Electromed (ELMD) 10-Q 12 May 15 2015 Q3 Quarterly report Financial data

Document_And_Entity_Informatio

Document And Entity Information	9 Months Ended
	Mar. 31, 2015	12-May-15
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	FALSE
Document Period End Date	31-Mar-15
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Registrant Name	Electromed, Inc.
Entity Central Index Key	1488917
Current Fiscal Year End Date	-24
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		8,133,857

Condensed_Consolidated_Balance

Condensed Consolidated Balance Sheets (USD $)	Mar. 31, 2015	Jun. 30, 2014
Current Assets
Cash	$2,904,811	$1,502,702
Accounts receivable (net of allowances for doubtful accounts of $45,000)	6,388,454	6,487,267
Inventories	2,401,864	2,235,496
Prepaid expenses and other current assets	481,477	397,853
Total current assets	12,176,606	10,623,318
Property and equipment, net	3,617,372	3,935,802
Finite-life intangible assets, net	832,520	930,451
Other assets	361,076	302,595
Total assets	16,987,574	15,792,166
Current Liabilities
Current maturities of long-term debt	48,098	46,375
Accounts payable	684,290	380,582
Accrued compensation	561,938	391,040
Warranty reserve	670,000	700,000
Other accrued liabilities	171,893	302,482
Total current liabilities	2,136,219	1,820,479
Long-term debt, less current maturities	1,214,795	1,251,192
Total liabilities	3,351,014	3,071,671
Commitments and Contingencies (Note 6)
Equity
Common stock, $0.01 par value; authorized: 13,000,000; shares issued and outstanding: 8,133,857 and 8,114,252 at March 31, 2015, June 30, 2014, respectively	81,339	81,143
Additional paid-in capital	13,295,566	13,217,166
Retained earnings (accumulated deficit)	259,655	-577,814
Total equity	13,636,560	12,720,495
Total liabilities and equity	$16,987,574	$15,792,166

Condensed_Consolidated_Balance1

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2015	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	8,133,857	8,114,252
Common stock, shares outstanding	8,133,857	8,114,252

Condensed_Consolidated_Stateme

Condensed Consolidated Statements Of Operations (USD $)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Condensed Consolidated Statements Of Operations [Abstract]
Net revenues	$4,556,977	$3,956,335	$14,209,239	$10,875,588
Cost of revenues	1,400,252	1,436,195	4,354,339	3,476,570
Gross profit	3,156,725	2,520,140	9,854,900	7,399,018
Operating expenses
Selling, general and administrative	3,020,849	2,634,036	8,714,746	8,097,067
Research and development	78,292	103,166	237,201	405,009
Total operating expenses	3,099,141	2,737,202	8,951,947	8,502,076
Operating income (loss)	57,584	-217,062	902,953	-1,103,058
Interest expense, net of interest income of $371, $392 $2,044 and $11,730 respectively	20,355	23,321	65,484	57,992
Net income (loss) before income taxes	37,229	-240,383	837,469	-1,161,050
Income tax expense		-764,000	0	-418,000
Net Income (loss)	$37,229	($1,004,383)	$837,469	($1,579,050)
Income (loss) per share:
Basic	$0	($0.12)	$0.10	($0.19)
Diluted	$0	($0.12)	$0.10	($0.19)
Weighted-average common shares outstanding:
Basic	8,114,252	8,114,252	8,114,252	8,114,252
Diluted	8,166,659	8,114,252	8,131,496	8,114,252

Condensed_Consolidated_Stateme1

Condensed Consolidated Statements Of Operations (Parenthetical) (USD $)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Condensed Consolidated Statements Of Operations [Abstract]
Interest income	$371	$392	$2,044	$11,730

Condensed_Consolidated_Stateme2

Condensed Consolidated Statements Of Cash Flows (USD $)	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash Flows From Operating Activities
Net income (loss)	$837,469	($1,579,050)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	459,223	409,651
Amortization of finite-life intangible assets	97,931	95,082
Amortization of debt issuance costs	14,546	13,078
Share-based compensation expense	78,596	73,821
Deferred income taxes		454,000
Loss on disposal of property and equipment	233,116	34,110
Changes in operating assets and liabilities:
Accounts receivable	98,813	2,544,116
Inventories	-166,368	-1,171,221
Prepaid expenses and other assets	-141,854	-37,930
Accounts payable and accrued liabilities	319,717	184,333
Net cash provided by operating activities	1,831,189	1,019,990
Cash Flows From Investing Activities
Expenditures for property and equipment	-379,609	-626,327
Expenditures for finite-life intangible assets		-8,155
Net cash used in investing activities	-379,609	-634,482
Cash Flows From Financing Activities
Principal payments on long-term debt including capital lease obligations	-34,674	-81,348
Payments of deferred financing fees	-14,797	-35,296
Net cash used in financing activities	-49,471	-116,644
Net increase in cash and cash equivalents	1,402,109	268,864
Cash and cash equivalents
Beginning of period	1,502,702	503,564
End of period	$2,904,811	$772,428

Interim_Financial_Reporting

Interim Financial Reporting	9 Months Ended
	Mar. 31, 2015
Interim Financial Reporting [Abstract]
Interim Financial Reporting	Note 1.	Interim Financial Reporting
	Basis of presentation: Electromed, Inc. (the "Company") develops, manufactures and markets innovative airway clearance products that apply High Frequency Chest Wall Oscillation ("HFCWO") therapy in pulmonary care for patients of all ages. The Company markets and sells 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 markets and sells its products internationally both directly and through distributors. International sales were approximately $599,000 and $585,000 for the nine months ended March 31, 2015 and 2014, 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 Company's financial position and results of operations as required by Regulation S-X. 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 Company's 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 and six months ended December 31, 2014 and the year ended June 30, 2014.  As of December 31, 2014, Electromed Financial, LLC was dissolved.
	A summary of the Company's 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 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 539,900 and 609,900 were excluded from the calculation of diluted earnings per share for the three and nine months ended March 31, 2015 and 2014, respectively, as their impact was antidilutive.

Inventories

Inventories	9 Months Ended
	Mar. 31, 2015
Inventories [Abstract]
Inventories	Note  2.	Inventories
	The components of inventory were approximately as follows:
			March 31,			June 30,
			2015			2014
	Parts inventory		$	1,615,000			1,491,000
	Work in process			165,000			264,000
	Finished goods			652,000			510,000
	Less: Reserve for obsolescence			(30,000	)		(30,000	)
	Total		$	2,402,000			2,235,000

Warranty_Liability

Warranty Liability	9 Months Ended
	Mar. 31, 2015
Warranty Liability [Abstract]
Warranty Liability	Note 3.	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 Company's 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 Company's warranty liability were approximately as follows:
			Nine Months			Year Ended
			Ended			30-Jun-14
			31-Mar-15
	Beginning warranty reserve		$	700,000		$	680,000
	Accrual for products sold			107,000			196,000
	Expenditures and costs incurred for warranty claims			(137,000	)		(176,000	)
	Ending warranty reserve		$	670,000		$	700,000

Income_Taxes

Income Taxes	9 Months Ended
	Mar. 31, 2015
Income Taxes [Abstract]
Income Taxes	Note 4.	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 rates for the nine months ended March 31, 2015 and 2014 were 0.0% and negative 36.0%, respectively. For the nine months ended March 31, 2015, the Company recorded no tax expense.  As income is earned the Company's 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 Company's gross deferred tax assets.  This reduction of the Company's gross deferred tax assets causes a corresponding decrease in respective valuation allowance. For the nine months ended March 31, 2015, the Company recorded an income tax expense of zero and the decrease in the Company's deferred tax assets and corresponding reduction in its deferred tax asset valuation allowance was approximately $358,000.
	For the nine months ended March 31, 2014, the Company recorded an income tax expense of $418,000. This amount includes a current tax benefit of $36,000 and a discrete tax expense of $454,000 due primarily to the Company's recording of a full valuation allowance against all of its net US federal and state deferred tax assets at March 31, 2014. For the three months ended March 31, 2014, tax expense also included $346,000 of tax expense due to the reversal of the current tax benefit recorded during the first two quarters of the fiscal year.
	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 Company's 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 existing taxable 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 Company's review of this evidence, management believes that a full valuation allowance against all of the Company's deferred tax assets at March 31, 2015 remains appropriate.

Financing_Arrangements

Financing Arrangements	9 Months Ended
	Mar. 31, 2015
Financing Arrangements [Abstract]
Financing Arrangements And Subsequent Events	Note 5.	Financing Arrangements
	The Company has a credit facility that provides for a revolving line of credit and a term loan.  On December 18, 2014, the Company renewed its $2,500,000 revolving line of credit. There was no outstanding principal balance on the line of credit as of March 31, 2015 or June 30, 2014. Interest on the line of credit accrues at the prime rate plus 1.00%, with a floor of 4.50% (4.50% at March 31, 2015) and is payable monthly. The amount eligible for borrowing on the line of credit is limited to the lesser of $2,500,000 or 57.00% of eligible accounts receivable ($2,500,000 eligible for borrowing at March 31, 2015) and the line of credit expires on December 18, 2015, 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 has a term loan, which had an outstanding principal balance of approximately $1,251,000 and $1,281,000 at March 31, 2015 and June 30, 2014, respectively. 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 is due on the maturity date of December 18, 2018. The term loan is secured by a mortgage on the Company's real property.
	The Company's 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 Company's ability to incur certain additional indebtedness or pay dividends.

Commitments_And_Contingencies

Commitments And Contingencies	9 Months Ended
	Mar. 31, 2015
Commitments And Contingencies [Abstract]
Commitments And Contingencies	Note 6.	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	9 Months Ended
	Mar. 31, 2015
Related Parties [Abstract]
Related Parties	Note 7.	Related Parties
	The Company uses a parts supplier whose founder and president is a director of the Company. For the nine months ended March 31, 2015 and 2014, the Company made payments to the supplier of approximately $85,000 and $163,000, respectively.

Interim_Financial_Reporting_Po

Interim Financial Reporting (Policy)	9 Months Ended
	Mar. 31, 2015
Interim Financial Reporting [Abstract]
Nature Of Business	Electromed, Inc. (the "Company") develops, manufactures and markets innovative airway clearance products that apply High Frequency Chest Wall Oscillation ("HFCWO") therapy in pulmonary care for patients of all ages. The Company markets and sells 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 markets and sells its products internationally both directly and through distributors. International sales were approximately $599,000 and $585,000 for the nine months ended March 31, 2015 and 2014, 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 Company's financial position and results of operations as required by Regulation S-X. 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 Company's 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 and six months ended December 31, 2014 and the year ended June 30, 2014.  As of December 31, 2014, Electromed Financial, LLC was dissolved.
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 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 539,900 and 609,900 were excluded from the calculation of diluted earnings per share for the three and nine months ended March 31, 2015 and 2014, respectively, as their impact was antidilutive.

Inventories_Tables

Inventories (Tables)	9 Months Ended
	Mar. 31, 2015
Inventories [Abstract]
Schedule Of Components Of Inventory
		March 31,			June 30,
		2015			2014
	Parts inventory	$	1,615,000			1,491,000
	Work in process		165,000			264,000
	Finished goods		652,000			510,000
	Less: Reserve for obsolescence		(30,000	)		(30,000	)
	Total	$	2,402,000			2,235,000

Warranty_Liability_Tables

Warranty Liability (Tables)	9 Months Ended
	Mar. 31, 2015
Warranty Liability [Abstract]
Schedule Of Warranty Liability
		Nine Months			Year Ended
		Ended			30-Jun-14
		31-Mar-15
	Beginning warranty reserve	$	700,000		$	680,000
	Accrual for products sold		107,000			196,000
	Expenditures and costs incurred for warranty claims		(137,000	)		(176,000	)
	Ending warranty reserve	$	670,000		$	700,000

Interim_Financial_Reporting_De

Interim Financial Reporting (Details) (USD $)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Interim Financial Reporting [Line Items]
Sales	$4,556,977	$3,956,335	$14,209,239	$10,875,588
Common stock equivalents excluded from calculation of diluted earnings per share	539,900	609,900	539,900	609,900
International [Member]
Interim Financial Reporting [Line Items]
Sales			$599,000	$585,000

Inventories_Details

Inventories (Details) (USD $)	Mar. 31, 2015	Jun. 30, 2014
Inventories [Abstract]
Parts inventory	$1,615,000	$1,491,000
Work in process	165,000	264,000
Finished goods	652,000	510,000
Less: Reserve for obsolescence	-30,000	-30,000
Total	$2,401,864	$2,235,496

Warranty_Liability_Narrative_D

Warranty Liability (Narrative) (Details) (Outside United States [Member])	9 Months Ended
	Mar. 31, 2015
Outside United States [Member]
Warranty Liability [Line Items]
Warranty term	3 years

Warranty_Liability_Schedule_Of

Warranty Liability (Schedule Of Warranty Liability) (Details) (USD $)	9 Months Ended	12 Months Ended
	Mar. 31, 2015	Jun. 30, 2014
Warranty Liability [Abstract]
Beginning warranty reserve	$700,000	$680,000
Accrual for products sold	107,000	196,000
Expenditures and costs incurred for warranty claims	-137,000	-176,000
Ending warranty reserve	$670,000	$700,000

Income_Taxes_Details

Income Taxes (Details) (USD $)	3 Months Ended	9 Months Ended
	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Taxes [Abstract]
Effective tax rate		0.00%	-36.00%
Income tax expense (benefit)	$764,000	$0	$418,000
Reduction in deferred tax asset valuation allowance		358,000
Current tax expense (benefit)			-36,000
Discrete tax expense			454,000
Tax expense due to reversal of current tax benefit recorded during first two quarters of the fiscal year	$346,000

Financing_Arrangements_Details

Financing Arrangements (Details) (Venture Bank [Member], USD $)	9 Months Ended
	Mar. 31, 2015	Jun. 30, 2014
Venture Bank [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$2,500,000
Outstanding principal balance	0	0
Amount added to prime rate for interest rate	1.00%
Interest rate, floor	4.50%
Effective interest rate including prime rate	4.50%
Borrowing restriction, revolving line of credit	2,500,000
Borrowing restriction, percent of eligible accounts receivable	57.00%
Amount eligible for borrowing, revolving line of credit	2,500,000
Credit facility expiration date	18-Dec-15
Term loan	1,251,000	1,281,000
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 $)	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Related Party Transaction [Line Items]
Payments to related party parts supplier	$85,000	$163,000
Member Of Electromed's Board Of Directors [Member]
Related Party Transaction [Line Items]
Number of related parties	1