Electromed, Inc.

Condensed Balance Sheets

See Notes to Condensed Financial Statements (Unaudited).

Condensed Statements of Operations (Unaudited)

See Notes to Condensed Financial Statements (Unaudited).

Condensed Statements of Cash Flows (Unaudited)

See Notes to Condensed Financial Statements (Unaudited).

Condensed Statements of Shareholders’** Equity (Unaudited)**

Notes to Condensed Financial Statements

(Unaudited)

Note1. Interim Financial Reporting

**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.

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

Basis of presentation:The accompanying unaudited Condensed Financial Statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. In the opinion of management, the accompanying unaudited Condensed Financial Statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations as required by Regulation S-X. Interim results of operations arenot necessarily indicative of the results that maybe achieved for the full year. The financial statements and related notes donot include all information and footnotes required by U.S. GAAP for annual reports. This interim report should be read in conjunction with the financial statements included in the Company’s Annual Report on Form10-K for the fiscal year ended June 30, 2025 (“fiscal2025”).

A summary of the Company’s significant accounting policies and estimates:

Our significant accounting policies are detailed in Note1. Nature of Business and Summary of Significant Accounting Policies of the Annual Report on Form10-K for the year ended* June 30, 2025.There have beenno* significant changes to these policies that have had a material impact on the Unaudited Condensed Financial Statements and the accompanying disclosure notes for thethree andnine months ended* March 31, 2026*.

Recently Issued Accounting Standards

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 expects to adopt this standard for its fiscal year ending June 30, 2026.Except for the required expanded disclosures, the Company doesnot* expect the adoption of this ASU to have a material effect on the consolidated financial statements.

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 expects to adopt this standard for its fiscal year ending June 30, 2028,*and is evaluating the impact of adoption and additional disclosure requirements.

ASU2025*-06* -Intangibles - Goodwill and Other - Internal Use Software

The standard modernizes the accounting for software costs that are accounted for under Subtopic350-40. It is effective for annual reporting periods beginning after* December 15, 2027,and for interim periods within those annual reporting periods, with early adoption permitted. The Company expects to adopt this standard for its fiscal year ending June 30, 2029,*and is evaluating the impact of adoption and additional disclosure requirements.

Management has evaluated other recently issued accounting pronouncements and doesnot believe that any of these pronouncements will have a significant impact on the Company’s financial statements and related disclosures.

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Note2. Revenues

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.** *Estimates of variable consideration primarily relate to capped installment payment arrangements with third‑party payers and patient responsibility amounts, including deductibles, coinsurance, copayments, and similar amounts. Estimating variable consideration requires significant judgement, including selecting estimation methodologies, evaluating historical payment experience, and assessing factors that may*affect future collections. Electromed estimates variable consideration using the expected value method, as it best predicts the amount of consideration to which Electromed expects to be entitled, given the large number of contracts with similar characteristics and a wide range of possible outcomes. In applying this method, management considers quantitative inputs such as historical claims approval rates, payment timing and recovery patterns, historical termination experience, and patient demographic data, as well as qualitative factors including changes in insurance coverage, mortality, patient utilization patterns, and other relevant circumstances.

Capped installment payment arrangements represent the majority of Electromed’s variable consideration. For the periods presented, amounts subject to capped installment payment arrangements represented a significant portion of net revenues, accounting for approximately 96% of net revenues in the homecare market. Electromed’s estimates of consideration related to these arrangements are based on historical payment and termination patterns and are subject to contractual caps that limit the total consideration to which Electromed* may*be entitled.

When a contract with a customer has been established, revenue is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer, typically upon shipment or delivery.

**Disaggregation of revenues.**In the following table, net revenues are disaggregated by market:

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

**Contract balances.**The following tables provide information about accounts receivable and contract assets from contracts with customers:

Total Accounts receivable, net of allowances for credit losses, as of* June 30, 2024*, were $23,333,000. Accounts receivable outstanding for greater thanone year totaled $473,000 and $430,000 as of* March 31, 2026,and June 30, 2025,respectively. Our accounts receivable balance contains amounts due from governmental and otherthird*-party payers, including Medicare. Under certain payer programs, cash collection occurs through interim payments and final settlement over a period greater thanone year, generally approximatingthirteen months. The Company has determined that this collection period represents its normal operating cycle. In accordance with ASC210‑10‑45, the Company classifies these receivables as current assets.

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Note3. Selected Balance Sheet Information

Inventory consists of the following:

Other assets consist of the following:

Other accrued liabilities consist of the following:

Note4. Warranty Reserve

The Company provides a lifetime warranty on its products to the prescribed patient for sales within the U.S. and aone- tofive-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 periodically assesses the adequacy of its recorded warranty reserve and adjusts the amounts as necessary.

Changes in the Company’s warranty reserve were as follows:

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Note5. Income Taxes

Income tax expense was estimated at $863,000 and $2,499,000, and the effective tax rate was 22.3% and 24.0% for thethree andnine months ended* March 31, 2026*. Estimated income tax expense for thethree andnine months ended* March 31, 2026*, includes a discrete current tax benefit of $94,000 and $197,000, respectively, primarily related to the windfall tax benefit of vested stock awards, the exercise of stock options, and the true up for the prior year Federal R&D credit.

Income tax expense was estimated at $391,000 and $1,776,000, and the effective tax rate was 17.1% and 25.0% for thethree andnine months ended* March 31, 2025*. Estimated income tax expense for thethree andnine months ended* March 31, 2025*, includes a discrete current tax benefit of $338,000 and $478,000, respectively, primarily related to the exercise of stock options.

The Company is subject to U.S. federal and state income tax in multiple jurisdictions. With limited exceptions, years prior to the Company’s fiscal year ended* June 30,2023,are no longer open to U.S. federal, state or local examinations by taxing authorities. The Company isnot* under any current income tax examinations by any federal, state or local taxing authority. If any issues addressed in the Company’s tax audits are resolved in a mannernot consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

On* July 4, 2025,the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S. law. This legislation primarily modifies certain provisions of the2017* Tax Cuts and Jobs Act. The Company has determined that the most significant impact of the OBBBA relates to the deductibility of U.S.-based research and experimental expenditures.

Under the new law, taxpayers* mayelect to either expense or amortize domestic research expenditures incurred in tax years beginning after December 31, 2024.Additionally, for expenditures incurred in prior years (i.e., after December 31, 2021,and before January 1, 2025),the legislation permits an election to accelerate the remaining deductions over either aone*-year period (2026) or atwo-year period (2026 and2027).

The Company anticipates it will elect to accelerate the remaining deductions over aone-year period (2026). The expected reduction of cash paid for taxes is estimated to be approximately $428,000 in2026.

Note6. Financing Arrangements

On* December 16, 2025,the Company entered into a credit agreement with BMO Bank N.A. The credit agreement provides the Company with a senior secured credit facility with a $10,000,000 revolving line of credit. The credit agreement provides that the credit facility will mature on December 16, 2026,ifnot* renewed or replaced before such date. Any borrowings under the credit facility will bear interest at the applicableone-month Term SOFR rate (3.67% on* March 31, 2026),plus 1.75%, payable monthly. There wasno outstanding principal balance on the line of credit as of March 31, 2026.The Company provided afirst* priority security interest in substantially all of its existing and future assets to secure the payment obligations under the credit agreement. In connection with the execution of the BMO Bank N.A. credit facility, the Company allowed its existing credit facility with Choice Financial Group to expire on its terms, effective* December 18, 2025.*

The documents governing the credit facility contain certain customary financial and non-financial covenants that include a maximum total funded debt ratio ofnot more than 2.50x and a minimum fixed charge coverage ratio of at least 1.20x (as each such term is defined in the credit agreement), as well as restrictions on the Company's ability to incur certain additional indebtedness.

Note7. 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 9, 2025,the Company announced the approval of a stock repurchase authorization. Under the authorization, the Company mayrepurchase up to $10,000,000 of its outstanding shares of common stock. This repurchase authorization hasno* expiration date. As of* March 31, 2026*, a total of 151,911 shares have been repurchased and retired under this authorization for a total cost of $3,918,000, or an average of $25.79 per share.

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

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Note8. Share-Based Compensation

The Company’s share-based compensation plans are described in Note8 to the financial statements included in the Company’s Annual Report on Form10-K for fiscal2025. Share-based compensation expenses were $1,960,000 and $2,409,000 for thenine months ended* March 31, 2026*, and2025, respectively. This expense is included in selling, general and administrative, research and development, and cost of revenues in the Condensed Statements of Operations.

Stock Options

Stock option transactions during thenine months ended* March 31, 2026*, are summarized as follows:

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

The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. On* March 31, 2026*, the weighted-average remaining contractual term for all outstanding stock options was 5.7 years, and the aggregate intrinsic value of the options was $7,906,000. Outstanding on* March 31, 2026*, there were 632,151 stock options issued to employees, of which 446,848 were vested and exercisable and had an aggregate intrinsic value of $6,518,000. As of* March 31, 2026*, $677,000 of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of approximately 2.1 years.

Restricted Stock

During thenine months ended* March 31, 2026*, the Company issued restricted stock awards to employees totaling 22,300 shares of common stock, with a weighted average vesting term of 3 years and a weighted average fair value of $23.95 per share. During thenine months ended* March 31, 2026*, the Company issued restricted stock awards to its Board of Directors totaling 21,000 shares of common stock, with a vesting term ofsix months and a fair value of $27.42 per share. There were 65,374 shares of unvested restricted stock with a weighted average fair value of $22.02 per share outstanding as of* March 31, 2026*. As of* March 31, 2026*, $636,000 of total unrecognized compensation expense related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.6 years.

During thenine months ended* March 31, 2026*, the Company issued restricted stock units to employees totaling 58,548 shares of common stock underlying restricted stock units, with a weighted average vesting term of 3 years and a weighted average fair value of $24.01 per share. During thenine months ended* March 31, 2026*, there were 8,073 restricted stock units canceled or forfeited. There were 94,891 shares of unvested restricted stock units with a weighted average fair value of $21.30 per share outstanding as of* March 31, 2026*. As of* March 31, 2026*, $1,109,000 of total unrecognized compensation expense related to restricted stock units is expected to be recognized over a weighted-average period of approximately 2.3 years.

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 Total Shareholder Return (“TSR”) of our common stock were achieved. TSR was evaluated from the initial grant date through the end of each subsequent fiscal quarter using thethree*-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 a1-for-1 basis with respect toone-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 offour years. As of* September 30, 2024,TSR exceeded the 50% target, resulting in a partial vesting and the issuance of an initial 87,500 shares of common stock to our CEO. As of December 31, 2024,TSR exceeded the 100% target, resulting in the vesting of the remaining 87,500 shares of common stock. As a result of both vesting, unrecognized stock-based compensation expense totaling $648,000 was recognized in thenine* months ended* March 31, 2025,*which was set to be recognized in future periods.

There wereno performance-based restricted stock units issued or outstanding during thenine months ended* March 31, 2026.*

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Note9. Commitments and Contingencies

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.

Note10. Segment Reporting

We have determined that we have asingle 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 Statements of Operations. We have a single active product and engage in the single business activity of selling and supporting that single product. There areno 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 Statements of Operations. Revenue by market is described above in Note2.

Note11. Earnings Per Common Share (“EPS”)

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

Common stock equivalents excluded from the calculation of diluted earnings per share because their impact was anti-dilutive were 56,030 and 3,196 for thethree months ended* March 31, 2026*, and2025, respectively, and were 43,592 and 47,971 for thenine months ended* March 31, 2026,and2025*, respectively.

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