What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-11-12 compared with 2025-05-13 · 132 added, 207 removed, 323 unchanged (51% of the section changed)

2 unchanged sentences

Condensed Balance Sheets

March 31, 2025

September 30, 2025

June 30, 2025

8 unchanged sentences

Income tax receivable

206,000 408,000

Prepaid expenses and other current assets

16 unchanged sentences

2,731,000 5,079,000

Income tax payable

Warranty reserve

5 unchanged sentences

Other long-term liabilities

110,000 125,000

Total liabilities

2 unchanged sentences

Common stock, $ 0.01 par value per share, 13,000,000 shares authorized;

8,509,619 and 8,637,883 shares issued and outstanding, as of March 31, 2025, and June 30, 2024, respectively

8,356,847 and 8,349,176 shares issued and outstanding, as of September 30, 2025, and June 30, 2025, respectively

84,000 83,000

11 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cost of revenues

12 unchanged sentences

Condensed Statements of Cash Flows (Unaudited)

Nine Months Ended March 31,

Three Months Ended September 30,

Cash Flows From Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of finite-life intangible assets

Share-based compensation expense

Deferred income taxes

Changes in operating assets and liabilities:

14 unchanged sentences

Repurchase of common stock

Net cash (used for) provided by financing activities

Net (decrease) increase in cash

Net cash used for financing activities

Net decrease in cash

Cash and cash equivalents

5 unchanged sentences

Property and equipment and intangible asset acquisitions in accounts payable

Taxes owed on net share settlement of stock awards in accrued liabilities

Demonstration equipment transferred between inventory and property and equipment

Issuance of common stock upon the vesting of performance-based stock units

Option exercise proceeds in other assets

Obligation for unsettled share repurchases in accrued liabilities

See Notes to Condensed Financial Statements (Unaudited).

3 unchanged sentences

Balance at June 30, 2024

Exercise of common stock options and issuance of restricted stock, net of cancellations and tax withholdings

Exercise of common stock options, vesting of performance stock units and issuance of restricted stock, net of cancellations and tax withholdings

Share-based compensation expense

Repurchase of common stock

Balance at September 30, 2024

Exercise of common stock options and issuance of restricted stock, net of cancellations and tax withholdings

Share-based compensation expense

Balance at December 31, 2023

Exercise of common stock options and issuance of restricted stock, net of cancellations and tax withholdings

Share-based compensation expense

Balance at March 31, 2024

Shareholders’

Balance at June 30, 2025

Exercise of common stock options, vesting of performance stock units and issuance of restricted stock, net of cancellations and tax withholdings

Exercise of common stock options, vesting of restricted stock units, and issuance of restricted stock awards, net of cancellations and tax withholdings

Share-based compensation expense

1 unchanged sentence

Balance at September 30, 2025

Exercise of common stock options, vesting of performance stock units and issuance of restricted stock, net of cancellations and tax withholdings

Share-based compensation expense

Repurchase of common stock

Balance at December 31, 2024

Exercise of common stock options, net of cancellations and tax withholdings

Share-based compensation expense

Repurchase of common stock

Balance at March 31, 2025

Electromed, Inc.

20 unchanged sentences

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

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.

Our other significant accounting policies are detailed in Note 1.

Our significant accounting policies are detailed in Note 1.

Nature of Business and Summary of Significant Accounting Policies of the Annual Report on Form 10 -K for the year ended June 30, 2025.

There have been no significant changes to these policies that have had a material impact on the Unaudited Condensed Financial Statements and the accompanying disclosure notes for the three and nine months ended March 31, 2025 .

Recently Issued Accounting Standards

ASU 2023 - 07 - Segment Reporting (Topic 280 ):

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 currently expects to adopt this standard for its fiscal year ending June 30, 2025.

Adoption of the standard is not expected to have a material impact on the financial statements.

ASU 2023 - 09 - Income Taxes (Topic 740 ):

2 unchanged sentences

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.

The Company expects to adopt this standard for its fiscal year ending June 30, 2026, and is evaluating the impact of adoption and additional disclosure requirements.

ASU 2024 - 03 - Reporting Comprehensive Income :

2 unchanged sentences

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.

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.

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.

2 unchanged sentences

In the following table, net revenues are disaggregated by market:

Three Months Ended March 31,

Nine Months Ended March 31,

$ 14,102,000 $ 12,287,000 $ 41,906,000 $ 36,108,000

724,000 783,000 2,137,000 1,909,000

Three Months Ended September 30,

Homecare distributor

696,000 524,000 2,090,000 1,377,000

162,000 277,000 474,000 490,000

$ 15,684,000 $ 13,871,000 $ 46,607,000 $ 39,884,000

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

Three Months Ended March 31,

Nine Months Ended March 31,

$ 7,151,000 $ 5,974,000 $ 21,329,000 $ 17,684,000

5,126,000 4,825,000 15,371,000 13,666,000

Three Months Ended September 30,

Medicare Supplemental

1,314,000 1,177,000 3,813,000 3,447,000

238,000 115,000 676,000 722,000

273,000 196,000 717,000 589,000

$ 14,102,000 $ 12,287,000 $ 41,906,000 $ 36,108,000

Contract balances.

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

March 31, 2025

June 30, 2024

As of September 30, 2025

As of June 30, 2025

Receivables, included in “Accounts receivable, net of allowances for credit losses”

$ 23,442,000 $ 23,333,000

Contract Assets

$ 1,124,000 $ 719,000

Total Accounts receivable, net of allowances for credit losses, as of June 30, 2024 , were $ 23,333,000 .

Nine Months Ended

Three Months Ended

Fiscal Year Ended

March 31, 2025

September 30, 2025

June 30, 2025

Increase (decrease)

Contract assets, beginning

$ 719,000 $ 487,000

Reclassification of contract assets to accounts receivable

( 2,166,000 ) ( 2,325,000 )

Contract assets recognized

2,355,000 2,840,000

Increase (decrease) as a result of changes in the estimate of amounts to be realized from payers, excluding amounts transferred to receivables during the period

216,000 ( 283,000 )

Increase as a result of changes in the estimate of amounts to be realized from payers, excluding amounts transferred to receivables during the period

Contract assets, ending

$ 1,124,000 $ 719,000

Selected Balance Sheet Information

Inventory consists of the following:

March 31, 2025

June 30, 2024

As of September 30, 2025

As of June 30, 2025

Parts inventory

$ 1,805,000 $ 2,556,000

Work in process

249,000 454,000

Finished goods

782,000 834,000

Estimated inventory to be returned

399,000 265,000

Reserve for obsolescence

( 267,000 ) ( 397,000 )

$ 2,968,000 $ 3,712,000

Other assets consist of the following:

March 31, 2025

June 30, 2024

As of September 30, 2025

As of June 30, 2025

Capitalized software costs

$ 662,000 $ -

41,000 87,000

$ 703,000 $ 87,000

Right of use assets

Other accrued liabilities consist of the following:

March 31, 2025

June 30, 2024

As of September 30, 2025

As of June 30, 2025

Accrued insurance recoupments

$ 620,000 $ 467,000

Other accrued expenses

447,000 463,000

$ 1,067,000 $ 930,000

Warranty Reserve

5 unchanged sentences

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

Nine Months Ended

Three Months Ended

Fiscal Year Ended

March 31, 2025

September 30, 2025

June 30, 2025

Warranty reserve, beginning

$ 1,567,000 $ 1,378,000

Accrual for products sold

297,000 559,000

Expenditures and costs incurred for warranty claims

( 270,000 ) ( 370,000 )

Warranty reserve, ending

$ 1,594,000 $ 1,567,000

Income tax expenses were $ 391,000 and $ 1,776,000 , and the effective tax rate was 17.1 % and 25.0 % for the three and nine months ended March 31, 2025 , respectively.

Estimated income tax expense for the three and nine 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.

Income tax expenses were estimated at $ 468,000 and $ 1,217,000 , and the effective tax rate was 23.9 % and 26.8 % for the three and nine months ended March 31, 2024 , respectively.

Estimated income tax expense for the three and nine months ended March 31, 2024 , includes a discrete current tax benefit of $ 99,000 and $ 95,000 , respectively, primarily related to the exercise of stock options.

Income tax expense was $ 668,000 and the effective tax rate was 23.8 % for the three months ended September 30, 2025 .

Estimated income tax expense for the three months ended September 30, 2025 , includes a discrete current tax benefit of $ 81,000 , primarily related to the windfall tax benefit of vested restricted stock and the exercise of stock options.

Income tax expense was estimated at $ 659,000 and the effective tax rate was 30.9 % for the three months ended September 30, 2024 .

Estimated income tax expense for the three months ended September 30, 2024 , includes a discrete current tax benefit of $ 4,000 , primarily related to the vesting of restricted stock awards.

The Company is subject to U.S.

4 unchanged sentences

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.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S.

This legislation primarily modifies certain provisions of the 2017 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 may elect 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 a one -year period ( 2026 ) or a two -year period ( 2026 and 2027 ).

The Company is currently evaluating the recognition of deferred tax assets associated with such prior year expenditures and the impact of the available acceleration options.

The outcome of this evaluation may affect the Company’s future income tax payments and related disclosures.

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 March 31, 2025 , or June 30, 2024 .

Interest on borrowings under the line of credit, if any, accrues at the prime rate ( 7.50 % on March 31, 2025 ) less 1.00 % and is payable monthly.

The Company has a credit facility that provides for a $ 2,500,000 revolving line of credit through December 18, 2025 , if not renewed or replaced before such date.

There was no outstanding principal balance on the line of credit as of September 30, 2025 , or June 30, 2025 .

Interest on borrowings under the line of credit, if any, accrues at the prime rate ( 7.25 % on September 30, 2025 ) less 1.00 % and is payable monthly.

The amount eligible for borrowing on the line of credit is limited to the lesser of $ 2,500,000 or 57.00 % of eligible accounts receivable.

On March 31, 2025 , the maximum $ 2,500,000 was eligible for borrowing.

On September 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 the tangible and intangible assets of the Company.

3 unchanged sentences

On September 9, 2025, 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 may repurchase up to $ 5,000,000 shares of common stock.

Under the authorization, the Company may repurchase up to $ 10,000,000 of the Company's outstanding shares of common stock.

This repurchase authorization has no expiration date.

Through March 31, 2025 , a total of 60,036 shares were repurchased and retired for a total cost of $ 1,449,000 , or $ 24.14 per share.

Of the total shares repurchased as of March 31, 2025 under the new authorization, 5,128 shares were unsettled and recorded as repurchases as of their trade date with a corresponding liability of $ 118,000 included within other accrued liabilities on the Condensed Balance Sheet.

As of September 30, 2025 , a total of 40,848 shares have been repurchased and retired under this authorization for a total cost of $ 1,003,000 , or an average of $ 24.57 per share.

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

1 unchanged sentence

The Company’s share-based compensation plans are described in Note 8 to the financial statements included in the Company’s Annual Report on Form 10 -K for fiscal 2025.

Share-based compensation expenses were $ 2,409,000 and $ 1,250,000 for the nine months ended March 31, 2025 , and 2024 , respectively.

This expense is included in selling, general and administrative, research and development, and cost of sales expense in the Condensed Statements of Operations.

Share-based compensation expenses were $ 458,000 and $ 697,000 for the three months ended September 30, 2025 , and 2024 , respectively.

This expense is included in selling, general and administrative, research and development, and cost of revenues expense in the Condensed Statements of Operations.

Stock Options

Stock option transactions during the nine months ended March 31, 2025 , are summarized as follows:

Stock option transactions during the three months ended September 30, 2025 , are summarized as follows:

Weighted-Average

6 unchanged sentences

Cancelled or Forfeited

( 6,698 ) $ 10.74

Outstanding at March 31, 2025

Outstanding at September 30, 2025

649,579 $ 11.00

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

Nine Months Ended

Three Months Ended

Fiscal Year Ended

March 31, 2025

September 30, 2025

June 30, 2025

3 unchanged sentences

Expected volatility

53 % 51 - 52 %

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, 2025 , the weighted average remaining contractual term for all outstanding stock options was 6.4 years and the aggregate intrinsic value of the options was $ 8,572,000 .

Outstanding on March 31, 2025 , were 607,554 stock options issued to employees, of which 364,423 were vested and exercisable and had an aggregate intrinsic value of $ 5,776,000 .

As of March 31, 2025 , $ 699,000 of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of approximately 2.2 years.

On September 30, 2025 , the weighted average remaining contractual term for all outstanding stock options was 6.2 years and the aggregate intrinsic value of the options was $ 8,801,000 .

Outstanding on September 30, 2025 , there were 649,579 stock options issued to employees, of which 435,777 were vested and exercisable and had an aggregate intrinsic value of $ 6,905,000 .

As of September 30, 2025 , $ 1,114,000 of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of approximately 2.4 years.

Restricted Stock

During the nine months ended March 31, 2025 , the Company issued restricted stock awards to employees totaling 21,400 shares of common stock, with a weighted average vesting term of 3 years and a weighted average fair value of $ 17.25 per share, and to directors totaling 21,000 shares of common stock, with a vesting term of 6 months and a weighted average fair value of $ 30.78 per share.

There were 62,817 shares of unvested restricted stock with a weighted average fair value of $ 19.59 per share outstanding as of March 31, 2025 .

As of March 31, 2025 , $ 514,000 of total unrecognized compensation expense related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.3 years.

During the nine months ended March 31, 2025 , the Company issued restricted stock units to employees totaling 68,095 shares of common stock, with a weighted average vesting term of 3 years and a weighted average fair value of $ 17.87 per share.

There were 65,395 shares of unvested restricted stock units with a weighted average fair value of $ 17.89 per share outstanding as of March 31, 2025 .

As of March 31, 2025 , $ 778,000 of total unrecognized compensation expense related to restricted stock units is expected to be recognized over a weighted-average period of approximately 2.5 years.

During the three months ended September 30, 2025 , 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.

There were 45,224 shares of unvested restricted stock with a weighted average fair value of $ 19.31 per share outstanding as of September 30, 2025 .

As of September 30, 2025 , $ 669,000 of total unrecognized compensation expense related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 2.5 years.

During the three months ended September 30, 2025 , the Company issued restricted stock units to employees totaling 55,300 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 the three months ended September 30, 2025 , there were 1,967 restricted stock units cancelled or forfeited.

There were 98,993 shares of unvested restricted stock units with a weighted average fair value of $ 21.32 per share outstanding as of September 30, 2025 .

As of September 30, 2025 , $ 1,682,000 of total unrecognized compensation expense related to restricted stock units is expected to be recognized over a weighted-average period of approximately 2.6 years.

Performance-Based Restricted Stock Units

The Company granted 175,000 performance-based restricted stock units (“PSUs”) to our CEO in connection with his appointment as CEO on July 1, 2023.

The PSUs were earned based on the extent to which performance goals tied to Total Shareholder Return (“TSR”) were achieved.

The performance-based restricted stock units 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 total shareholder return of 50 % and the remaining shares upon a total shareholder return of 100 %, in each case within four years of the date of grant.

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 the three -month volume-weighted average closing prices in accordance with the underlying award agreement.

The PSU's 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 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 , which was set to be recognized in future periods, was recognized in the nine months ended March 31, 2025 .

Stock-based compensation expense recognized for PSUs was $ 863,000 and $ 217,000 for the nine months ended March 31, 2025 , and 2024 , respectively.

After the vesting and settlement described above, there were no PSUs outstanding as of March 31, 2025 .

The partial vesting resulted in an acceleration of $ 395,000 of stock-based compensation expense in the three months ended September 30, 2024, which was set to be recognized in future periods.

There were no performance-based restricted stock units issued or outstanding during the three months ended September 30, 2025.

Commitments and Contingencies

2 unchanged sentences

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 Statements 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 segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated level.

Accordingly, we have determined that we have a single reportable and operating segment structure.

We and our CODM evaluate performance based on revenue from our single product in the markets in which the Company operates.

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 Statements of Operations.

Revenue by market is described above in Note 2.

1 unchanged sentence

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

Three Months Ended March 31,

Nine Months Ended March 31,

$ 1,891,000 $ 1,493,000 $ 5,333,000 $ 3,322,000

Three Months Ended September 30,

Weighted-average common shares outstanding:

8,495,005 8,565,725 8,493,715 8,549,352

Effect of dilutive common stock equivalents

472,833 327,096 486,503 273,586

8,967,838 8,892,821 8,980,218 8,822,938

Earnings per common share:

$ 0.22 $ 0.17 $ 0.63 $ 0.39

$ 0.21 $ 0.17 $ 0.59 $ 0.38

Common stock equivalents excluded from the calculation of diluted earnings per share because their impact was anti-dilutive were 3,196 and 289,362 for the three months ended March 31, 2025 , and 2024 , respectively, and were 47,971 and 400,639 for the nine months ended March 31, 2025 , and 2024 , respectively.

Common stock equivalents excluded from the calculation of diluted earnings per share because their impact was anti-dilutive were 104,290 and 44,026 for the three months ended September 30, 2025 , and 2024 , respectively.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

11 unchanged sentences

Critical Accounting Estimates

For a description of our critical accounting estimates and assumptions used in the preparation of our financial statements, including the unaudited Condensed Financial Statements in this Quarterly Report on Form 10-Q, see Note 1 and Note 2 to our unaudited Condensed Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Part II, Item 7, and Note 1 to our audited financial statements included in Part II, Item 8, of our Annual Report on Form 10-K for fiscal 2024.

For a description of our critical accounting estimates and assumptions used in the preparation of our financial statements, including the unaudited Condensed Financial Statements in this Quarterly Report on Form 10-Q, see Notes 1 and 2 to our unaudited Condensed Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Part II, Item 7, and Note 1 to our audited financial statements included in Part II, Item 8, of our Annual Report on Form 10-K for fiscal 2025.

There were no material changes in our critical accounting estimates and assumptions since the filing of our Annual Report on Form 10-K for fiscal 2025 .

Results of Operations

Net revenues for the three and nine months ended March 31, 2025, and 2024 are summarized in the table below.

Net revenues for the three months ended September 30, 2025, and 2024 are summarized in the table below.

Three Months Ended

Nine Months Ended

Increase (Decrease)

September 30,

Increase (Decrease)

1 unchanged sentence

Homecare revenue.

Homecare revenue increased by $1,815,000 or 14.8%, for the three months ended March 31, 2025, compared to the same period in the prior year.

For the nine months ended March 31, 2025, homecare revenue was $41,906,000, representing an increase of $5,798,000, or 16.1%, compared to the same period in the prior year.

The increases were primarily due to incremental referrals and approvals driven by an increase in direct sales representatives and efficiencies within our reimbursement department, as well as higher net revenues per approval.

Homecare revenue increased by $1,678,000 or 12.7%, for the three months ended September 30, 2025, compared to the same period in the prior year.

The increase was primarily due to an increase in direct sales representatives and higher net revenues per sales representative.

Throughout the three months ended September 30, 2025, we averaged 57 homecare field sales representatives.

Hospital revenue.

Hospital revenue was $724,000, a decrease of $59,000, or 7.5%, for the three months ended March 31, 2025, compared to the same period in the prior year.

For the nine months ended March 31, 2025, hospital revenue was $2,137,000, an increase of $228,000, or 11.9%, compared to the same period in the prior year.

The decrease in the three-month period was primarily due to the timing of hospital purchases, while the growth in the nine-month period primarily reflects the increased demand for capital and consumables in hospitals.

Hospital revenue was $1,047,000, an increase of $357,000, or 51.7%, for the three months ended September 30, 2025, compared to the same period in the prior year.

The growth in the current period primarily reflects an increase in sales representatives focused on the hospital market and higher capital and disposal demand.

Homecare distributor revenue.

Homecare distributor revenue increased by $172,000, or 32.8%, for the three months ended March 31, 2025, compared to the same period in the prior year.

For the nine months ended March 31, 2025, homecare distributor revenue was $2,090,000, an increase of $713,000, or 51.8%, compared to the same period in the prior year.

The increases in homecare distributor sales were primarily a result of increased demand from our distribution partners.

Homecare distributor revenue increased by $242,000, or 41.2%, for the three months ended September 30, 2025, compared to the same period in the prior year.

The increase in homecare distributor sales was primarily a result of an increased number of distribution partners.

Other revenue.

Other revenue was $162,000, a decrease of $115,000, or 41.5% for the three months ended March 31, 2025, compared to the same period in the prior year.

For the nine months ended March 31, 2025, other revenue was $474,000, a decrease of $16,000, or 3.3%, compared to the same period in the prior year.

The decreases in other revenue were primarily due to the lower demand for purchases by customers that do not fall within the other markets described above.

Gross profit increased to $12,229,000, or 78.0% of net revenues, for the three months ended March 31, 2025, from $10,382,000, or 74.8% of net revenues, in the same period in the prior year.

Gross profit increased to $36,347,000, or 78.0% of net revenues, for the nine months ended March 31, 2025, from $30,425,000, or 76.3% of net revenues, in the same period in the prior year.

The increase in gross profit dollars was primarily a result of increased overall revenue and the increase in gross profit percentage was a result of higher net revenue per device.

Other revenue was $122,000, a decrease of $58,000, or 32.2% for the three months ended September 30, 2025, compared to the same period in the prior year.

The decrease in other revenue was primarily due to the lower demand for purchases by international distributors and other customers that do not fall within the markets described above.

Gross profit dollars increased to $13,197,000, or 78.1% of net revenues, for the three months ended September 30, 2025, from $11,491,000, or 78.3% of net revenues, in the same period in the prior year.

The increase in gross profit dollars was primarily a result of increased overall revenue and higher net revenues per device.

The decrease in gross profit percentage was a result of higher costs which were partially offset by higher net revenues per device.

Operating expenses

Selling, general and administrative expenses.

Selling, general and administrative (“SG&A”) expenses were $9,812,000 and $29,033,000 for the three and nine months ended March 31, 2025, respectively, representing increases of $1,438,000 and $3,334,000, or 17.2% and 13.0%, respectively, compared to the same periods in the prior year.

Payroll and compensation-related expenses were $6,592,000 and $19,924,000 for the three and nine months ended March 31, 2025, respectively, representing increases of $871,000 and $2,813,000, or 15.2% and 16.4%, respectively, compared to the same periods in the prior year.

The increases in the current-year periods were 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.

Selling, general and administrative (“SG&A”) expenses were $10,286,000 for the three months ended September 30, 2025, representing an increase of $899,000, or 9.6%, compared to the same period in the prior year.

Payroll and compensation-related expenses were $6,876,000 for the three months ended September 30, 2025, representing an increase of $419,000, or 6.5%, compared to the same period in the prior year.

The increase in the current-year period was primarily due to the increase in salaries and incentive compensation related to the higher average number of sales, 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 as of March 31, 2025, 55 of which were direct sales representatives, compared to 59 field sales employees and 51 direct sales representatives as of March 31, 2024.

Travel, meals and entertainment expenses were $922,000 and $2,880,000 for the three and nine months ended March 31, 2025, respectively, representing increases of $162,000 and $427,000, or 21.3% and 17.4%, respectively, compared to the same periods in the prior year.

The increase in the current year was primarily due to a higher average number of direct sales representatives and higher travel costs.

Total discretionary marketing expenses were $325,000 and $943,000 for the three and nine months ended March 31, 2025, respectively, representing an increase of $21,000 and a decrease of $152,000, or an increase of 6.9% and a decrease of 13.9%, respectively, compared to the same periods in the prior year.

The increase in the three-month period was due to increased investment in our direct-to-consumer advertising, while the decrease in the nine -month period was primarily due to a one-time investment in market research in the prior year that did not recur in t he nine months ended March 31, 2025.

Professional fees were $1,285,000 and $3,604,000 for the three and nine months ended March 31, 2025, respectively, representing increases of $307,000 and $382,000, or 31.4% and 11.9%, respectively, compared to the same periods in the prior year.

Professional fees are primarily for services related to legal costs, shareowner services and reporting requirements, information technology technical support and consulting fees.

The increase for the three and nine months ended March 31, 2025 , was primarily related to increased expense recognition associated with the board of directors’ equity compensation.

Travel, meals and entertainment expenses were $1,274,000 for the three months ended September 30, 2025, representing an increase of $310,000, or 32.2%, compared to the same period in the prior year.

The increase in the current year was primarily due to a higher average number of direct sales representatives, training, and increased travel to support sales activity as well as market development.

Total discretionary marketing expenses were $410,000 for the three months ended September 30, 2025, representing an increase of $146,000, or 55.3%, compared to the same period in the prior year.

The increase in the current period was due to increased investment in our direct-to-consumer advertising and other market development initiatives in t he three months ended September 30, 2025.

Professional fees were $1,090,000 for the three months ended September 30, 2025, representing a decrease of $50,000, or 4.4%, compared to the same period in the prior year.

Professional fees are primarily for services related to legal costs, shareowner services and reporting requirements, information technology technical support, insurance and consulting fees.

The decrease in the current year was primarily due to external recruiting spend in the prior year that did not recur in the three months ended September 30, 2025.

Research and development expenses .

Research and development (“R&D”) expenses were $277,000 and $694,000 for the three and nine months ended March 31, 2025, respectively, representing increases of $110,000 and $214,000, or 65.9% and 44.6%, respectively, compared to the same periods in the prior year.

The increases were primarily due to increased average headcount and external spend related to product enhancements and sustaining engineering.

Research and development (“R&D”) expenses were $241,000 for the three months ended September 30, 2025, representing an increase of $75,000, or 45.2%, compared to the same period in the prior year.

The increase was primarily due to increased average headcount and external spend related to product enhancements and sustaining engineering.

Operating income

Operating income increased by $299,000 or 16.2% to $2,140,000 for the three months ended March 31, 2025, compared to the same period in the prior year.

Operating income increased by $2,374,000 or 55.9% to $6,620,000 for the nine months ended March 31, 2025, compared to the same period in the prior year.

The increase is primarily due to an increase in revenue and gross profit in both the three- and nine- month periods, as well as a lower growth rate in selling, general and administrative expenses in the nine- month period.

Operating income increased by $732,000 or 37.8% to $2,670,000 for the three months ended September 30, 2025, compared to the same period in the prior year.

The increase is primarily due to an increase in revenue and gross profit.

Interest income, net

Net interest income for the three and nine months ended March 31, 2025, was $142,000 and $489,000, respectively, compared to $120,000 and $293,000, respectively, for the same periods in the prior year.

The increases are primarily due to increased cash balances.

Net interest income for the three months ended September 30, 2025, was $134,000, compared to $195,000, for the same period in the prior year.

The decrease is primarily due to decreased interest rates and cash balances.

Income tax expense

Income tax expenses were estimated at $391,000 and $1,776,000, and the effective tax rate was 17.1% and 25.0%, for the three and nine months ended March 31, 2025, respectively.

Estimated income tax expense for the three and nine months ended March 31, 2025, includes a discrete tax benefit of $338,000 and $478,000, respectively, primarily related to the exercise of stock options.

Income tax expense was estimated at $468,000 and $1,217,000, and the effective tax rate was 23.9% and 26.8%, for the three and nine months ended March 31, 2024, respectively.

Estimated income tax expense for the three and nine months ended March 31, 2024, includes a discrete current tax benefit of $99,000 and $95,000, respectively, primarily related to the exercise of stock options.

Net income for the three and nine months ended March 31, 2025, was $1,891,000 and $5,333,000, respectively, compared to $1,493,000 and $3,322,000 for the same periods in the prior year.

Income tax expense was estimated at $668,000, and the effective tax rate was 23.8%, for the three months ended September 30, 2025.

Estimated income tax expense for the three months ended September 30, 2025, includes a discrete tax benefit of $81,000, primarily related to the windfall tax benefit of vested restricted stock and the exercise of stock options.

Income tax expense was estimated at $659,000, and the effective tax rate was 30.9%, for the three months ended September 30, 2024.

Estimated income tax expense for the three months ended September 30, 2024, includes a discrete current tax benefit of $4,000, primarily related to the vesting of restricted stock awards.

Net income for the three months ended September 30, 2025, was $2,136,000, an increase of 44.9%, compared to $1,474,000 for the same period in the prior year.

The increase in net income was primarily due to increased revenue and gross profit.

2 unchanged sentences

Cash Flows from Operating Activities

For the nine months ended March 31, 2025, net cash provided by operating activities was $7,534,000.

Cash flows provided by operating activities consisted of net income of $5,333,000, non-cash expenses of $3,184,000, an increase in accounts payable and accrued expenses of $877,000, a decrease in inventories of $564,000, and an increase in accrued compensation of $78,000.

These cash flows from operating activities were offset by an increase in income tax receivable, net of $1,209,000, an increase in prepaid expenses and other assets of $779,000, an increase in contract assets of $405,000, and an increase in accounts receivable of 109,000.

For the three months ended September 30, 2025, net cash provided by operating activities was $169,000.

Cash flows provided by operating activities consisted of net income of $2,136,000, non-cash expenses of $717,000, an increase in accounts payable and accrued expenses of $448,000 and a decrease in income tax receivable, net of $202,000.

These cash flows from operating activities were offset by a decrease in accrued compensation of $2,348,000, an increase in inventories of $515,000, an increase in prepaid expenses and other assets of $241,000, an increase in contract assets of $134,000, and an increase in accounts receivable of 96,000.

Cash Flows from Investing Activities

For the nine months ended March 31, 2025, cash used for investing activities was $149,000.

Cash used for investing activities consisted of $117,000 in expenditures for property and equipment and $32,000 in expenditures for intangible asset costs.

For the three months ended September 30, 2025, cash used for investing activities was $267,000.

Cash used for investing activities consisted of $252,000 in expenditures for property and equipment and $15,000 in expenditures for intangible assets.

Cash Flows from Financing Activities

For the nine months ended March 31, 2025, cash used for financing activities was $8,228,000.

For the three months ended September 30, 2025, cash used for financing activities was $1,076,000.

Cash used for financing activities consisted of $1,003,000 used for our share repurchase program and $229,000 for taxes paid on net share settlement of stock awards, partially offset by $156,000 from the issuance of common stock upon exercise of options.

3 unchanged sentences

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 March 31, 2025) less 1.0% and is payable monthly.

There was no outstanding principal balance on the line of credit as of March 31, 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.

As of March 31, 2025, the maximum $2,500,000 was available under the line of credit.

Interest on borrowings on the line of credit accrues at the prime rate (7.25% as of September 30, 2025) less 1.0% and is payable monthly.

There was no outstanding principal balance on the line of credit as of September 30, 2025, or June 30, 2025.

As of September 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 our tangible and intangible assets.

3 unchanged sentences

If we are unable to repay such indebtedness, the lender could foreclose on these assets.

For the nine months ended March 31, 2025, and 2024, we spent approximately $117,000 and $265,000, respectively, on property and equipment.

For the three months ended September 30, 2025, and 2024, we spent approximately $252,000 and $37,000, 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.

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 flow.

While the impact of macroeconomic factors such as inflation 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 fiscal 2026 and the foreseeable future.

3 unchanged sentences

Forward-looking statements include, but are not limited to, statements regarding:

our business strategy, including our intended level of investment in R&D and marketing activities;

our business strategy, including our intended level of investment in research and development and marketing activities;

our expectations with respect to earnings, gross margins and sales growth, industry relationships, marketing strategies and international sales;

14 unchanged sentences

and our anticipated revenues, expenses, capital requirements and liquidity.

Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “project,” “goal,” “target,” “should,” “will,” “would,” and similar expressions, including the negative of these terms, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “ongoing,” “plan,” “potential,” “project,” “target,” “should,” “will,” “would,” and similar expressions, including the negative of these terms, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Although we believe these forward-looking statements are reasonable, they involve risks and uncertainties that may cause actual results to differ materially from those projected by such statements.

1 unchanged sentence

Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, the following:

ability to obtain reimbursement from Medicare, Medicaid, or private insurance payers for our products;

component or raw material shortages, changes to lead times or significant price increases;

ability to obtain and maintain reimbursement from Medicare, Medicaid, or private insurance payers for our products;

component or raw material shortages, changes to lead times or significant price increases and changes to trade regulations (including, but not limited to, changes to tariffs);

adverse changes to state and federal health care regulations;

2 unchanged sentences

adverse economic and business conditions or intense competition;

the risks associated with our planned salesforce expansion;

wage and component price inflation;

wage inflation;

technical problems with our research and products;

1 unchanged sentence

changes affecting the medical device industry;

our ability to develop new sales channels for our products such as the homecare distributor channel;

our ability to develop new sales channels for our products such as the hospital or homecare distributor channels;

adverse international health care regulation impacting current international business;

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements