ELMD US Equity☆

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

Protecting the privacy of customer and personnel information is important to us, and we maintain security protocols and processes, including ongoing training and education for all personnel, designed to combat the risk of unauthorized access or inadvertent disclosure. Our business operations involve confidential information, including patient health information subject to regulation as discussed under “HIPAA, HITECH and Other Privacy Regulations” above. Our information technology infrastructure is designed to offer reliability, scalability, performance, security and privacy for our personnel, clients, and third-party contractors.

Cybersecurity Risk Management and Strategy

We have designed and implemented a cybersecurity risk management program to help us identify, assess, and mitigate cybersecurity risks relevant to our business, based on the National Institute of Standards and Technology (NIST) Cyber Security Framework. The cybersecurity risk management program is integrated into our Enterprise Risk Management (ERM) program.

Our cybersecurity risk management program includes:

To date, the Company is not aware of any cybersecurity threats, including as a result of any previous cybersecurity incidents, that has had or is reasonably likely to have a material impact on the Company’s business strategy, results of operations or financial condition. However, despite our security measures, there can be no assurance that the Company, or the third parties with which we interact, will not experience a cybersecurity incident in the future that may materially affect us.

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Cybersecurity Governance

The Audit Committee and the Board of Directors provide oversight of cybersecurity risk management. The cybersecurity risk management program is co-led by senior leaders of our management and third-party service providers. Between our senior leaders, there is a combined 30+ years of experience assisting public and privately held companies in a variety of industries, leading several enterprise-wide transformation initiatives to adapt to changing cybersecurity threats. Our Director of IT leads the IT organization, reports directly to the Chief Financial Officer and works closely with the President and Chief Executive Officer to guide strategic direction and IT decisions to drive business outcomes. Our Board of Directors is engaged in the Company’s Enterprise Risk Management (ERM) program and receives briefings on the outcomes of the ERM program and the steps the Company takes to mitigate risks that the program identifies. The Audit Committee oversees the Company’s cybersecurity strategies, systems, and controls to ensure reliability and prevent unauthorized access. The Audit Committee discusses policies with respect to risk assessment and risk management, including risks associated with the reliability and security of the Company’s information technology and security systems, and the steps management has undertaken to monitor and control such exposures. The Audit Committee and Board of Directors receives regular updates on the Company’s cybersecurity risk management program from the Chief Financial Officer, Director of IT and third-party managed service provider CISO.

Item 2. Properties.

We own our principal headquarters and manufacturing facilities, consisting of approximately 37,000 square feet, which are located on an approximately 2.3-acre parcel in New Prague, Minnesota. Nearly all the Company’s revenues, profits, and assets are associated with this facility. We believe that our facilities are satisfactory for our long-term growth plans.

Item 3. Legal Proceedings.

Occasionally, we may be party to legal actions, proceedings, or claims in the ordinary course of business, including claims based on the assertions of patent and trademark infringement. Corresponding costs are accrued when it is probable that loss will be incurred, and the amount can be precisely or reasonably estimated. We are not aware of any undisclosed actual or threatened litigation that would have a material adverse effect on our financial condition or results of operations.

Item 4. Mine Safety Disclosures.

None.

PART II

Market Information

Our common stock is listed on the NYSE American under the symbol “ELMD”.

As of August 20, 2025, there were 45 registered holders of our common stock.

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Dividends

We have never paid cash dividends on any of our shares of common stock. We currently intend to first retain any earnings for use in operations and do not anticipate paying cash dividends to our shareholders in the foreseeable future. The agreement governing our credit facility restricts our ability to pay dividends.

Recent Sales of Unregistered Equity Securities

None.

Purchases of Equity Securities by the Company and Affiliated Purchasers

On March 6, 2025, we announced the approval of a stock repurchase authorization. Under the authorization, the Company could repurchase up to $5,000,000 shares of common stock. A total of 220,899 shares were repurchased and retired for a total cost of $5,000,000, or $22.63 per share. As of June 30, 2025, this repurchase authorization was exhausted in its entirety.

The following table sets forth information concerning purchases of shares of our common stock for the three months ended June 30, 2025:

Total Number of Approximate Dollar Value

Average Shares Purchased as Part of Shares that May Yet

Total Number of Price Paid of Publicly Announced be Purchased Under the

Period Shares Purchased per Share Plans or Programs Plans or Programs

Item 6. [Reserved].

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K. The forward-looking statements include statements that reflect management’s good faith beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our future development plans, capital resources and requirements, results of operations, and future business performance. Our actual results could differ materially from those anticipated in the forward-looking statements included in this discussion as a result of certain factors, including, but not limited to, those discussed in the section entitled “Information Regarding Forward-Looking Statements” immediately preceding Part I of this Annual Report on Form 10-K.

Overview

Electromed develops and provides innovative airway clearance products applying HFCWO technologies in pulmonary care for patients of all ages.

We manufacture, market and sell products that provide HFCWO, including the SmartVest System that includes our newest generation SmartVest Clearway, previous generation SmartVest SQL and related products, to patients with compromised pulmonary function. The SmartVest Clearway is an updated and modern approach to HFCWO focused on an enhanced patient experience and proven patient outcomes. The product delivers effective 360o oscillatory pressure through our proprietary rapid inflate-deflate technology which improves the patient’s ability to breathe deeply during therapy. SmartVest Clearway delivers a sleek and lightweight generator and is designed with an intuitive touchscreen to simplify programing and everyday use. Our products are sold in both the homecare market and the hospital market. The SmartVest SQL has been sold in the domestic homecare market since 2014. In 2015, we launched the SmartVest SQL into hospital and certain international markets. In June 2017, we announced the launch of the SmartVest SQL with SmartVest ConnectTM wireless technology, which allows data connection between physicians and patients to track therapy performance and collaborate in treatment decisions. In 2022, we launched the SmartVest Clearway to adult pulmonary, pediatric and cystic fibrosis patients for use in the home. We have marketed the SmartVest System and its predecessor products since 2000 to patients suffering from cystic fibrosis, bronchiectasis and repeated episodes of pneumonia. Additionally, we offer our products to a patient population that includes neuromuscular disorders such as cerebral palsy, muscular dystrophies, ALS, and patients with post-surgical complications or who are ventilator dependent or have other conditions involving excess secretion and impaired mucus transport.

The SmartVest System is often eligible for reimbursement from major private insurance providers, health maintenance organizations (“HMOs”), state Medicaid systems, and the federal Medicare system, which we believe is an important consideration for patients considering an HFCWO course of therapy. For domestic sales, the SmartVest System may be reimbursed under the Medicare-assigned billing code (E0483) for HFCWO devices if the patient has cystic fibrosis, bronchiectasis (including chronic bronchitis or COPD that has resulted in a diagnosis of bronchiectasis), or any one of certain enumerated neuromuscular diseases, and can demonstrate that another less expensive physical or mechanical treatment did not adequately mobilize retained secretions. Private payers consider a variety of sources, including Medicare, as guidelines in setting their coverage policies and payment amounts.

We have primarily employed a direct-to-patient and provider model, through which we obtain patient referrals from clinicians, manage insurance claims on behalf of our patients and their clinicians, deliver our solutions to patients and train them on proper use in their homes. This model allows us to directly approach patients and clinicians, whereby we disintermediate the traditional HME distributors and capture both the manufacturer and distributor margins. We have engaged a limited number of regional HME distributors focused on respiratory therapies as an alternate sales channel.

Our key growth strategies for fiscal 2026 are to accelerate our revenue growth by taking market share and expanding the addressable population for the largest and fastest growing segments of the market: adult pulmonology/bronchiectasis. Actions to support accelerating our revenue growth in this area include the following:

● Provide best-in-class customer care and support; and

Impacts of Certain Macro-Economic Conditions and the Supply Chain on Our Business and Operations

We expect that component and raw material costs will be a challenge in fiscal 2026 relating to supply chain availability and inflationary trends in electronic components and may extend to other components resulting from uncertain trade regulations such as tariffs. In certain instances, we have purchased key materials in advance to ensure adequate future supply and mitigate the risk of potential supply chain disruptions. It is possible that these macro-economic conditions could have a greater adverse impact on our supply chain in the future, including impacts associated with preventative and precautionary measures taken by other businesses and applicable governments. A reduction or further interruption in any of our manufacturing processes or significant changes in trade regulations could have a material adverse effect on our business. Any significant increases to our raw material or shipping costs could reduce our gross margins.

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Critical Accounting Estimates

During the preparation of our financial statements, we are required to make estimates, assumptions and judgment that affect reported amounts. Those estimates and assumptions affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities, and our reported revenues and expenses. We update these estimates, assumptions, and judgments as appropriate. Some of our accounting policies and estimates require us to exercise significant judgment in selecting the appropriate assumptions for calculating financial statements. Such judgments are subject to an inherent degree of uncertainty. Among other factors, these judgments are based upon our historical experience, known trends in our industry, terms of existing contracts and other information from outside sources, as appropriate. The following is a summary of our primary critical accounting policies and estimates. See also Note 1 to the Financial Statements, included in Part II, Item 8, of this Annual Report on Form 10-K.

Revenue Recognition

Revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including consideration paid or payable to customers and significant financing components. Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer.

Individual promised goods and services in a contract are considered a performance obligation and accounted for separately if the individual good or service is distinct (i.e., the customer can benefit from the good or service on its own or with other resources that are readily available to the customer and the good or service is separately identifiable from other promises in the arrangement). If an arrangement includes multiple performance obligations, the consideration is allocated between the performance obligations in proportion to their estimated standalone selling price, unless discounts or variable consideration is attributable to one or more but not all the performance obligations. Costs related to products delivered are recognized in the period incurred, unless criteria for capitalization of costs under Accounting Standards Codification (“ASC”) 340-40, “Other Assets and Deferred Costs,” or the requirements under other applicable accounting guidance are met.

The Company includes shipping and handling fees in net revenues. Shipping and handling costs associated with the shipment of the Company’s SmartVest System after control has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues.

We request that customers return previously sold units that are no longer in use to us to limit the possibility that such units would be resold by unauthorized parties or used by individuals without a prescription. The customer is under no obligation to return the product; however, we do reclaim many previously sold units upon the discontinuance of patient usage. We are certified to recondition and resell returned SmartVest System units. Returned units are typically reconditioned and resold or used for demonstration equipment and warranty replacement parts.

Inventory Valuation

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Work in process and finished goods are carried at standard cost, which approximates actual cost, and includes materials, labor and allocated overhead. The reserve for obsolescence is determined by analyzing the inventory on hand and comparing it to expected future sales. Estimated inventory to be returned is based on the number of devices that have shipped that are expected to be returned prior to completion of the insurance reimbursement process.

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Warranty Reserve

The Company provides a lifetime warranty on its products to the prescribed patient for homecare sales within the U.S. and a one to five-year warranty for all homecare distributor, hospital and other sales. 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 reserve include the number of units shipped, historical and anticipated rates of warranty claims, the product’s useful life and cost per claim. The Company routinely assesses the adequacy of its recorded warranty reserve and adjusts the amounts as necessary.

Share-Based Compensation

Share-based payment awards consist of options to purchase shares of our common stock, restricted stock awards, restricted stock units, and performance-based awards. Expense for options is estimated using the Black-Scholes pricing model at the date of grant and expense for restricted stock is determined by the closing price on the day the grant is made. Expense is recognized on a graded vesting basis over the requisite service or vesting period of the award, or at the time services are provided for non-employee awards. Expenses for performance-based awards with market conditions are estimated using the Monte-Carlo pricing model at the date of grant and expense is recognized on a straight-line basis. In determining the fair value of options and performance-based awards with market conditions, we make various assumptions, including expected risk-free interest rate, stock price volatility, and life. See Note 8 to the Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-K for a description of these assumptions.

Results of Operations

Fiscal Year Ended June 30, 2025 Compared to Fiscal Year Ended June 30, 2024

Revenues

Revenue for the fiscal years ended June 30, 2025, and 2024 are summarized in the table below.

Fiscal Year Ended June 30,

Homecare Revenue. Homecare revenue increased by $7,784,000, or 15.7%, in fiscal 2025 compared to fiscal 2024. The increase in revenue was due to an increase in direct sales representatives and higher net revenues per approval.

Hospital Revenue. Hospital revenue increased by $605,000, or 23.9%, in fiscal 2025 compared to fiscal 2024. Hospital revenue includes sales to hospitals, rental companies and other institutions. The increase was primarily due to an increase in sales representatives focused on the hospital market as well as higher capital and disposable demand.

Homecare Distributor Revenue. Homecare distributor revenue increased by $1,076,000, or 58.1%, in fiscal 2025 compared to fiscal 2024. The revenue increase in fiscal 2025 was due to an increased number of homecare distribution partners. We sell to a limited number of home medical equipment distributors, who in turn sell our SmartVest System in the U.S. homecare market.

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Other Revenue. Other revenue decreased by $181,000, or 21.9%, in fiscal 2025 compared to fiscal 2024. The decrease in other revenue was primarily due to decreased demand of international distributor purchases and purchases by customers that do not fall within the other markets described above.

Gross Profit

Gross profit increased to $49,971,000 in fiscal 2025, or 78.1% of net revenues, from $41,726,000 or 76.3% of net revenues, in fiscal 2024. The increase in gross profit and gross margin was primarily due to increased revenue and higher net revenue per device.

Operating Expenses

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $39,315,000 in fiscal 2025, representing an increase of $4,826,000 or 14.0% from $34,489,000 in fiscal 2024.

SG&A payroll and compensation-related expenses including health insurance benefits and other compensation increased by $3,162,000, or 13.5%, to $26,599,000 in fiscal 2025, compared to $23,437,000 in fiscal 2024. The increase in the current year was primarily due to the accelerated recognition of share-based compensation associated with the vesting of performance-based equity awards and salaries and incentive compensation related to the higher average number of sales, sales support, marketing, and reimbursement personnel to process higher patient referrals. We have also continued to provide regular merit-based increases for our employees and are regularly benchmarking our compensation ranges including share-based compensation for new and existing employees to ensure we can hire and retain the talent needed to drive growth in our business. Field sales employees totaled 62, of which 55 were direct sales, as of June 30, 2025, compared to 62 as of June 30, 2024, of which 53 were direct sales. We expect to continue to expand our salesforce to align with our revenue growth projections.

Travel, meals and entertainment expenses increased $577,000, or 17.3%, to $3,919,000 for fiscal 2025 compared to $3,342,000 in fiscal 2024. The increase in the current year was primarily due to an increased number of sales territories and higher travel costs.

Professional and legal fees, including recruiting and insurance expenses, increased by $98,000, or 2.0%, to $4,926,000 in fiscal 2025, compared to $4,828,000 in fiscal 2024. Professional fees include services related to legal costs, shareowner services and reporting requirements, board of directors compensation, information technology technical support and consulting fees. The increase was primarily related to expense recognition associated with the annual equity compensation payable to non-employee directors.

Total discretionary marketing expenses decreased by $66,000, or 4.4% to $1,421,000 in fiscal 2025, compared to $1,487,000 in fiscal 2024. The decrease in the current year was primarily due to a one-time investment in market research in the prior year that did not recur in fiscal 2025.

Research and Development Expenses

R&D expenses increased by $340,000, or 51.8%, to $996,000 in fiscal 2025 compared to $656,000 in fiscal 2024. The increase in the current year was primarily due to increased average headcount and external spend related to product enhancements and sustaining engineering.

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Operating Income

Operating income increased by $3,079,000 or 46.8% to 9,660,000 in fiscal 2025, compared to $6,581,000 in fiscal 2024. The increase in operating income was primarily due to increases in net revenues and gross profit.

Interest Income, net

Net interest income was approximately $624,000 in fiscal 2025 compared to net interest income of $455,000 in fiscal 2024. The increase in the current year was primarily due to higher cash balances.

Income Tax Expense

Income tax expense in fiscal 2025 was $2,747,000, which includes a current tax expense of $3,057,000, and a deferred benefit of $310,000. Estimated income tax expense includes a current federal and state tax benefit of approximately $1,004,000 primarily related to the excess tax benefit for non-qualified stock options that were exercised during the period.

Income tax expense in fiscal 2024 was $1,886,000, which includes a current tax expense of $2,457,000, and a deferred benefit of $571,000. Estimated income tax expense includes a current federal and state tax benefit of approximately $103,000, primarily related to the excess tax benefit for non-qualified stock options that were exercised during the period.

The effective tax rates were 26.7% and 26.8% for fiscal 2025 and 2024, respectively. The effective tax rates differ from the statutory federal rate because of state income taxes and other permanent items that are non-deductible for tax purposes relative to the amount of taxable income.

Net Income

Net income for fiscal 2025 was $7,537,000 compared to net income of $5,150,000 in fiscal 2024. The increase of $2,387,000, or 46.3%, in the current year net income was primarily due to increased net revenues and gross profit.

Liquidity and Capital Resources

Cash Flows and Sources of Liquidity

Cash Flows from Operating Activities

Net cash provided by operating activities in fiscal 2025 was $11,393,000. Cash flows from operating activities consisted of net income of $7,537,000, non-cash expenses of approximately $4,133,000, an increase in accounts payable and accrued liabilities of $1,650,000, an increase in accrued compensation of $1,186,000, and a decrease in inventories of $175,000. These cash flows from operating activities were offset by an increase in accounts receivable of $1,327,000, an increase in prepaid expenses and other assets of $959,000, an increase in income tax receivable of $685,000, and an increase in contract assets of $317,000.

Cash Flows from Investing Activities

Net cash used for investing activities in fiscal 2025 was approximately $306,000. Cash used for investing activities consisted of approximately $262,000 in expenditures for property and equipment and $44,000 in payments for patent and trademark costs.

Cash Flows from Financing Activities

Net cash used for financing activities in fiscal 2025 was approximately $11,880,000, consisting of $10,000,000 used for the repurchase of our common stock and $2,278,000 used for tax payments on net share settlement of stock awards, partially offset by cash received from the issuance of common stock upon the exercise of options of $398,000.

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Adequacy of Capital Resources

Our primary working capital requirements relate to adding employees to our sales force and support functions, continuing infrastructure investments, and supporting general corporate needs, including financing equipment purchases and other capital expenditures incurred in the ordinary course of business. Based on our current operational performance, we believe our working capital of approximately $34,614,000 and available borrowings under our existing credit facility will provide sufficient liquidity to meet our anticipated working capital and other liquidity needs for at least the next twelve months from the date of this report.

We maintain a credit facility that was last amended in December 2023, which provides us with a revolving line of credit. Interest on borrowings on the line of credit accrues at the prime rate (7.50% as of June 30, 2025) less 1.0% and is payable monthly. There was no outstanding principal balance on the line of credit as of June 30, 2025, or June 30, 2024. The amount eligible for borrowing on the line of credit is limited to the lesser of $2,500,000 or 57.0% of eligible accounts receivable, and the line of credit expires on December 18, 2025, if not renewed prior to that date. As of June 30, 2025, the maximum $2,500,000 was available under the line of credit. Payment obligations under the line of credit are secured by a security interest in substantially all of our tangible and intangible assets.

The documents governing our line of credit contain certain financial and non-financial covenants that include a minimum tangible net worth of not less than $10,125,000 and restrictions on our ability to incur certain additional indebtedness or pay dividends.

Any failure to comply with these covenants in the future may result in an event of default, which if not cured or waived, could result in the lender accelerating the maturity of our indebtedness, preventing access to additional funds under the line of credit, requiring prepayment of outstanding indebtedness, or refusing to renew the line of credit. If the maturity of the indebtedness is accelerated or the line of credit is not renewed, sufficient cash resources to satisfy the debt obligations may not be available and we may not be able to continue operations as planned. If we are unable to repay such indebtedness, the lender could foreclose on these assets.

During fiscal 2025 and 2024, we spent approximately $262,000 and $287,000, respectively, on property and equipment. We currently expect to finance planned equipment purchases with cash flows from operations or borrowings under our credit facility. We may need to incur additional debt if we have an unforeseen need for additional capital equipment or if our operating performance does not generate adequate cash flows.

While the impact of macroeconomic conditions and other factors such as inflation and trade regulations are difficult to predict, we believe our cash, cash equivalents and cash flows from operations will be sufficient to meet our working capital, capital expenditure, operational cash requirements for at least the next twelve months from the date of this report.

Accounting Standards Recently Issued But Not Yet Adopted by the Company

See Note 1 of the Notes to our Financial Statements in this Annual Report on Form 10-K for information on new accounting standards adopted in fiscal 2025 or pending adoption.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

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Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm F-2

Balance Sheets F-4

Statements of Operations F-5

Statements of Shareholders’ Equity F-6

Statements of Cash Flows F-7

Notes to Financial Statements F-8

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Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Electromed, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Electromed, Inc. (the Company) as of June 30, 2025, and 2024, the related statements of operations, shareholders’ equity and cash flows for the years then ended, and the related notes to the financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025, and 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Measurement of Customer Revenue Net of Adjustments

As discussed in Note 2 to the financial statements, revenues are recognized at a point in time when control passes to the customer upon product shipment or delivery. Net patient revenues (patient revenue less estimated adjustments) are recognized at the estimated net realizable amounts from third-party payers and customers in exchange for the product. The Company has agreements with third-party payers that provide for payments at amounts different from its established rates. Each quarter, the Company estimates its adjustments for each sale based on the terms of third-party payer contracts and historical collections experience, then applies an estimate for an adjustment reserve percentage to the gross accounts receivable balances.

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We identified the measurement of the adjustment reserve related to customer revenue as a critical audit matter due to the audit effort, degree of auditor judgment, and subjectivity involved in evaluating the audit evidence related to management’s estimate.

Our audit procedures related to the Company’s measurement of the adjustment reserve included the following, among others.

/s/ RSM US LLP

We have served as the Company’s auditor since 2010.

Minneapolis, Minnesota

August 26, 2025

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Electromed, Inc.

Balance Sheets

June 30, 2025, and 2024

As of June 30,

Assets

Current Assets

Income tax receivable 408,000 —

Liabilities and Shareholders’ Equity

Current Liabilities

Shareholders’ Equity

See Notes to Financial Statements.

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Electromed, Inc.

Statements of Operations

Years Ended June 30, 2025, and 2024

Year Ended June 30,

Operating expenses

Income per share:

Weighted-average common shares outstanding:

See Notes to Financial Statements.

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Electromed, Inc.

Statements of Shareholders’ Equity

Years Ended June 30, 2025, and 2024

Total

Common Stock Additional Retained Shareholders’

Shares Amount Paid-in Capital Earnings Equity

See Notes to Financial Statements.

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Electromed, Inc.

Statements of Cash Flows

Years Ended June 30, 2025, and 2024

Year Ended June 30,

Cash Flows from Operating Activities

Impairment of intangible assets 212,000 —

Amortization of finite-life intangible assets 133,000 52,000

Changes in operating assets and liabilities:

Cash Flows from Investing Activities

Expenditures for property and equipment (262,000 ) (287,000 )

Expenditures for finite-life intangible assets (44,000 ) (108,000 )

Cash Flows from Financing Activities

Issuance of common stock upon exercise of options 398,000 311,000

Taxes paid on net share settlement of stock awards (2,278,000 ) —

Net cash (used for) provided by financing activities (11,880,000 ) 36,000

Cash and cash equivalents

Supplemental Disclosures of Cash Flow Information

Supplemental Disclosures of Noncash Investing and Financing Activities

See Notes to Financial Statements.

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Electromed, Inc.

Notes to Financial Statements

Note 1. Nature of Business and Summary of Significant Accounting Policies

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 its products in the U.S. to the homecare and hospital markets. The Company also sells internationally through distributors. International sales were $248,000 and $470,000 for the fiscal years ended June 30, 2025 (“fiscal 2025”) and June 30, 2024 (“fiscal 2024”), respectively.

Since its inception, the Company has operated in a single industry segment: developing, manufacturing, and marketing medical equipment.

A summary of the Company’s significant accounting policies follows:

Use of estimates: Management uses estimates and assumptions in preparing the financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). 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 financial statements include revenue recognition and the related estimation of variable consideration, inventory valuation, share-based compensation and warranty reserve.

Revenue recognition: Revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to customers and significant financing components. Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer. See Note 2 for information on revenue.

Shipping and handling expense: Shipping and handling charges incurred by the Company on shipments to customers are included in cost of revenues and were $445,000 and $383,000 for fiscal 2025 and 2024, respectively.

Cash and cash equivalents: Cash and cash equivalents consist of cash in bank deposits and money market funds with original maturities of three months or less at the time of purchase. The Company has not experienced any losses in these accounts.

Accounts receivable: The Company’s accounts receivable balance is comprised of amounts due from individuals, hospitals and distributors. Balances due from individuals are typically remitted to the Company by third-party reimbursement agencies such as Medicare, Medicaid and private insurance companies. Accounts receivable are carried at amounts estimated to be received from patients under reimbursement arrangements with third-party payers. Accounts receivable are also net of an allowance for credit losses. Management determines the allowance for credit losses by regularly evaluating individual customer accounts and separately considering macroeconomic trends in determining expected losses. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

Contract assets: Contract assets include amounts recognized as revenue that are estimates of variable consideration when the consideration due to the Company is dependent on a future event such as the patient meeting a deductible prior to the Company’s claim being processed by the payer. Contract assets are classified as current as amounts will turn into accounts receivable and be collected during the Company’s normal business operating cycle. Contract assets are reclassified to accounts receivable when the right to receive payment is unconditional.

Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Work in process and finished goods are carried at standard cost, which approximates actual cost, and includes materials, labor and allocated overhead. Standard costs are reviewed at least annually by management, or more often in the event circumstances indicate a change in cost has occurred. The reserve for obsolescence is determined by analyzing the inventory on hand and comparing it to expected future sales. Estimated inventory to be returned is based on how many devices have shipped that are expected to be returned prior to completion of the insurance reimbursement process.

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Property and equipment: Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company retains ownership of demonstration equipment in the possession of both inside and outside sales representatives, who use the equipment in the sales process.

Leases: The Company determines if an arrangement is a lease at inception. Where an arrangement is a lease, the Company determines if it is an operating lease or a finance lease. At lease commencement, the Company records a lease liability and corresponding right of use (“ROU”) asset. Lease liabilities represent the present value of our future lease payments over the expected lease term, which includes options to extend or terminate the lease when it is reasonably certain those options will be exercised. The present value of the Company’s lease liability is determined using its incremental collateralized borrowing rate at lease inception. ROU assets represent the Company’s right to control the use of the leased assets during the lease and are recognized in an amount equal to the lease liability for leases with an initial term greater than 12 months. Over the lease term (operating leases only), the Company uses the effective interest rate method to account for the lease liability as lease payments are made and the ROU asset is amortized to consolidated statement of operations in a manner that results in straight line expense recognition. The Company has elected the practical expedient to calculate the present value of the fixed payments without having to perform an allocation to lease and non-lease components.

Finite-life intangible assets: Finite-life intangible assets include patents and trademarks. These intangible assets are amortized on a straight-line basis over their estimated useful lives, as described in Note 5.

Long-lived assets: Long-lived assets, primarily property and equipment and finite-life intangible assets, are evaluated for impairment when significant events or changes in circumstances indicate the carrying value of an asset or asset group may not be recoverable. In evaluating recoverability, the following factors, among others, are considered: a significant change in the circumstances used to determine the amortization period, an adverse change in legal factors or in the business climate, a transition to a new product or service strategy, a significant change in customer base, and a realization of failed marketing efforts. The recoverability of an asset or asset group is measured by a comparison of the carrying value of the asset to future undiscounted cash flows.

The amount of the impairment loss to be recorded, if any, is calculated as the excess of the asset’s or assets group’s carrying amount over its estimated fair value.

In addition, we periodically reassess the estimated remaining useful lives of our long-lived and finite-life intangible assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in earnings. We have experienced no significant changes in the carrying amount or estimated remaining useful lives of our long-lived or amortizable intangible assets, except as described in Note 5.

Software costs: We capitalize certain implementation costs incurred during the development stage of implementing new software. Capitalized costs are included within Other Assets on the Condensed Balance Sheets when the software meets the definition of a cloud computing arrangement that is a service contract. We expense costs as incurred during the post-implementation/operation stage. Capitalized implementation costs are amortized on a straight-line basis over the contractual term of the cloud computing arrangement, which includes renewal options that are reasonably certain to be exercised.

Warranty liability: The Company provides a lifetime warranty on its products to the prescribed patient for homecare sales within the U.S. and a one to five-year warranty for all homecare distributor, hospital and other sales. 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 or delivered. Factors that affect the Company’s warranty liability include the number of units shipped, historical and anticipated rates of warranty claims, the product’s useful life, 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 as follows:

Year Ended June 30,

Expenditures and costs incurred for warranty claims (363,000 ) (370,000 )

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Income taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company reverses a valuation allowance if it determines, based on the weight of all available evidence, including when cumulative losses become positive income, that it is more likely than not that some or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company recognizes tax liabilities when the Company believes that certain positions may not be fully sustained upon review by tax authorities. Benefits from tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense.

Research and development: Research and development costs include the costs of research activities as well as engineering and technical efforts required to develop new products or make improvements to existing products. Research and development costs are expensed as incurred.

Advertising costs: Advertising costs are expensed when incurred. Advertising, marketing and trade show costs for fiscal 2025 and 2024 were $1,421,000 and $1,487,000, respectively.

Share-based payments: Share-based payment awards consist of options to purchase shares of our common stock, restricted stock awards, restricted stock units, and performance-based awards, issued to employees for services as well as restricted stock awards issued to non-employee directors. Expense for options is estimated using the Black-Scholes pricing model at the date of grant, expense for performance-based awards with market conditions is estimated using the Monte-Carlo pricing model at the date of grant and expense for restricted stock awards and restricted stock units is determined by the closing price on the day the grant is made. Expense is recognized on a graded vesting basis over the requisite service or vesting period of the award, on a straight-line basis for performance-based awards, or at the time services are provided for non-employee awards.

Fair value of financial instruments: The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value due to the short-term nature of these instruments.

Net income per common share: Net income is presented on a per share basis for both basic and diluted common shares. Basic net income per common share is computed using the weighted-average number of common shares outstanding during the period, excluding any restricted stock awards which have not vested. The diluted net income per common share calculation includes outstanding restricted stock grants and assumes that all stock options were exercised and converted into shares of common stock at the beginning of the period unless their effect is anti-dilutive.

Recently Issued Accounting Standards

ASU2023-07- Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures

The standard introduces increased disclosure requirements primarily related to significant segment expenses, along with disclosure of key criteria and metrics utilized by the Chief Operating Decision Maker (“CODM”). It is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted this standard for the year ended June 30, 2025 and expanded its disclosures as required under the standard.

ASU2023-09- Income Taxes (Topic740): Improvements to Income Tax Disclosures

The standard introduces increased transparency about income tax information through the requirement of increased disclosures around specific categories in the rate reconciliation and requires additional information on reconciling items. It is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company currently expects to adopt this standard for its fiscal year ending June 30, 2026, and is evaluating the impact of adoption and additional disclosure requirements.

ASU2024-03 - Reporting Comprehensive Income: Expense Disaggregation Disclosures

The standard introduces increased disclosure requirements for certain costs and expenses. It is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company currently expects to adopt this standard for its fiscal year ending June 30, 2027, and is evaluating the impact of adoption and additional disclosure requirements.

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Note 2. Revenues

Disaggregation of revenues. In the following table, revenue is disaggregated by market:

Year Ended June 30,

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In the following table, homecare revenue is disaggregated by payer type:

Year Ended June 30,

Performance obligations and transaction price. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under ASC 606, “Revenue From Contracts With Customers” (“ASC 606”). A contract’s transaction price is allocated to each distinct performance obligation in proportion to the standalone selling price for each and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations and the timing or method of revenue recognition in each of the Company’s markets are discussed below:

Homecare market. In the Company’s homecare market, its customers are patients who use the SmartVest System. The various models of the SmartVest System are comprised of three main components - a generator, a vest and a connecting hose - that are sold together as an integrated unit. Accordingly, in contracts within the homecare market, the Company regards the SmartVest System to be a single performance obligation.

The Company makes available to its homecare patients limited post-sale services that are not material in the context of the contracts, either individually or taken together, and therefore does not consider them to be performance obligations. The costs associated with the services are accrued and expensed when the related revenues are recognized. As such, transactions in the homecare market consist of a single performance obligation: the SmartVest System.

Homecare patients generally will rely on third-party payers, including commercial payers and governmental payers such as Medicare, Medicaid and the U.S. Department of Veterans Affairs to cover and reimburse all or part of the cost of the SmartVest System. The third-party payers’ reimbursement programs fall into three types, distinguished by the differences in the timing of payments from the payer, consisting of either (i) outright sale, in which payment is received from the payer based on standard terms, (ii) capped installment sale, under which the SmartVest System is sold for a series of payments that are capped not to exceed a prescribed or negotiated amount over a period of time or (iii) installment sale, under which the SmartVest System is paid for over a period of several months as long as the patient continues to use the SmartVest System.

Regardless of the type of transaction, provided criteria for an enforceable contract are met, it is the Company’s long-standing business practice to regard all homecare agreements as transferring control to the patient upon shipment or delivery, despite possible payment cancellation under government or commercial programs where the payer is controlling the payment over specified time periods. For homecare sales that feature installment payments, the ultimate amount of consideration received from Medicare, Medicaid or commercial payers can be significantly less than expected if the contract is terminated due to changes in the patient’s status, including insurance coverage, hospitalization, death or otherwise becoming unable to use the SmartVest System. However, once delivered to a patient who needs the SmartVest System, the patient is under no obligation to return the SmartVest System should payments be terminated because of the described contingencies. As a result, the Company’s product sales qualify for point-in-time revenue recognition. Control transfers to the patient, and revenue is recognized upon shipment or delivery of the SmartVest System. At this point, physical possession and the significant risks and rewards of ownership are transferred to the patient and either a current or future right to payment is triggered.

The Company’s contractually stated transaction prices in the homecare market are generally set by the terms of the contracts negotiated with insurance companies or by government programs. The transaction price for the Company’s products may be further impacted by variable consideration. ASC 606 requires the Company to adjust the transaction price at contract inception and throughout the contract duration for the estimated value of payments to be received from insurance payers based on historical experience and other available information, subject to the constraint on estimates of variable consideration. Transactions requiring estimates of variable consideration primarily include (i) capped installment payments, which are subject to the third-party payer’s termination due to changes in insurance coverage, death or the patient’s discontinued use of the SmartVest System, and (ii) patient responsibility amounts for deductibles, coinsurance, copays and other similar payments.

Although estimates may be made on a contract-by-contract basis, whenever possible, the Company uses all available information including historical collection patterns to estimate variable consideration for portfolios of contracts. For each type of variable consideration discussed above, there are many contracts with similar characteristics with a wide range of possible transaction prices. For that reason, the Company uses the probability-weighted expected value method provided under ASC 606 to estimate variable consideration. The Company’s estimates of variable consideration consist of amounts it may receive from insurance providers in excess of its initial revenue estimate due to patients meeting deductibles or coinsurance during the payment duration, changes to a patient’s insurance status, changes in an insurance allowable, and amounts received directly from patients for their allowable or coinsurance. The Company believes it has representative historical information to estimate the amount of variable consideration in relevant portfolios considering the significant experience it has with each portfolio and the similarity of patient accounts within a portfolio. The analysis includes steps to ensure that revenue recognized on a portfolio basis does not result in a material difference when compared with an individual contract approach. The Company also leverages its historical experience and all available relevant information for each portfolio of contracts to minimize the risk its estimates used to arrive at the transaction price will result in a significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is subsequently resolved. Historical payment trends for recovery of claims subject to payer installments and payments from patients have remained relatively consistent over the past five years. No significant changes in patient demographics or other relevant factors have occurred that would limit the predictive value of such payment trends in estimating variable consideration for current contracts. As a result, the Company believes its estimates of variable consideration are generally not subject to the risk of significant revenue reversal. Revenue recognized from performance obligations satisfied in prior periods due to changes in estimates of variable consideration was immaterial for the years ended June 30, 2025, and 2024, respectively.

The Company often receives payment from third-party payers for the SmartVest System sales that may exceed one year. Despite these extended payment terms, no significant financing component is deemed to exist because the purpose of such terms is not to provide financing to the patient, the payer or the Company. Rather, the extended payment terms are mandated by the government or commercial insurance programs, the fundamental purpose of which is to avoid paying the full purchase price of equipment that may potentially be used by the patient for only a short period of time.

Homecare Distributor, Hospital and Other markets. Sales within the homecare distributor, hospital, and other markets are primarily at fixed contract prices that are not subject to further adjustments for variable consideration. Limited sales within the homecare distributor and hospital markets may include tiered pricing structures or volume-based rebates which offer more favorable pricing once certain volumes are achieved per the negotiated contract. The distributor or hospital’s purchases accumulate to give a right to a higher discount on purchases in excess of the specified level within the contract period. As a result, to the extent the Company expects the distributor or hospital to exceed the specified volume of purchases in the annual period, it recognizes revenue at a blended rate based on estimated total annual volume and sales revenue. This effectively defers a portion of the transaction price on initial purchases below the specified volumes for recognition when the higher discount is earned on purchases in excess of specified volumes.

Sales to homecare distributors include the SmartVest system which is considered one performance obligation as described previously in the Homecare section. For our hospital and other customers, generators, hoses, and wraps (used in institutional and other settings rather than vests) are sold separately. Accordingly, each product is distinct and considered a separate performance obligation. Transfer of control of the products occurs upon shipment or delivery to the customer as applicable. Payment is made within normal credit terms, usually within 30 days.

In addition to outright sales, within the hospital market, the Company also enters into wrap usage agreements. Under these transactions, the Company provides a generator device at no cost to the hospital in return for a fixed annual commitment to purchase consumable wraps. These agreements are cancellable upon at least sixty days prior written notice by either party. If cancelled, the generator is returned to the Company, where it can be refurbished and used again later. Revenue for the consumable wraps is recognized when control transfers to the customer.

Product warranty. The Company offers warranties on its products. These warranties are assurance type warranties not sold on a standalone basis or are otherwise considered immaterial in the context of the contract and therefore are not considered distinct performance obligations under ASC 606. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the product is sold.

Contract costs. Costs related to products delivered are recognized in the period incurred, unless criteria for capitalization of costs under Accounting Standards Codification (“ASC”) 340-40, “Other Assets and Deferred Costs” (“ASC 340”), or other applicable guidance are met.

The Company includes shipping and handling fees in net revenues. Shipping and handling costs associated with the shipment of the SmartVest System or individual generators, hoses, and wraps after control has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues in the Statements of Operations.

Contract balances. The following table provides information about accounts receivable and contracts assets from contracts with customers:

As of June 30,

Total Accounts receivable, net of allowances for credit losses, as of June 30, 2023, were $24,130,000.

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Significant changes in contract assets during the period are as follows:

Year Ended Year Ended

Increase (decrease) Increase (decrease)

Note 3. Selected Balance Sheet Information

Inventory consists of the following:

Other assets consist of the following:

Capitalized software costs $ 952,000 $ -

Other accrued liabilities consist of the following:

Note 4. Property and Equipment

Property and equipment were as follows:

Estimated Useful As of June 30,

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Note 5. 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 $428,000 and $273,000 as of June 30, 2025, and 2024, respectively.

The Company assesses intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. If impairment indicators are present, the Company performs a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to these long-lived assets to their carrying value. Starting in the fourth quarter of fiscal 2025, we have ceased efforts to maintain or renew patents issued by jurisdictions outside of the United States and Mexico. The Company determined that the current carrying value of the international patents was not recoverable. An impairment charge of $212,000 was recorded during the year ended June 30, 2025. The impairment loss is included within selling, general, and administrative expenses within the Statement of Operations.

The activity and net balances of finite-life intangible assets were as follows:

Year Ended June 30,

Based on the carrying value as of June 30, 2025, future amortization is expected to be as follows:

Fiscal year ending June 30:

Note 6. Financing Arrangements

The Company has a credit facility that provides for a $2,500,000 revolving line of credit through December 18, 2025, if not renewed before such date. There was no outstanding principal balance on the line of credit as of June 30, 2025, or June 30, 2024. Interest on borrowings under the line of credit, if any, accrues at the prime rate (7.50% as of June 30, 2025) less 1.0% and is payable monthly. The amount eligible for borrowing on the line of credit is limited to the lesser of $2,500,000 or 57.0% of eligible accounts receivable and the line of credit expires on December 18, 2025, if not renewed before such date. As of June 30, 2025, the maximum $2,500,000 was eligible for borrowing. Payment obligations under the line of credit, if any, are secured by a security interest in substantially all of the tangible and intangible assets of the Company.

The documents governing the line of credit contain certain financial and nonfinancial covenants that 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.

Note 7. Common Stock

Authorized shares: The Company’s Articles of Incorporation, as amended, have established 15,000,000 authorized shares of capital stock consisting of 13,000,000 shares of common stock, par value $0.01 per share, and 2,000,000 shares of undesignated stock.

On September 11, 2024, the Company announced the approval of a stock repurchase authorization. Under the authorization, the Company could repurchase up to $5,000,000 of shares of common stock. A total of 280,017 shares were repurchased and retired under this authorization for a total cost of $5,000,000, or $ 17.86 per share. This repurchase authorization has been exhausted in its entirety.

On March 6, 2025, the Company announced the approval of a new stock repurchase authorization. Under the new authorization, the Company could repurchase up to $5,000,000 shares of common stock. A total of 220,899 shares were repurchased and retired under this authorization for a total cost of $5,000,000, or 22.63 per share. This repurchase authorization has been exhausted in its entirety.

Repurchased shares are automatically retired and constitute authorized but unissued shares.

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Note 8. Share-Based Compensation

Share-based compensation expense for fiscal 2025 and 2024 was $3,059,000 and $1,692,000, respectively, related to employee stock options, performance-based awards, restricted stock units and restricted stock awards. This expense is included in selling, general and administrative, research and development, and cost of sales expense in the Condensed Statements of Operations. As of June 30, 2025, the Company had $1,351,000 of unrecognized compensation expense related to non-vested equity awards, which is expected to be recognized over a weighted-average period of 2.01, 2.23 and 2.01 years related to restricted stock awards, restricted stock units, and employee stock options, respectively.

Equity plans: In November 2023, the Company’s shareholders approved the 2023 Equity Incentive Plan (the “2023 Plan”) which superseded the 2017 Omnibus Incentive Plan (the “2017 Plan”) and the 2014 Equity Incentive Plan (the “2014 Plan”). The 2023 Plan allows the Board to grant stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards, as well as cash incentive awards to all employees, non-employee directors, and advisors or consultants of the Company. The vesting schedule and term for each award are determined by the Board upon each grant. Upon vesting, and the Company’s determination that any necessary conditions precedent to the exercise of shares (such as satisfaction of tax withholding and compliance with applicable legal requirements) have been satisfied, shares purchased are delivered to the participant in a manner prescribed or permitted by the Board. The maximum number of shares of common stock available for issuance under the 2023 Plan is (i) 850,000 new shares of common stock, (ii) up to 192,018 shares of common stock that remained available for issuance under the 2017 Plan as of the approval date of the 2023 Plan, and (iii) up to 360,856 shares of common stock that were subject to outstanding awards under the 2017 Plan as of the approval date of the 2023 Plan, which shares will be available for future grants under the 2023 Plan to the extent that, on or after the approval date of the 2023 Plan, such awards expire, are cancelled, are forfeited or are settled for cash. There were 868,331 shares available for grant under the 2023 Plan as of June 30, 2025.

Employee options: The Company has historically granted stock options to employees as long-term incentive compensation. Options expire ten years from the grant date and typically vest over a period of three years. There were 366,847 options granted under the 2017 Plan and prior plans outstanding as of June 30, 2025. There were 175,000 options granted as a standalone inducement outstanding as of June 30, 2025. There were 63,532 options issued under the 2023 Plan outstanding as of June 30, 2025.

The Company recognizes compensation expenses related to share-based payment transactions in the financial statements based on the estimated fair value of the award issued. The fair value of each option is estimated using the Black-Scholes pricing model at the time of award grant. The Company estimates the expected life of options based on the expected holding period by the option holder. The risk-free interest rate is based upon observed U.S. Treasury interest rates for the expected term of the options. The Company makes assumptions with respect to expected stock price volatility based upon the historical volatility of its stock price. Forfeitures are accounted for as they occur.

The following assumptions were used to estimate the fair value of options granted:

Year Ended June 30,

Expected term (years) 6 6

Expected volatility 53 % 51 - 52 %

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The following table presents employee stock option activity for fiscal 2025 and 2024:

Weighted-

Weighted- Average

Average Weighted- Remaining

Number of Grant Date Average Contractual

Shares Fair Value Exercise Price Life (in Years)

The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds its exercise price. At June 30, 2025, the weighted average remaining contractual term for all outstanding stock options was 6.16 years and their aggregate intrinsic value was $7,412,000. Outstanding at June 30, 2025 were 605,379 stock options issued to employees, of which 417,551 were vested and exercisable and had an aggregate intrinsic value of $5,711,000.

Restricted stock: The 2023 Plan permits the Personnel and Compensation Committee of the Board to grant other stock-based awards, including shares of restricted stock. The Company makes restricted stock grants to key employees and non-employee directors that vest over six months to three years following the applicable grant date.

The Company issued restricted stock awards to employees consisting of 21,400 and 23,428 shares of common stock during fiscal 2025 and 2024, respectively, with vesting terms of three years and fair values of $17.25 and $10.74 per share, respectively. The Company issued restricted stock awards to directors consisting of 21,000 shares of common stock during fiscal 2025 and 2024, with vesting terms of six months and fair values of $30.78 and $10.44 per share, respectively. Restricted stock transactions during the years ended June 30, 2025, and 2024 are summarized as follows:

Weighted-Average

Shares of Grant Date Fair

Restricted Stock Value per Share

Canceled or forfeited — $ —

Canceled or forfeited — $ —

Restricted stock units: The Company issued restricted stock units to employees during fiscal 2025 consisting of opportunities to receive up to 69,102 shares of common stock upon vesting, with vesting terms of three years and a weighted average fair value of $17.96 per share. Restricted stock unit transactions during the years ended June 30, 2025, and 2024 are summarized as follows:

Weighted-Average

Shares Underlying Grant Date Fair

Restricted Stock Units Value per Share

Unvested units outstanding as of June 30, 2023 — $ —

Granted — $ —

Vested — $ —

Canceled or forfeited — $ —

Unvested units outstanding as of June 30, 2024 — $ —

Vested — $ —

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Performance-based restricted stock units: The Company granted 175,000 performance-based restricted stock units (“PSUs”) to our President and Chief Executive Officer in connection with his commencement of service on July 1, 2023. The PSUs were eligible to vest and settle into shares of common stock based on the extent to which performance goals tied to the total shareholder return of our common stock (“TSR”) were achieved. TSR was evaluated from the initial grant date through the end of each subsequent fiscal quarter using the three-month volume-weighted average closing prices in accordance with the underlying award agreement. The PSUs were eligible to vest and settle into shares of common stock on a 1-for-1 basis with respect to one-half of the shares upon achieving a TSR of 50% and the remaining shares upon a TSR of 100%, in each case within four years of the date of grant. The grant date fair value of the awards was determined using a Monte Carlo valuation model with an expected term of four years. As of September 30, 2024, TSR exceeded the 50% target, resulting in a partial vesting and the issuance of 87,500 shares of common stock. As of December 31, 2024, TSR exceeded the 100% target, resulting in vesting and issuance of the remaining 87,500 shares of common stock.

As a result of both vestings, unrecognized stock-based compensation expense totaling $575,000, which was set to be recognized in future periods, was recognized during the year ended June 30, 2025. Stock-based compensation expense recognized for the PSUs was $863,000 and $288,000 for the years ended June 30, 2025, and June 30, 2024, respectively. As a result of the vestings and settlements described above, there were no PSUs outstanding as June 30, 2025.

Note 9. Income Taxes

Components of the provision for income taxes were as follows:

Year Ended June 30,

Current:

Deferred:

Actual income tax expense differs from the expected tax expense, computed by applying the statutory federal income tax rate to the Company’s earnings before income taxes, as follows:

Year Ended June 30,

State income tax expense, net of federal tax effect 459,000 369,000

Non-deductible officer compensation 897,000 —

The effective tax rates for fiscal 2025 and 2024 were 26.7% and 26.8%, respectively.

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The significant components of deferred income taxes were as follows:

As of June 30,

Deferred tax assets:

Revenue recognition and accounts receivable reserves $ 1,247,000 $ 1,298,000

Deferred tax liabilities:

The Company has research and development state tax credit carryforwards, net of federal tax impacts, of $205,000 and $204,000 as of June 30, 2025, and June 30, 2024, respectively. Based on the historical use of the credits, management believes it is more likely than not these credits will begin to expire unused between fiscal years 2026 and 2038. As of June 30, 2025, and June 30, 2024, the Company had a valuation allowance of $205,000 and $204,000, respectively, related to its research and development state tax carryforwards.

The Company’s effective tax rates for the fiscal years ended June 30, 2025, and 2024 differ from its 21% U.S. statutory corporate tax rate due to the impact of state income taxes, permanent tax differences, the tax impact of the vesting of restricted stock units, and changes in the Company’s deferred tax asset valuation allowance. The effective tax rate in any year or quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The effective income tax rate for the fiscal years ended June 30, 2025, and 2024 were 26.7% and 26.8%, respectively.

The Company applies the accounting standard for uncertain tax positions pursuant to which a more-likely-than-not threshold is utilized to determine the recognition and derecognition of uncertain tax positions. Once the more-likely-than-not threshold is met, the amount of benefit to be recognized is the largest amount of tax benefit that is greater than 50 percent likely of being ultimately realized upon settlement. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such a change. The Company does not believe that it has any material uncertain tax positions as of June 30, 2025, and June 30, 2024.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. With limited exceptions, the Company is no longer subject to federal and state income tax examinations by tax authorities for fiscal year ended prior to June 30, 2022. The Internal Revenue Service has completed its examination of the Company’s U.S. federal income tax return for the fiscal year ended June 30, 2022, without proposing any adjustments. The Company is not under any current income tax examinations by any other state or local taxing authority. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

The One, Big, Beautiful Bill Act (the “Act”) was signed into law on July 4, 2025. The Act contains tax law changes with various effective dates affecting business taxpayers. Among the tax law changes were provisions that would impact the Company related to the timing of certain tax deductions including depreciation expense, research and development expenditures, and interest expense. The Company will implement the tax law changes in the first quarter of fiscal 2026. The Company does not anticipate any material impacts to its overall tax expense; however, we do expect a reclassification between current and deferred tax expense.

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Note 10. Leases

The Company has leases for office and warehouse space and office equipment that require monthly payments. These leases have payments ranging from $1,000 to $6,000 per month which expire through June 2028 and are recognized on a straight-line basis over the life of the lease. All leases are classified as operating leases which do not include renewal options. The Company currently does not have any variable lease costs. The Company elected the practical expedient to calculate the present value of the fixed payments without having to perform an allocation to lease and non-lease components.

In June 2025, the Company modified its operating lease in California, extending the term for another three years. As a result of the lease modification, the Company obtained an additional right-of-use asset in exchange for new operating lease liabilities in the amount of $190,000. The additional right-of-use asset in exchange for new operating lease liabilities represents non cash investing and financing activities, which have been excluded from the Statement of Cash Flows. These amounts are present on the Company's balance sheet in other assets, accrued liabilities and other long-term liabilities.

The Company has recognized total right of use assets associated with its operating leases of $198,000 and $87,000 as of June 30, 2025, and June 30, 2024, respectively, which is included in other assets on the Company’s balance sheet. Operating lease liabilities were $198,000 and $87,000 as of June 30, 2025, and June 30, 2024, respectively, which are included in other accrued liabilities and other long-term liabilities on the Company’s balance sheet.

As of June 30, 2025, and June 30, 2024, the Company had a weighted-average lease term of 2.9 and 1.1 years, respectively, for its operating leases, which had a weighted-average discount rate of 6.4% and 4.0%, respectively. Operating lease payments of $81,000 are included in operating cash flows in fiscal 2025.

Maturities of lease liabilities, which are included in other accrued liabilities and other long-term liabilities on the Balance Sheet, are as follows:

Fiscal years ending June 30:

Present value of lease liabilities $ 198,000

Note 11. Earnings Per Common Share ("EPS")

The computations of basic and diluted EPS amounts were as follows:

Year Ended June 30,

Weighted-average common shares outstanding:

Earnings per common share:

Common stock equivalents excluded from the calculation of diluted earnings per share because their impact was anti-dilutive were 52,146 and 288,792 shares for fiscal 2025 and 2024, respectively.

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Note 12. Commitments and Contingencies

Litigation: The Company is occasionally involved in claims and disputes arising in the ordinary course of business. The Company insures certain 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.

401(k) Profit Sharing Plan: The Company has an employee benefit plan under Section 401(k) of the Internal Revenue Code covering all employees who are 21 years of age or older. The Company matches each employee’s salary reduction contribution, not to exceed four percent of annual compensation. Total employer contributions to this plan for fiscal 2025 and 2024 were $743,000 and $598,000, respectively.

Employment Agreements: The Company is party to employment agreements with its President and Chief Executive Officer and its Chief Financial Officer, as may be amended from time to time. These agreements provide these officers with, among other things, twelve months of base salary upon a termination of employment without “Cause” or in the event the employee resigns for “Good Reason.” The employment agreements also provide these officers with, among other things, increased severance payments in connection with a termination that occurs within twelve months of a “Change in Control,” as defined in the respective employment agreements.

Note 13. Related Parties

The Company uses a parts supplier whose founder and president was a director of the Company through November 12, 2021. The former director has remained a beneficial owner of greater than 5% of the Company’s outstanding common stock through June 30, 2025. The Company made payments to the supplier of $1,377,000 and $2,051,000 during fiscal years 2025 and 2024, respectively. Amounts due to the supplier were $508,000 and $18,000 on June 30, 2025, and June 30, 2024, respectively, which were included in accounts payable and other accrued liabilities on the Balance Sheets.

Note 14. Segment Reporting

We have determined that we have a single reportable and operating segment structure. Our President and Chief Executive Officer is our chief operating decision maker (“CODM”). The CODM reviews financial information, including long-lived assets, presented on a consolidated basis, accompanied by information about revenue by market, for purposes of allocating resources and evaluating financial performance. Furthermore, the CODM uses consolidated net income (loss) as the measure of our sole segment’s profit or loss. Significant segment expenses are those expenses reported in the Consolidated Statement of Operations. We have a single active product and engage in the single business activity of selling and supporting that single product. There are no managers who are held accountable for operations, operating results or plans for levels or components below the consolidated level. We and our CODM evaluate our performance based on revenue from our single product in the markets in which the Company operates and consolidated net income (loss), which is reflected in the Consolidated Statement of Operations. Revenue by market is described above in Note 2.

Note 15. Subsequent Events

The Company evaluates, as of each reporting period, events or transactions that occur after the balance sheet date through the date the financial statements are issued for either disclosure or adjustment to the Company’s financial results. There have been no events subsequent to June 30, 2025, which would require recognition in the Financial Statements or Notes to the Financial Statements.

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None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period subject to this Annual Report on Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting refers to the process designed by, or under the supervision of, our President and Chief Executive Officer and our Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of preventing and detecting misstatements on a timely basis. It is possible to design into the process safeguards to reduce, though not eliminate, the risk that misstatements are not prevented or detected on a timely basis. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management has concluded that, as of June 30, 2025, our internal control over financial reporting was effective.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that exempt smaller reporting companies from the auditor attestation requirement.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 9B. Other Information.

During the three months ended June 30, 2025, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Certain information required by Part III is incorporated by reference from our definitive Proxy Statement for the annual meeting of shareholders to be held in 2025 (the “Proxy Statement”). Except for those portions specifically incorporated in this Annual Report on Form 10-K by reference to the Proxy Statement, no other portions of the Proxy Statement are deemed to be filed as part of this Annual Report on Form 10-K.

Item 10. Directors, Executive Officers and Corporate Governance.

Information about our Executive Officers

The following sets forth certain information about our current executive officers:

James L. Cunniff, age 60, joined Electromed in July 2023 as the Company’s President and Chief Executive Officer. Prior to joining Electromed, Mr. Cunniff most recently served as President and Chief Executive Officer of Provista Inc., from 2017 to May 2022. Previously, he served as President and Chief Executive Officer at Denver Solutions, LLC (d/b/a Leiters Health) from 2015 to 2017 and as Senior Vice President, Americas, at Acelity L.P. Inc., from 2012 to 2014. Mr. Cunniff holds a bachelor’s degree in advertising and business from the University of Illinois Urbana-Champaign and has completed the Advanced Management Program at Harvard Business School.

Bradley M. Nagel, age 43, joined Electromed in November 2022 as the Company’s Chief Financial Officer, Treasurer and Secretary. Prior to joining Electromed, Mr. Nagel most recently served as Divisional Chief Financial Officer of Global Lung Health and Visualization at Medtronic plc from June 2018 to November 2022. Previously, he served at Medtronic as Sr. Manager, Accounting and Sales Operations from 2016 to June 2018 and Accounting Manager from 2015 to 2016. Before joining Medtronic, Mr. Nagel held various roles of increasing responsibility in sales, operations and accounting at Target Corporation and TCF Financial Corporation. Mr. Nagel holds a bachelor’s degree in business & finance from Calvin University.

Code of Ethics

Our Board annually reviews and approves revisions to our Code of Ethics and Business Conduct (the “Code of Ethics”) that applies to all employees, directors, and officers, including the Chief Executive Officer and the Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer). The Code of Ethics is available in the “Investor Relations” section of our website at www.smartvest.com. We intend to disclose on our website any amendment to or waiver from any provision of the Code of Ethics that applies to our Chief Executive Officer or our Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), and that relates to any element of the Code of Ethics identified in Item 406(b) of Regulation S-K, as promulgated by the SEC. Such disclosure will be provided promptly following the date of the amendment or waiver. We are not including the information contained on our website as part of, or incorporating it by reference into, this report or any other filing or document submitted to the SEC.

The additional information required by this item is incorporated herein by reference to the sections labeled “Election of Directors,” “Corporate Governance,” “Security Holder Communications to the Board of Directors,” “Security Ownership Certain Beneficial Owners and Management” and, if any, under “Delinquent Section 16(a) Reports” in the Proxy Statement.

Insider Trading Policy

We have adopted an Insider Training Policy governing the purchase, sale and /or other dispositions of our securities by directors, officers and employees. Our Insider Training Policy is filed as Exhibit 19.

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Item 11. Executive Compensation.

The information required by this item is incorporated herein by reference to the sections labeled “Executive Compensation,” “Director Compensation,” and “Corporate Governance – Personnel and Compensation Committee” in the Proxy Statement.

The information required by this item relating to the security ownership of certain holders is incorporated herein by reference to the sections labeled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement.

The information required by this item is incorporated herein by reference to the sections labeled “Corporate Governance” and “Certain Relationships and Related-Party Transactions” in the Proxy Statement.

Item 14. Principal Accountant Fees and Services.

Our independent registered public accounting firm is RSM US LLP, Minneapolis, MN.

The information required by this item is incorporated herein by reference to the subsections labeled “Audit Fees” and “Audit Committee Pre-Approval” under the “Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm” heading in the Proxy Statement.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Documents filed as part of this report.

● Report of Independent Registered Public Accounting Firm, PCAOB ID: 49

● Statements of Operations for the years ended June 30, 2025, and 2024

● Statements of Shareholders’ Equity for the years ended June 30, 2025, and 2024

● Statements of Cash Flows for the years ended June 30, 2025, and 2024

● Notes to Financial Statements

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Exhibit Number Description Method of Filing

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Exhibit Number Description Method of Filing

10.21 Description of Fiscal Year 2026 Officer Bonus Plan* Filed Electronically

24.1 Powers of Attorney Filed Electronically

* Management compensatory contract or arrangement.

Item 16. Form 10-K Summary.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ELECTROMED, INC.

Date: August 26, 2025 By /s/ James L. Cunniff

James L. Cunniff

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

James L. Cunniff (principal executive officer)

/s/ Bradley M. Nagel Chief Financial Officer August 26, 2025

Bradley M. Nagel (principal financial and accounting officer)

Stan K. Erickson

Gregory J. Fluet

Joseph L. Galatowitsch

Kathleen S. Skarvan

Andrew J. Summers

Kathleen A. Tune

Andrea M. Walsh

By /s/ James L. Cunniff

James L. Cunniff

Attorney-in-Fact

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