacturing and marketing medical equipment.
Basis Of Presentation	'
	The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the Companys financial position and results of operations as required by Regulation S-X, Rule 10-01. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This interim report should be read in conjunction with the consolidated financial statements included in the Companys annual report on Form 10-K for the year ended June 30, 2014.
Principles Of Consolidation	'
	Principles of consolidation: The accompanying condensed consolidated financial statements include the accounts of Electromed, Inc. and its subsidiary, Electromed Financial, LLC. Operating activities and net assets in Electromed Financial, LLC were insignificant as of and for the three months ended September 30, 2014 and the year ended June 30, 2014.
Use Of Estimates	'
	Use of estimates: Management uses estimates and assumptions in preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. The Company believes the critical accounting policies that require the most significant assumptions and judgments in the preparation of its condensed consolidated financial statements include revenue recognition and the related estimation of selling price adjustments, allowance for doubtful accounts, inventory obsolescence, share-based compensation, income taxes and the warranty reserve.
Net Income (Loss) Per Common Share	'
	Net income (loss) per common share: Net income (loss) is presented on a per share basis for both basic and diluted common shares. Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding during the period. The diluted net income (loss) per common share calculation assumes that all stock warrants were exercised and converted into common stock at the beginning of the period, unless their effect would be anti-dilutive. Common stock equivalents of 684,900 and 614,900 were excluded from the calculation of diluted earnings per share for the three months ended September, 2014 and 2013, respectively, as their impact was antidilutive.

Inventories_Tables

Inventories (Tables)	3 Months Ended
	Sep. 30, 2014
Inventories [Abstract]	'
Schedule Of Components Of Inventory	'
		September 30,			June 30,
		2014			2014
	Parts inventory	$	1,439,000		$	1,491,000
	Work in process		194,000			264,000
	Finished goods		640,000			510,000
	Less: Reserve for obsolescence		(30,000	)		(30,000	)
	Total	$	2,243,000		$	2,235,000

FiniteLife_Intangible_Assets_T

Finite-Life Intangible Assets (Tables)	3 Months Ended
	Sep. 30, 2014
Finite-Life Intangible Assets [Abstract]	'
Schedule Of Finite-Life Intangible Assets	'
		Three Months			Year Ended
		Ended			30-Jun-14
		September 30,
		2014
	Balance, beginning	$	930,000		$	1,081,000
	Additions					41,000
	Abandonments					(63,000	)
	Amortization expense		(30,000	)		(129,000	)
	Balance, ending	$	900,000		$	930,000

Warranty_Liability_Tables

Warranty Liability (Tables)	3 Months Ended
	Sep. 30, 2014
Warranty Liability [Abstract]	'
Schedule Of Warranty Liability	'
		Three Months			Year Ended
		Ended			30-Jun-14
		September 30,
		2014
	Balance warranty reserve	$	700,000		$	680,000
	Accrual for products sold		71,000			196,000
	Expenditures and costs incurred for warranty claims		(51,000	)		(176,000	)
	Ending warranty reserve	$	720,000		$	700,000

Nature_Of_Business_And_Summary2

Nature Of Business And Summary Of Significant Accounting Policies (Narrative) (Details) (USD $)	3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]	'	'
Sales	$4,770,539	$3,418,178
Common stock equivalents excluded from calculation of diluted earnings per share	684,900	614,900
International [Member]	'	'
Nature Of Business And Summary Of Significant Accounting Policies [Line Items]	'	'
Sales	$399,000	$149,000

Inventories_Details

Inventories (Details) (USD $)	Sep. 30, 2014	Jun. 30, 2014
Inventories [Abstract]	'	'
Parts inventory	$1,439,000	$1,491,000
Work in process	194,000	264,000
Finished goods	640,000	510,000
Less: Reserve for obsolescence	-30,000	-30,000
Total	$2,243,198	$2,235,496

FiniteLife_Intangible_Assets_N

Finite-Life Intangible Assets (Narrative) (Details) (USD $)	Sep. 30, 2014	Jun. 30, 2014	Sep. 30, 2014	Sep. 30, 2014
			Patents [Member]	Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]	'	'	'	'
Estimated useful life	'	'	'15 years	'12 years
Accumulated amortization	$607,000	$576,000	'	'

FiniteLife_Intangible_Assets_S

Finite-Life Intangible Assets (Schedule Of Finite-Life Intangible Assets) (Details) (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Jun. 30, 2014
Finite-Life Intangible Assets [Abstract]	'	'	'
Balance, beginning	$930,451	$1,081,000	$1,081,000
Additions	'	'	41,000
Abandonments	'	'	-63,000
Amortization expense	-30,892	-31,619	-129,000
Balance, ending	$899,559	'	$930,451

Warranty_Liability_Narrative_D

Warranty Liability (Narrative) (Details) (Outside United States [Member])	3 Months Ended
	Sep. 30, 2014
Outside United States [Member]	'
Warranty Liability [Line Items]	'
Warranty term	'3 years

Warranty_Liability_Schedule_Of

Warranty Liability (Schedule Of Warranty Liability) (Details) (USD $)	3 Months Ended	12 Months Ended
	Sep. 30, 2014	Jun. 30, 2014
Warranty Liability [Abstract]	'	'
Beginning warranty reserve	$700,000	$680,000
Accrual for products sold	71,000	196,000
Expenditures and costs incurred for warranty claims	-51,000	-176,000
Ending warranty reserve	$720,000	$700,000

Income_Taxes_Details

Income Taxes (Details) (USD $)	3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Income Taxes [Abstract]	'	'
Effective tax rate	0.00%	43.40%
Income tax expense (benefit)	$0	($257,000)
Reduction in deferred tax asset valuation allowance	$155,000	'

Financing_Arrangements_Narrati

Financing Arrangements (Narrative) (Details) (Venture Bank [Member], USD $)	3 Months Ended
	Sep. 30, 2014
Venture Bank [Member]	'
Line of Credit Facility [Line Items]	'
Maximum borrowing capacity	$2,500,000
Outstanding principal balance	0
Amount added to prime rate for interest rate	1.50%
Interest rate, floor	4.50%
Effective interest rate including prime rate	4.75%
Borrowing restriction, revolving line of credit	2,500,000
Borrowing restriction, percent of eligible accounts receivable	57.75%
Credit facility expiration date	18-Dec-14
Term loan	1,268,000
Term loan, interest rate	5.00%
Monthly payments of principal and interest	8,600
Final payment of principal and interest	1,095,000
Term loan maturity date	18-Dec-18
Minimum tangible net worth to be maintained	$10,125,000

Related_Parties_Details

Related Parties (Details) (USD $)	3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Related Party Transaction [Line Items]	'	'
Payments to related party parts supplier	$19,000	$14,000
Member Of Electromed's Board Of Directors [Member]	'	'
Related Party Transaction [Line Items]	'	'
Number of related parties	1	'