Electromed, Inc. (NYSE Amex: ELMD) today announced financial results for the three-month period ended September 30, 2011. Net Revenues for the three months ended September 30, 2011 were approximately $5,379,000, a 29.1% increase compared to Net Revenues of approximately $4,165,000 for the same period last year. The Company also announced Net Income of approximately $246,000, or $0.03 per basic and diluted share, for the three months ended September 30, 2011, compared to Net Income of approximately $112,000, or $0.02 per basic and diluted share, for the same period last year. Net Revenues increased in correlation with the expansion of the sales force. Net Income results were attributable to higher Net Revenues, offset by increased expenses related to increases in sales force. Research investments, additions to senior management, and additional facilities have all added to expenses in the first quarter.

Robert Hansen, Chairman and CEO, commented on the Company, saying,“In very uncertain times, Electromed, Inc. continues to execute successfully on its business plans. The Company is committed to building a platform in sales, product innovation, and patient services sufficient to assure its expanding position in airway clearance therapy.”

Gross Profit increased to approximately $4,058,000, or 75.4% of Net Revenues, for the three months ended September 30, 2011, compared to $2,934,000, or 70.4% for the same period in Fiscal 2011. The increase in Gross Profit dollars resulted primarily from the increase in Sales volume. The change in Gross Profit percentage for the three-month period ended September 30, 2011, was primarily the result of higher reimbursement from the mix of referrals and approvals compared to the three-month period ended September 30, 2010. Factors such as diagnoses that are not assured of reimbursement, along with insurance programs which present lower allowable reimbursement amounts (for example, state Medicaid programs) affect average reimbursement received on a short-term basis and tend to cause margins to fluctuate on a quarterly basis.

Operating Expenses, which consist of Selling, General, and Administrative Expenses and Research and Development expenses, were approximately $3,605,000 for the three months ended September 30, 2011, an increase of approximately 34.2% over total Operating Expenses for the same period last year. These planned increases resulted from higher payroll and marketing expenses related to increasing the size of the sales team, increases in reimbursement, administration, patient services staff, and patient training costs related to the higher Sales volume, increased expenses relating to being a new public Company, and increased Research and Development expenses.

Total cash was approximately $2,946,000 as of September 30, 2011. For the three months ended September 30, 2011, cash used in financing activities was approximately $86,000, consisting of primarily $110,000 on payments of Long-term Debt and capital lease obligations offset by proceeds from a warrant exercise and subscription notes receivable of approximately $24,000. An aggregate of $237,000 was used for investing activities during the three months ended September 30, 2011, including $22,000 in payments for patent-related costs and $215,000 in expenditures for property and equipment. The Company used approximately $823,000 in operating activities composed primarily of an increase in the Company’s receivable position, which increased approximately $807,000, or 8.4% to approximately $10,400,000 during the three months ended September 30, 2011.

About Electromed, Inc.Electromed, Inc., founded in 1992 and headquartered in New Prague, Minnesota, manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest® Airway Clearance System and related products, to patients with compromised pulmonary function. Further information about the Company can be found at www.electromed.com.

Cautionary StatementsCertain statements found in this release may constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the speaker’s current views with respect to future events and financial performance and include any statement that does not directly relate to a current or historical fact. Forward-looking statements can generally be identified by the words “believe,” “expect,” “anticipate” or “intend” or similar words. Forward-looking statements made in this release include the Company’s plans and expectations regarding sales growth and product innovation. Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known and unknown, associated with such statements. Examples of risks and uncertainties for Electromed include, but are not limited to, the impact of emerging and existing competitors, the effectiveness of our sales and marketing initiatives, changes to reimbursement programs, as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including our Annual Report on Form 10-K). Investors should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into account when making investment decisions. Shareholders and other readers should not place undue reliance on “forward-looking statements,” as such statements speak only as of the date of this release.

  Electromed, Inc. and Subsidiary Condensed Consolidated Balance Sheets     September 30     June 30 2011 2011 Assets (Unaudited) Current Assets Cash and cash equivalents $ 2,946,173 $ 4,091,739 Accounts receivable (net of allowances for doubtful accounts of $45,000) 10,400,466 9,593,105 Inventories 2,163,802 1,855,957 Prepaid expenses and other current assets 419,203 371,257 Deferred income taxes   722,000     722,000  

Total current assets

16,651,644 16,634,058 Property and equipment, net 3,070,662 2,807,082 Finite-life intangible assets, net assets, net 1,227,572 1,235,828

Other assets

  217,907     191,964   Total assets $ 21,167,785   $ 20,868,932     Liabilities and Shareholders’ Equity Current Liabilities Revolving line of credit $ 1,768,128 $ 1,768,128 Current maturities of long-term debt 403,745 438,267 Accounts payable 758,986 733,621 Accrued compensation 906,425 868,229 Warranty reserve 475,019 444,096

Other accrued liabilities

  174,613     161,166   Total current liabilities 4,486,916 4,413,507 Long-term debt, less current maturities 1,506,654 1,582,102   Deferred income taxes   167,000     167,000   Total liabilities   6,160,570     6,162,609     Commitments and Contingencies (Note 8)   Shareholders’ Equity

Common stock, $0.01 par value; authorized: 13,000,000; shares; issued and outstanding: 8,101,085 and 8,100,485 shares respectively

81,011 81,005 Additional paid-in capital 12,827,215 12,794,368 Retained earnings 2,098,989 1,853,450   Common stock subscriptions receivable for 15,000 shares outstanding as of June 30, 2011   -     (22,500 ) Total shareholders’ equity   15,007,215     14,706,323   Total liabilities and shareholders’ equity $ 21,167,785   $ 20,868,932       Electromed, Inc. and Subsidiary Condensed Consolidated Statements of Income (Unaudited)     For the Three Months Ended September 30, 2011     2010   Net revenues $ 5,378,918 $ 4,165,429 Cost of revenues   1,321,318     1,231,690   Gross profit   4,057,600     2,933,739     Operating expenses Selling, general and administrative 3,397,553 2,487,595 Research and development   207,585     198,386   Total operating expenses   3,605,138     2,685,981   Operating income 452,462 247,758 Interest expense, net of interest income of $2,027 and $1,971 respectively   43,923     59,688   Net income before income taxes 408,539 188,070   Income tax expense   (163,000 )   (76,000 ) Net income $ 245,539   $ 112,070     Earnings per share attributable to Electromed, Inc. common shareholders: Basic $ 0.03   $ 0.02   Diluted $ 0.03   $ 0.02     Weighted-average Electromed, Inc. common shares outstanding: Basic   8,100,915     6,986,798   Diluted   8,119,190     7,002,904       Electromed, Inc. and Subsidiary Condensed Consolidated Statements of Cash Flows (Unaudited)     For the Three Months Ended September 30, 2011     2010 Cash Flows From Operating Activities Net income $ 245,539 $ 112,070 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 90,552 78,684 Amortization of finite-life intangible assets 30,006 25,721 Amortization of debt issuance costs 3,297 13,408 Share-based compensation expense 31,053 42,900 Loss on disposal of property and equipment 9,864 2,385 Changes in operating assets and liabilities: Accounts receivable (807,361 ) (470,716 ) Inventories (307,845 ) 35,730 Prepaid expenses and other assets (77,186 ) (96,234 ) Accounts payable and accrued liabilities   (40,754 )   194,943   Net cash used in operating activities   (822,835 )   (61,109 )   Cash Flows From Investing Activities Expenditures for property and equipment (215,311 ) (97,544 ) Expenditures for finite-life intangible assets   (21,750 )   (196,332 ) Net cash used in investing activities   (237,061 )   (293,876 )   Cash Flows From Financing Activities Net borrowings on revolving line of credit - (500,000 ) Principal payments on long-term debt including capital lease obligations (109,970 ) (105,428 ) Payments of deferred financing fees - (4,659 ) Proceeds from warrant exercises 1,800 - Proceeds from sales of 1.9 million shares of common stock, net of offering costs of $1,229,882 - 6,370,118 Proceeds from subscription notes receivable   22,500     -   Net cash provided by (used in) financing activities   (85,670)     5,760,031   Net increase (decrease) in cash and cash equivalents (1,145,566) 5,405,046 Cash and cash equivalents Beginning of period   4,091,739     610,727   End of period $ 2,946,173   $ 6,015,773    
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