Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to .. Commission File No.: 001-34839

Electromed, Inc.

(Exact Name of Registrant as Specified in its Charter)

Minnesota		41-1732920
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Sixth Avenue NW New Prague, Minnesota		56071
(Address of principal executive offices)		(Zip Code)

(952) 758-9299

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.01 par value		ELMD		NYSE American LLC
(Title of each class)		(Trading Symbol(s))		(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☑

Smaller reporting company ☑

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 8,581,677 shares of Electromed, Inc. common stock, par value $0.01 per share, outstanding as of the close of business on November 2, 2023.

Electromed, Inc.

Index to Quarterly Report on Form 10-Q

	Page

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4. Controls and Procedures	16

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	17
Item 1A. Risk Factors	17
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	17
Item 3. Defaults Upon Senior Securities	17
Item 4. Mine Safety Disclosures	17
Item 5. Other Information	17
Item 6. Exhibits	18

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

Electromed, Inc.

Condensed Balance Sheets

	September 30, 2023		June 30, 2023
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	7,024,000	$	7,372,000
Accounts receivable (net of allowances for doubtful accounts of $45,000)		23,455,000		24,130,000
Contract assets		544,000		487,000
Inventories		4,480,000		4,221,000
Prepaid expenses and other current assets		692,000		1,577,000
Total current assets		36,195,000		37,787,000
Property and equipment, net		5,534,000		5,672,000
Finite-life intangible assets, net		613,000		605,000
Other assets		143,000		161,000
Deferred income taxes		1,581,000		1,581,000
Total assets	$	44,066,000	$	45,806,000

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	1,057,000	$	1,372,000
Accrued compensation		1,844,000		3,018,000
Income tax payable		110,000		336,000
Warranty reserve		1,424,000		1,378,000
Other accrued liabilities		1,341,000		1,949,000
Total current liabilities		5,776,000		8,053,000
Other long-term liabilities		68,000		86,000
Total liabilities		5,844,000		8,139,000

Commitments and Contingencies

Shareholders’ Equity
Common stock, $0.01 par value per share, 13,000,000 shares authorized; 8,579,050 and 8,555,238 shares issued and outstanding, as of September 30, 2023 and June 30, 2023, respectively		86,000		86,000
Additional paid-in capital		19,188,000		18,788,000
Retained earnings		18,948,000		18,793,000
Total shareholders’ equity		38,222,000		37,667,000
Total liabilities and shareholders’ equity	$	44,066,000	$	45,806,000

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Condensed Statements of Operations (Unaudited)


	Three Months Ended September 30,
	2023		2022
Net revenues	$	12,324,000	$	10,658,000
Cost of revenues		2,826,000		2,327,000

Gross profit		9,498,000		8,331,000

Operating expenses
Selling, general and administrative		9,150,000		7,989,000
Research and development		206,000		298,000
Total operating expenses		9,356,000		8,287,000
Operating income		142,000		44,000

Interest income, net		77,000		4,000
Net income before income taxes		219,000		48,000

Income tax expense (benefit)		64,000		(33,000	)

Net income	$	155,000	$	81,000

Income per share:

Basic	$	0.02	$	0.01

Diluted	$	0.02	$	0.01

Weighted-average common shares outstanding:
Basic		8,537,388		8,445,893
Diluted		8,782,824		8,689,377

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Condensed Statements of Cash Flows (Unaudited)


	Three Months Ended September 30,
	2023			2022
Cash Flows From Operating Activities
Net income	$	155,000		$	81,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		202,000			134,000
Amortization of finite-life intangible assets		12,000			20,000
Share-based compensation expense		371,000			95,000
Deferred income taxes		-			6,000
Changes in operating assets and liabilities:
Accounts receivable		675,000			95,000
Contract assets		(57,000	)		(167,000	)
Inventories		(240,000	)		(500,000	)
Prepaid expenses and other assets		901,000			(125,000	)
Income tax payable, net		(226,000	)		(175,000	)
Accounts payable and accrued liabilities		(863,000	)		(26,000	)
Accrued compensation		(1,174,000	)		(1,132,000	)
Net cash used in operating activities		(244,000	)		(1,694,000	)

Cash Flows From Investing Activities
Expenditures for property and equipment		(109,000	)		(241,000	)
Expenditures for finite-life intangible assets		(24,000	)		(15,000	)
Net cash used in investing activities		(133,000	)		(256,000	)

Cash Flows From Financing Activities
Issuance of common stock upon exercise of options		29,000			-
Taxes paid on net share settlement of stock option exercises		-			(60,000	)
Repurchase of common stock		-			(145,000	)
Net cash provided by (used in) financing activities		29,000			(205,000	)
Net decrease in cash		(348,000	)		(2,155,000	)
Cash and cash equivalents
Beginning of period		7,372,000			8,153,000
End of period	$	7,024,000		$	5,998,000

Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes	$	251,000		$	135,000

Supplemental Disclosures of Noncash Investing and Financing Activities
Property and equipment acquisitions in accounts payable	$	34,000		$	46,000
Intangible asset acquisitions in accounts payable	$	-		$	9,000
Demonstration equipment returned to inventory	$	19,000		$	5,000

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Condensed Statements of Shareholders’ Equity (Unaudited)


	Common Stock					Additional Paid-			Retained			Total Shareholders’
	Shares			Amount		in Capital			Earnings			Equity
Balance at June 30, 2022		8,475,438		$	85,000	$	18,308,000		$	15,780,000		$	34,173,000

Net income		—			—		—			81,000			81,000

Issuance of restricted stock		27,400			—		—			—			—
Forfeiture of restricted stock		(14,166	)		—		—			—			—
Issuance of common stock upon exercise of options		11,760			—		—			—			—
Taxes paid on stock options exercised on a net basis		—			—		(60,000	)		—			(60,000	)
Share-based compensation expense		—			—		95,000			—			95,000
Repurchase of common stock		(14,568	)		—		—			(145,000	)		(145,000	)

Balance at September 30, 2022		8,485,864		$	85,000	$	18,343,000		$	15,716,000		$	34,144,000


	Common Stock				Additional Paid-		Retained		Total Shareholders’
	Shares		Amount		in Capital		Earnings		Equity
Balance at June 30, 2023		8,555,238	$	86,000	$	18,788,000	$	18,793,000	$	37,667,000

Net income		—		—		—		155,000		155,000

Issuance of restricted stock		20,878		—		—		—		—
Forfeiture of restricted stock		—		—		—		—		—
Issuance of common stock upon exercise of options		2,934		—		29,000		—		29,000
Taxes paid on stock options exercised on a net basis		—		—		—		—		—
Share-based compensation expense		—		—		371,000		—		371,000
Repurchase of common stock		—		—		—		—		—

Balance at September 30, 2023		8,579,050	$	86,000	$	19,188,000	$	18,948,000	$	38,222,000

See Notes to Condensed Financial Statements (Unaudited).

Electromed, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Note 1. 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 home health care and hospital markets for use by patients in personal residences, hospitals and clinics. The Company also sells internationally through distributors.

International sales were $91,000 and $81,000 for the three months ended September 30, 2023 and 2022, respectively. Since its inception, the Company has operated in a single industry segment: developing, manufacturing and marketing medical equipment.

Basis of presentation: The accompanying unaudited Condensed 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 are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. GAAP for annual reports. This interim report should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“fiscal 2023”).

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

Use of estimates. Management uses estimates and assumptions in preparing the unaudited Condensed Financial Statements in accordance with 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 unaudited Condensed Financial Statements include revenue recognition and the related estimation of variable consideration, inventory valuation, share-based compensation and warranty reserve.

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 common stock at the beginning of the period unless their effect would be anti-dilutive. Common stock equivalents excluded from the calculation of diluted earnings per share because their impact was anti-dilutive were 403,944 and 212,023 for the three months ended September 30, 2023 and 2022, respectively.

Recently Issued Accounting Standards

In June 2016, the Financial Accounting Board issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments -- Credit Losses: Measurement of Credit Losses on Financial Instruments, which was subsequently amended by ASU 2018-19, ASU 2019-04, 2019-05, 2019-10, 2019-11, and 2020-02. The standard introduces new accounting guidance for credit losses on financial instruments within its scope, including trade receivables. This new guidance adds an impairment model that is based on expected losses rather than incurred losses. The company adopted the standard effective July 1, 2023. The Company’s adoption of the standard did not have a material impact on the financial statements.

Note 2. 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, including consideration paid or payable from 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, as further described below under Performance obligations and transaction price.

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” (“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 Company’s SmartVest® Airway Clearance System (“SmartVest System”) after control has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues in the Condensed Statements of Operations.

The timing of revenue recognition, billings and cash collections results in accounts receivable on the Condensed Balance Sheets as further described below under Accounts receivable and Contract assets.

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

Schedule of disaggregated revenue

	Three Months Ended September 30,
	2023		2022
Homecare	$	11,153,000	$	9,632,000
Hospital		507,000		391,000
Homecare distributor		573,000		554,000
International		91,000		81,000
Total	$	12,324,000	$	10,658,000

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

	Three Months Ended September 30,
	2023		2022
Commercial	$	5,765,000	$	3,879,000
Medicare		3,948,000		4,245,000
Medicare Supplemental		983,000		1,137,000
Medicaid		293,000		154,000
Other		164,000		217,000
Total	$	11,153,000	$	9,632,000

Revenues are recognized at a point in time when control passes to the customer upon product shipment or delivery.

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 as a result 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 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, as further discussed under Accounts receivable and Contract assets below.

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, (ii) contracts under appeal and (iii) 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. 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, claims in appeals with Medicare 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. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

For example, for contracts in which the Company believes the criteria for reimbursement under government or commercial payer contracts have been met but for which coverage is unconfirmed or payments are under appeal, the Company has significant observable evidence of relatively consistent claims recovery experience over the prior three to five years. The Company believes the low volatility in historical claims approval rates for populations of patients whose demographics are similar to those of current patients provides reliable predictive value in arriving at estimates of variable consideration in such contracts. Similarly, 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.

For each type of variable consideration discussed above, there are a large number of 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 often receives payment from third-party payers for SmartVest System sales over a period of time 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 distributors. Sales to distributors, who sell direct to patients, are made at fixed contract prices and 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’s purchases accumulate to give the distributor the right to a higher discount on purchases more than the specified level within the contract period. As a result, to the extent the Company expects the distributor 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. Transfer of control of the products occurs upon shipment or delivery to the distributor, as applicable.

Hospital market. The Company’s hospital sales are made to hospitals and home health care centers, pulmonary rehabilitation centers and other clinics. Sales to these hospitals are negotiated with the individual hospital or with group purchasing organizations, with payments received directly from the hospital. No insurance reimbursement is involved. Generators are either sold or leased to the hospitals and associated hoses and wraps (used in hospital settings rather than vests) are sold separately. Accordingly, each product is distinct and considered a separate performance obligation in sales to hospital customers. The agreements with hospitals fall into two main types, distinguished by differences in the timing of transfer of control and timing of payments:

●

Outright sale – Under these transactions, the Company sells its products for a prescribed or negotiated price. Transfer of control of the product, and associated revenue recognition, occurs at the time of shipment and payment is made within normal credit terms, usually within thirty days.

●

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 at a later date. Revenue for the consumable wraps is recognized when control transfers to the customer.

International market. Sales to international markets are made directly to a number of independent distributors at fixed contract prices that are not subject to further adjustments for variable consideration. Transfer of control of the products occurs upon shipment or delivery to the distributor, as applicable.

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.

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 receivables 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 doubtful accounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition and credit history. Receivables are written off when deemed uncollectible.

Contract assets. Contract assets include amounts recognized as revenue that are estimates of variable consideration for Medicare appeals where the final determination of the insurance coverage amount is dependent on future approval of an appeal, or 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.

Contract balances. The following table provides information about contract assets from contracts with customers:

Schedule of contract asset

	Three Months Ended September 30, 2023			Fiscal Year Ended June 30, 2023
	Increase (decrease)			Increase (decrease)
Contract assets, beginning	$	488,000		$	286,000
Reclassification of contract assets to accounts receivable		(447,000	)		(1,220,000	)
Contract assets recognized		761,000			1,351,000
Increase (decrease) because of changes in the estimate of amounts to be realized from payers, excluding amounts transferred to receivables during the period		(258,000	)		71,000
Contract assets, ending	$	544,000		$	488,000

Incremental costs to obtain a contract. Sales incentives paid to sales representatives are eligible for capitalization as they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. However, the recovery period is less than one year as the performance obligation is satisfied upon shipment or delivery. Consequently, the Company applies the practical expedient provided by ASC 340 and expenses sales incentives as incurred. These costs are included in selling, general and administrative expenses in the Condensed Statements of Operations.

Note 3. Inventories

The components of inventory were as follows:

	September 30, 2023			June 30, 2023
Parts inventory	$	3,559,000		$	3,420,000
Work in process		500,000			470,000
Finished goods		518,000			323,000
Estimated inventory to be returned		263,000			265,000
Less: Reserve for obsolescence		(360,000	)		(257,000	)
Total	$	4,480,000		$	4,221,000

Note 4. Warranty Reserve

The Company provides a lifetime warranty on its products to the prescribed patient for sales within the U.S. and a three-year warranty for all hospital sales and sales to individuals outside the U.S. 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:

	Three Months Ended September 30, 2023			Fiscal Year Ended June 30, 2023
Warranty reserve, beginning	$	1,378,000		$	1,256,000
Accrual for products sold		153,000			416,000
Expenditures and costs incurred for warranty claims		(107,000	)		(294,000	)
Warranty reserve, ending	$	1,424,000		$	1,378,000

Note 5. Income Taxes

Income tax expense was estimated at $64,000, and the effective tax rate was 29.3% for the three months ended September 30, 2023.

Income tax benefit was estimated at $33,000, and the effective tax rate was (68.8%) for the three months ended September 30, 2022. Estimated income tax expense for the three months ended September 30, 2022 included a discrete current tax benefit of $44,000 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, 2020 are no longer open to U.S. federal, state or local examinations by taxing authorities. The Company is not 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 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.

Note 6. Financing Arrangements

The Company has a credit facility that provides for a $2,500,000 revolving line of credit through December 18, 2023 if not renewed before such date. There was no outstanding principal balance on the line of credit as of September 30, 2023 or June 30, 2023. Interest on borrowings under the line of credit, if any, accrues at the prime rate (8.50% at September 30, 2023) 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 September 30, 2023, 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 May 26, 2021, the Company’s Board of Directors (the “Board”) approved a stock repurchase authorization. Under the authorization, the Company was originally able to repurchase up to $3.0 million of shares of common stock through May 26, 2022. On May 26, 2022, the Board removed the date limitation. As of September 30, 2023, a total of 239,995 shares have been repurchased and retired under this authorization for a total cost of $2,725,000, or $11.36 per share. Repurchased shares have been retired and constitute authorized but unissued shares. There were no share repurchases for the three months ended September 30, 2023.

Note 8. Share-Based Compensation

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 2023. Share-based compensation expense was $371,000 and $95,000 for the three months ended September 30, 2023 and 2022, respectively. This expense is included in selling, general and administrative expense in the Condensed Statements of Operations.

Stock Options

Stock option transactions during the three months ended September 30, 2023 are summarized as follows:

Schedule of stock option transactions

	Number of Shares			Weighted-Average Exercise Price per Share
Outstanding at June 30, 2023		451,570		$	6.93
Granted		255,562		$	10.71
Exercised		(2,934	)	$	9.90
Cancelled or Forfeited		(6,646	)	$	10.91
Outstanding at September 30, 2023		697,552		$	8.26

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

	Three Months Ended September 30, 2023	Fiscal Year Ended June 30, 2023
Risk-free interest rate	4.07-4.43%	2.88-4.23%
Expected term (years)	6	6
Expected volatility	53%	53-54%

The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. At September 30, 2023, the weighted average remaining contractual term for all outstanding stock options was 6.9 years and the aggregate intrinsic value of the options was $1,740,000. Outstanding on September 30, 2023 were 697,552 stock options issued to employees, of which 375,673 were vested and exercisable and had an aggregate intrinsic value of $1,717,000. As of September 30, 2023, $1,444,000 of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted-average period of approximately 3.25 years.

Restricted Stock

During the three months ended September 30, 2023, the Company issued restricted stock awards to employees totaling 20,878 shares of common stock, with a vesting term of three years and a weighted average fair value of $10.72 per share. There were 39,111 shares of unvested restricted stock with a weighted average grant date fair value of $10.49 per share outstanding as of September 30, 2023. As of September 30, 2023, $257,000 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.

Performance-Based Restricted Stock Units

We have 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 are to be earned based on the extent to which performance goals tied to Total Shareholder Return (“TSR”) are achieved. The performance-based restricted stock units will be 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 grant date fair value of the awards was determined using a Monte Carlo valuation model with an expected term of four years.

Stock based compensation expense recognized for PSUs was $73,000 and $0 for the three months ended September 30, 2023 and 2022, respectively. The weighted average grant date fair value per unit was $6.58 and as of September 30, 2023 there are 175,000 PSUs outstanding. On September 30, 2023, there was approximately $1,079,000 of total unrecognized compensation expense related to outstanding PSUs that is expected to be recognized over a period of 3.75 years.

Note 9. 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.

On September 8, 2021, a state court putative class action lawsuit was filed in Minnesota against the Company asserting injury resulting from the previously announced data breach that impacted the Company’s customer protected health information and employee personal information and seeking compensatory damages, equitable relief, and attorneys’ fees and costs. On October 6, 2021, the proceeding was removed to the District of Minnesota. The Company believes the plaintiff was not injured as a result of the data privacy incident and, as a result, the claims are without merit. Accordingly, on November 11, 2021, the Company moved to dismiss the complaint in its entirety. Prior to the hearing on the motion to dismiss, the parties agreed in principle to settle the case. The parties have executed a settlement agreement and submitted a motion to settle the class action. During January 2023, the settlement was preliminarily approved. The hearing for final approval took place on June 5, 2023. Following the final approval hearing, the court issued a judgment on July 10, 2023 granting a motion for final approval of the settlement. Payment was made to the settlement fund during the first quarter of fiscal 2024 for the settlement amount of $825,000 which was covered by insurance, resulting in a reduction in other current assets and other accrued liabilities.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Financial Statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and our audited financial statements and related notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“fiscal 2023”).

Overview

Electromed, Inc. (“we,” “our,” “us,” “Electromed” or the “Company”) develops and provides innovative airway clearance products applying High Frequency Chest Wall Oscillation (“HFCWO”) technologies in pulmonary care for patients of all ages.

We manufacture, market and sell products that provide HFCWO, including the SmartVest® Airway Clearance System (“SmartVest System”) that includes our newest generation SmartVest Clearway® Airway Clearance System (“Clearway”), previous generation SmartVest SQL®, and related garments and accessories to patients with compromised pulmonary function. The SmartVest Clearway, which received 510(k) clearance from the U.S. Food and Drug Administration in December 2022, provides patients with proven quality of life outcomes while offering a state-of-the-art patient experience with a simple touch screen user interface, small footprint and lightest HFCWO generator on the market.

Our products are sold in both the home health care market and the hospital market for inpatient use, which we refer to as “hospital sales.” Since 2000, we have marketed the SmartVest System and its predecessor products to patients suffering from bronchiectasis, cystic fibrosis, and other chronic pulmonary conditions which require external chest manipulation to enhance mucus transport. Additionally, we offer our products to a patient population that includes neuromuscular disorders such as cerebral palsy, muscular dystrophies, amyotrophic lateral sclerosis (“ALS”), patients with post-surgical complications or who are ventilator dependent and patients who 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 myopathies, 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.

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 2023.

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 2023.

Results of Operations

Net Revenues

Net revenues for the three months ended September 30, 2023 and 2022 are summarized in the table below.

	Three Months Ended September 30,
	2023		2022		Increase (Decrease)
Homecare Revenue	$	11,153,000	$	9,632,000	$	1,521,000	15.8	%
Homecare Distributor Revenue		573,000		554,000		19,000	3.4	%
Hospital Revenue		507,000		391,000		116,000	29.7	%
International Revenue		91,000		81,000		10,000	12.3	%
Total Revenue	$	12,324,000	$	10,658,000	$	1,666,000	15.6	%

Homecare revenue. Homecare revenue increased by $1,521,000, or 15.8%, for the three months ended September 30, 2023 compared to the same period in fiscal 2023. The increase was primarily due to an increase in referrals, approvals and reimbursement rates. The increase in referrals was due to an increase in direct sales representatives and the increase in approvals was due to an increase in reimbursement personnel.

Homecare distributor revenue. Homecare distributor revenue increased by $19,000, or 3.4%, for the three months ended September 30, 2023 compared to the same period in fiscal 2023.

Hospital revenue. Hospital revenue increased by $116,000, or 29.7%, for the three months ended September 30, 2023 compared to the same period in fiscal 2023. This increase was primarily due to an increase in sales representatives focused on the hospital market.

International revenue. International revenue increased by $10,000, or 12.3%, for the three months ended September 30, 2023 compared to the same period in fiscal 2023.

Gross profit

Gross profit increased to $9,498,000, or 77.1% of net revenues, for the three months ended September 30, 2023, from $8,331,000 or 78.2% of net revenues, in the same period in fiscal 2023. The increase in gross profit in dollars for the three months ended September 30, 2023 was primarily due to increased revenue. Gross margin rate decreased year over year as a result of increased material and labor costs.

Operating expenses

Selling, general and administrative expenses. Selling, general and administrative (“SG&A”) expenses were $9,150,000 for the three months ended September 30, 2023, representing an increase of $1,161,000 or 14.5%, compared to the same period in the prior year.

Payroll and compensation-related expenses increased by $882,000, or 18.1%, to $5,766,000 for the three months ended September 30, 2023, compared to the same period in the prior year. The increase was primarily due to salaries and incentive compensation related to the higher average number of sales, sales support and marketing personnel, 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 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 59 as of September 30, 2023, 51 of which were direct sales representatives, compared to 53 field sales employees and 44 direct sales representatives as of September 30, 2022.

Travel, meals and entertainment expenses increased $23,000, or 2.6%, to $917,000 for the three months ended September 30, 2023, compared to the same period in the prior year. The increase was primarily due to the impacts of inflation on airfare and lodging and costs associated with our annual sales meeting as well as a higher average number of direct sales representatives.

Total discretionary marketing expenses increased $274,000, or 108.3%, to $527,000 for the three months ended September 30, 2023, compared to the same period in the prior year. The increase was primarily due to an investment in market research, direct-to-consumer and direct-to-physician marketing.

Professional fees decreased $120,000, or 8.4%, to $1,311,000 for the three months ended September 30, 2023, 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 and consulting fees. The decrease was primarily due to legal fees in Q1 fiscal 2023 related to a reimbursement project that did not recur in Q1 fiscal 2024.

Research and development expenses. Research and development (“R&D”) expenses decreased $92,000, or 30.9%, to $206,000 for the three months ended September 30, 2023 compared to the same period in the prior year. The decrease was primarily due to reduced costs associated with our SmartVest Clearway platform development which has now been launched into the Homecare market.

Interest income, net

Net interest income increased $73,000, or 1,820.2%, to $77,000 for the three months ended September 30, 2023, compared to the same period in the prior year. The increase is due to increased savings rates associated with cash balances.

Income tax expense

Income tax expense was estimated at $64,000 for the three months ended September 30, 2023 and the income tax benefit was estimated at $33,000 for the three months ended September 30, 2022. The effective tax rates were 29.3% and (68.8%) for the three months ended September 30, 2023 and 2022, respectively. The income tax expense for the three months ended September 30, 2022 included a discrete tax benefit of $44,000 related to the exercise of stock options.

Net income

Net income for the three months ended September 30, 2023 was $155,000 compared to $81,000 for the same period in the prior year. The increase in net income was primarily due to increased revenue.

Liquidity and Capital Resources

Cash Flows and Sources of Liquidity

Cash Flows from Operating Activities

For the three months ended September 30, 2023, net cash used in operating activities was $244,000. Cash flows provided by operating activities consisted of net income of $155,000, non-cash expenses of $585,000, a decrease in accounts receivable of $675,000 and a decrease of prepaid expenses of 901,000. These cash flows from operating activities were offset by a decrease in accrued compensation of $1,174,000, a decrease in accounts payable and other accrued liabilities of $863,000, an increase in inventory of $240,000, an increase in contract assets of $57,000 and a decrease in income tax payable of $226,000. The decrease in accrued compensation was primarily due to the payment of annual incentives.

Cash Flows from Investing Activities

For the three months ended September 30, 2023, cash used in investing activities was $133,000. Cash used in investing activities consisted of $109,000 of expenditures for property and equipment and $24,000 in expenditures for intangible asset costs.

Cash Flows from Financing Activities

For the three months ended September 30, 2023, cash provided by financing activities was $29,000, consisting of cash received upon stock option exercises.

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 $30,419,000 and available borrowings under our existing credit facility will provide sufficient liquidity to meet our anticipated working capital and other liquidity needs for the next twelve months from the date of this report.

Our credit facility provides us with a revolving line of credit. Interest on borrowings on the line of credit accrues at the prime rate (8.50% on September 30, 2023) less 1.00% and is payable monthly. There was no outstanding principal balance on the line of credit as of September 30, 2023 or June 30, 2023. 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, and the line of credit expires on December 18, 2023, if not renewed. As of September 30, 2023, 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 nonfinancial 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.

For the three months ended September 30, 2023 and 2022, we spent $109,000 and $241,000, respectively, on property and equipment. We currently expect to finance planned equipment purchases with cash flows from operations. 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 the 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 2024 and the foreseeable future. We will continue to evaluate our projected expenditures relative to our available cash and evaluate financing alternatives in order to satisfy our working capital and other cash requirements.

Information Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact should be considered forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 expectations with respect to earnings, gross margins and sales growth, industry relationships, marketing strategies and international sales; estimated sizes of markets into which our products are or may be sold; our business strengths and competitive advantages; our ability to grow additional sales distribution channels; our intent to retain any earnings for use in operations rather than paying dividends; our expectation that our products will continue to qualify for reimbursement and payment under government and private insurance programs; our intellectual property plans and practices; the expected impact of applicable regulations on our business; our beliefs about our manufacturing processes; our expectations and beliefs with respect to our employees and our relationships with them; our belief that our current facilities are adequate to support our growth plans; our expectations with respect to ongoing compliance with the terms of our credit facility; our expectations regarding the ongoing availability of credit and our ability to renew our line of credit; enhancements to our products and services; expected excise tax exemption for the SmartVest System; 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. 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. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements.

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 including potential adverse impact with an expiration of the Centers for Medicare and Medicaid Services waiver for certain respiratory diseases;

•

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

•

adverse changes to state and federal health care regulations;

•

our ability to maintain regulatory compliance and to gain future regulatory approvals and clearances;

•

entry of new competitors including new drug or pharmaceutical discoveries;

•

adverse economic and business conditions or intense competition;

•

the risks associated with our planned salesforce expansion;

•

wage and component price inflation;

•

technical problems with our research and products;

•

the risks associated with cyberattacks, data breaches, computer viruses and other similar security threats;

•

changes affecting the medical device industry;

•

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

•

adverse international health care regulation impacting current international business;

•

our ability to renew our line of credit or obtain additional credit as necessary; and

•

our ability to protect and expand our intellectual property portfolio.

This list of factors is not exhaustive, however, and these or other factors, many of which are outside of our control, could have a material adverse effect on us and our results of operations. Therefore, you should consider these risk factors with caution and form your own critical and independent conclusions about the likely effect of these risk factors on our future performance. Forward-looking statements speak only as of the date on which the statements are made, and we undertake no obligation, and expressly disclaim any such obligation, to update any forward-looking statement for any reason other than as required by law, even if new information becomes available or other events occur in the future. You should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for fiscal 2023. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth herein.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period subject to this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the date of such evaluation to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Changes to Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings.

The disclosure regarding legal proceedings set forth in Note 9 to our unaudited Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference. Occasionally, we may be party to legal actions, proceedings, or claims in the ordinary course of business, including claims based on 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 1A. Risk Factors.

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

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

On May 26, 2021, our Board of Directors (the “Board”) approved the repurchase of up to $3.0 million of outstanding shares of our common stock. The shares of our common stock may be repurchased under the authorization on the open market or in privately negotiated transactions subject to applicable securities laws and regulations. The current repurchase authorization does not expire and the approximate dollar value of shares that may yet be purchased under the plan as of September 30, 2023 was approximately $275,000.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

None.

Item 5.

Other Information.

During the three months ended September 30, 2023, 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 6.

Exhibits.

Exhibit Number		Description	Method of Filing
3.1		Composite Articles of Incorporation, as amended through November 8, 2010 (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the fiscal year ended June 30, 2015)	Incorporated by Reference

3.2	Amended and Restated Bylaws, effective September 29, 2020 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed September 29, 2020)	Incorporated by Reference

31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed Electronically

31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed Electronically

32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished Electronically

32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished Electronically

101	Financial statements from the Quarterly Report on Form 10-Q for the period ended September 30, 2023, formatted in inline XBRL: (i) Condensed Balance Sheets, (ii) Condensed Statements of Operations, (iii) Condensed Statements of Cash Flows, (iv) Condensed Statements of Shareholders’ Equity, and (v) Notes to Condensed Financial Statements	Filed Electronically

104	Cover Page Interactive Data File (embedded within the inline XBRL Document)	Filed Electronically

*Management compensatory contract or arrangement.

SIGNATURES

Pursuant to the requirements 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: November 7, 2023		/s/ James L. Cunniff
		James L. Cunniff, President and Chief Executive Officer (duly authorized officer)

Date: November 7, 2023		/s/ Bradley M. Nagel
		Bradley M. Nagel, Chief Financial Officer (principal financial officer and principal accounting officer)

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James L. Cunniff, certify that:

I have reviewed this report on Form 10-Q of Electromed, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2023	/s/ James L. Cunniff
	James L. Cunniff
	President and Chief Executive Officer

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Bradley M. Nagel, certify that:

I have reviewed this report on Form 10-Q of Electromed, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2023	/s/ Bradley M. Nagel
	Bradley M. Nagel
	Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Electromed, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, James L. Cunniff, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 7, 2023	/s/ James L. Cunniff
	James L. Cunniff
	President and Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Electromed, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Bradley M. Nagel, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 7, 2023	/s/ Bradley M. Nagel
	Bradley M. Nagel
	Chief Financial Officer

Cover - shares	3 Months Ended
Cover - shares	Sep. 30, 2023	Nov. 02, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--06-30
Entity File Number	001-34839
Entity Registrant Name	Electromed, Inc.
Entity Central Index Key	0001488917
Entity Tax Identification Number	41-1732920
Entity Incorporation, State or Country Code	MN
Entity Address, Address Line One	500 Sixth Avenue NW
Entity Address, City or Town	New Prague
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	56071
City Area Code	952
Local Phone Number	758-9299
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	ELMD
Security Exchange Name	NYSEAMER
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		8,581,677

Condensed Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2023	Jun. 30, 2023
Current Assets
Cash and cash equivalents	$ 7,024,000	$ 7,372,000
Accounts receivable (net of allowances for doubtful accounts of $45,000)	23,455,000	24,130,000
Contract assets	544,000	487,000
Inventories	4,480,000	4,221,000
Prepaid expenses and other current assets	692,000	1,577,000
Total current assets	36,195,000	37,787,000
Property and equipment, net	5,534,000	5,672,000
Finite-life intangible assets, net	613,000	605,000
Other assets	143,000	161,000
Deferred income taxes	1,581,000	1,581,000
Total assets	44,066,000	45,806,000
Current Liabilities
Accounts payable	1,057,000	1,372,000
Accrued compensation	1,844,000	3,018,000
Income tax payable	110,000	336,000
Warranty reserve	1,424,000	1,378,000
Other accrued liabilities	1,341,000	1,949,000
Total current liabilities	5,776,000	8,053,000
Other long-term liabilities	68,000	86,000
Total liabilities	5,844,000	8,139,000
Shareholders’ Equity
Common stock, $0.01 par value per share, 13,000,000 shares authorized; 8,579,050 and 8,555,238 shares issued and outstanding, as of September 30, 2023 and June 30, 2023, respectively	86,000	86,000
Additional paid-in capital	19,188,000	18,788,000
Retained earnings	18,948,000	18,793,000
Total shareholders’ equity	38,222,000	37,667,000
Total liabilities and shareholders’ equity	$ 44,066,000	$ 45,806,000

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2023	Jun. 30, 2023
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 45,000	$ 45,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized	13,000,000	13,000,000
Common stock, issued	8,579,050	8,555,238
Common stock, outstanding	8,579,050	8,555,238

Condensed Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Net revenues	$ 12,324,000	$ 10,658,000
Cost of revenues	2,826,000	2,327,000
Gross profit	9,498,000	8,331,000
Operating expenses
Selling, general and administrative	9,150,000	7,989,000
Research and development	206,000	298,000
Total operating expenses	9,356,000	8,287,000
Operating income	142,000	44,000
Interest income, net	77,000	4,000
Net income before income taxes	219,000	48,000
Income tax expense (benefit)	64,000	(33,000)
Net income	$ 155,000	$ 81,000
Income per share:
Basic	$ 0.02	$ 0.01
Diluted	$ 0.02	$ 0.01
Weighted-average common shares outstanding:
Basic	8,537,388	8,445,893
Diluted	8,782,824	8,689,377

Condensed Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash Flows From Operating Activities
Net income	$ 155,000	$ 81,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	202,000	134,000
Amortization of finite-life intangible assets	12,000	20,000
Share-based compensation expense	371,000	95,000
Deferred income taxes		6,000
Changes in operating assets and liabilities:
Accounts receivable	675,000	95,000
Contract assets	(57,000)	(167,000)
Inventories	(240,000)	(500,000)
Prepaid expenses and other assets	901,000	(125,000)
Income tax payable, net	(226,000)	(175,000)
Accounts payable and accrued liabilities	(863,000)	(26,000)
Accrued compensation	(1,174,000)	(1,132,000)
Net cash used in operating activities	(244,000)	(1,694,000)
Cash Flows From Investing Activities
Expenditures for property and equipment	(109,000)	(241,000)
Expenditures for finite-life intangible assets	(24,000)	(15,000)
Net cash used in investing activities	(133,000)	(256,000)
Cash Flows From Financing Activities
Issuance of common stock upon exercise of options	29,000
Taxes paid on net share settlement of stock option exercises		(60,000)
Repurchase of common stock		(145,000)
Net cash provided by (used in) financing activities	29,000	(205,000)
Net decrease in cash	(348,000)	(2,155,000)
Cash and cash equivalents
Beginning of period	7,372,000	8,153,000
End of period	7,024,000	5,998,000
Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes	251,000	135,000
Supplemental Disclosures of Noncash Investing and Financing Activities
Property and equipment acquisitions in accounts payable	34,000	46,000
Intangible asset acquisitions in accounts payable		9,000
Demonstration equipment returned to inventory	$ 19,000	$ 5,000

Condensed Statements of Shareholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Beginning balance, value at Jun. 30, 2022	$ 85,000	$ 18,308,000	$ 15,780,000	$ 34,173,000
Balance at beginning (in shares) at Jun. 30, 2022	8,475,438
Net income			81,000	81,000
Issuance of restricted stock
Issuance of restricted stock (in shares)	27,400
Forfeiture of restricted stock
Forfeiture of restricted stock (in shares)	(14,166)
Issuance of common stock upon exercise of options
Issuance of common stock upon exercise of options (in shares)	11,760
Taxes paid on stock options exercised on a net basis		(60,000)		(60,000)
Share-based compensation expense		95,000		95,000
Repurchase of common stock			(145,000)	(145,000)
Repurchase of common stock (in shares)	(14,568)
Ending balance, value at Sep. 30, 2022	$ 85,000	18,343,000	15,716,000	34,144,000
Balance at ending (in shares) at Sep. 30, 2022	8,485,864
Beginning balance, value at Jun. 30, 2023	$ 86,000	18,788,000	18,793,000	$ 37,667,000
Balance at beginning (in shares) at Jun. 30, 2023	8,555,238			8,555,238
Net income			155,000	$ 155,000
Issuance of restricted stock
Issuance of restricted stock (in shares)	20,878
Forfeiture of restricted stock
Issuance of common stock upon exercise of options		29,000		29,000
Issuance of common stock upon exercise of options (in shares)	2,934
Taxes paid on stock options exercised on a net basis
Share-based compensation expense		371,000		371,000
Repurchase of common stock
Repurchase of common stock (in shares)				(239,995)
Ending balance, value at Sep. 30, 2023	$ 86,000	$ 19,188,000	$ 18,948,000	$ 38,222,000
Balance at ending (in shares) at Sep. 30, 2023	8,579,050			8,579,050

Interim Financial Reporting

3 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Interim Financial Reporting

Note 1. Interim Financial Reporting

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

Recently Issued Accounting Standards

Revenues

3 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenues

Note 2. Revenues

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

Schedule of disaggregated revenue

	Three Months Ended September 30,
	2023		2022
Homecare	$	11,153,000	$	9,632,000
Hospital		507,000		391,000
Homecare distributor		573,000		554,000
International		91,000		81,000
Total	$	12,324,000	$	10,658,000

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

	Three Months Ended September 30,
	2023		2022
Commercial	$	5,765,000	$	3,879,000
Medicare		3,948,000		4,245,000
Medicare Supplemental		983,000		1,137,000
Medicaid		293,000		154,000
Other		164,000		217,000
Total	$	11,153,000	$	9,632,000

Revenues are recognized at a point in time when control passes to the customer upon product shipment or delivery.

●

Contract balances. The following table provides information about contract assets from contracts with customers:

Schedule of contract asset

	Three Months Ended September 30, 2023			Fiscal Year Ended June 30, 2023
	Increase (decrease)			Increase (decrease)
Contract assets, beginning	$	488,000		$	286,000
Reclassification of contract assets to accounts receivable		(447,000	)		(1,220,000	)
Contract assets recognized		761,000			1,351,000
Increase (decrease) because of changes in the estimate of amounts to be realized from payers, excluding amounts transferred to receivables during the period		(258,000	)		71,000
Contract assets, ending	$	544,000		$	488,000

Inventories

3 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

Inventories

Note 3. Inventories

The components of inventory were as follows:

	September 30, 2023			June 30, 2023
Parts inventory	$	3,559,000		$	3,420,000
Work in process		500,000			470,000
Finished goods		518,000			323,000
Estimated inventory to be returned		263,000			265,000
Less: Reserve for obsolescence		(360,000	)		(257,000	)
Total	$	4,480,000		$	4,221,000

Warranty Reserve

3 Months Ended

Sep. 30, 2023

Guarantees and Product Warranties [Abstract]

Warranty Reserve

Note 4. Warranty Reserve

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

	Three Months Ended September 30, 2023			Fiscal Year Ended June 30, 2023
Warranty reserve, beginning	$	1,378,000		$	1,256,000
Accrual for products sold		153,000			416,000
Expenditures and costs incurred for warranty claims		(107,000	)		(294,000	)
Warranty reserve, ending	$	1,424,000		$	1,378,000

Income Taxes

3 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 5. Income Taxes

Income tax expense was estimated at $64,000, and the effective tax rate was 29.3% for the three months ended September 30, 2023.

Financing Arrangements

3 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Financing Arrangements

Note 6. Financing Arrangements

Common Stock

3 Months Ended

Sep. 30, 2023

Common Stock

Common Stock

Note 7. Common Stock

Share-Based Compensation

3 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Share-Based Compensation

Note 8. Share-Based Compensation

Stock Options

Stock option transactions during the three months ended September 30, 2023 are summarized as follows:

Schedule of stock option transactions

	Number of Shares			Weighted-Average Exercise Price per Share
Outstanding at June 30, 2023		451,570		$	6.93
Granted		255,562		$	10.71
Exercised		(2,934	)	$	9.90
Cancelled or Forfeited		(6,646	)	$	10.91
Outstanding at September 30, 2023		697,552		$	8.26

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

	Three Months Ended September 30, 2023	Fiscal Year Ended June 30, 2023
Risk-free interest rate	4.07-4.43%	2.88-4.23%
Expected term (years)	6	6
Expected volatility	53%	53-54%

Restricted Stock

Performance-Based Restricted Stock Units

Commitments and Contingencies

3 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 9. Commitments and Contingencies

Interim Financial Reporting (Policies)	3 Months Ended
Interim Financial Reporting (Policies)	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Use of estimates.	Use of estimates. Management uses estimates and assumptions in preparing the unaudited Condensed Financial Statements in accordance with 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 unaudited Condensed Financial Statements include revenue recognition and the related estimation of variable consideration, inventory valuation, share-based compensation and warranty reserve.
Net income per common share.	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 common stock at the beginning of the period unless their effect would be anti-dilutive. Common stock equivalents excluded from the calculation of diluted earnings per share because their impact was anti-dilutive were 403,944 and 212,023 for the three months ended September 30, 2023 and 2022, respectively.
Recently Issued Accounting Standards	Recently Issued Accounting Standards In June 2016, the Financial Accounting Board issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments -- Credit Losses: Measurement of Credit Losses on Financial Instruments, which was subsequently amended by ASU 2018-19, ASU 2019-04, 2019-05, 2019-10, 2019-11, and 2020-02. The standard introduces new accounting guidance for credit losses on financial instruments within its scope, including trade receivables. This new guidance adds an impairment model that is based on expected losses rather than incurred losses. The company adopted the standard effective July 1, 2023. The Company’s adoption of the standard did not have a material impact on the financial statements.

Revenues (Tables)

3 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Schedule of disaggregated revenue

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

Schedule of disaggregated revenue

	Three Months Ended September 30,
	2023		2022
Homecare	$	11,153,000	$	9,632,000
Hospital		507,000		391,000
Homecare distributor		573,000		554,000
International		91,000		81,000
Total	$	12,324,000	$	10,658,000

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

	Three Months Ended September 30,
	2023		2022
Commercial	$	5,765,000	$	3,879,000
Medicare		3,948,000		4,245,000
Medicare Supplemental		983,000		1,137,000
Medicaid		293,000		154,000
Other		164,000		217,000
Total	$	11,153,000	$	9,632,000

Schedule of contract asset

Contract balances. The following table provides information about contract assets from contracts with customers:

Schedule of contract asset

	Three Months Ended September 30, 2023			Fiscal Year Ended June 30, 2023
	Increase (decrease)			Increase (decrease)
Contract assets, beginning	$	488,000		$	286,000
Reclassification of contract assets to accounts receivable		(447,000	)		(1,220,000	)
Contract assets recognized		761,000			1,351,000
Increase (decrease) because of changes in the estimate of amounts to be realized from payers, excluding amounts transferred to receivables during the period		(258,000	)		71,000
Contract assets, ending	$	544,000		$	488,000

Inventories (Tables)

3 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

The components of inventory were as follows:

	September 30, 2023			June 30, 2023
Parts inventory	$	3,559,000		$	3,420,000
Work in process		500,000			470,000
Finished goods		518,000			323,000
Estimated inventory to be returned		263,000			265,000
Less: Reserve for obsolescence		(360,000	)		(257,000	)
Total	$	4,480,000		$	4,221,000

Warranty Reserve (Tables)

3 Months Ended

Sep. 30, 2023

Guarantees and Product Warranties [Abstract]

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

	Three Months Ended September 30, 2023			Fiscal Year Ended June 30, 2023
Warranty reserve, beginning	$	1,378,000		$	1,256,000
Accrual for products sold		153,000			416,000
Expenditures and costs incurred for warranty claims		(107,000	)		(294,000	)
Warranty reserve, ending	$	1,424,000		$	1,378,000

Share-Based Compensation (Tables)

3 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of stock option transactions

Stock option transactions during the three months ended September 30, 2023 are summarized as follows:

Schedule of stock option transactions

	Number of Shares			Weighted-Average Exercise Price per Share
Outstanding at June 30, 2023		451,570		$	6.93
Granted		255,562		$	10.71
Exercised		(2,934	)	$	9.90
Cancelled or Forfeited		(6,646	)	$	10.91
Outstanding at September 30, 2023		697,552		$	8.26

Schedule of assumptions were used to estimate the fair value of stock options granted

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

	Three Months Ended September 30, 2023	Fiscal Year Ended June 30, 2023
Risk-free interest rate	4.07-4.43%	2.88-4.23%
Expected term (years)	6	6
Expected volatility	53%	53-54%

Interim Financial Reporting (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Net revenues	$ 12,324,000	$ 10,658,000
Common stock equivalents included from calculation of diluted earnings per share	403,944	212,023
International [Member]
Net revenues	$ 91,000	$ 81,000

Schedule of disaggregated revenue (Details) - USD ($)	3 Months Ended
Schedule of disaggregated revenue (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 12,324,000	$ 10,658,000
Home Care [Member]
Disaggregation of Revenue [Line Items]
Revenue	11,153,000	9,632,000
Home Care [Member] \| Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue	5,765,000	3,879,000
Home Care [Member] \| Medicare [Member]
Disaggregation of Revenue [Line Items]
Revenue	3,948,000	4,245,000
Home Care [Member] \| Medicare Supplemental [Member]
Disaggregation of Revenue [Line Items]
Revenue	983,000	1,137,000
Home Care [Member] \| Medicaid [Member]
Disaggregation of Revenue [Line Items]
Revenue	293,000	154,000
Home Care [Member] \| Other [Member]
Disaggregation of Revenue [Line Items]
Revenue	164,000	217,000
Hospital [Member]
Disaggregation of Revenue [Line Items]
Revenue	507,000	391,000
Home Care Distributor [Member]
Disaggregation of Revenue [Line Items]
Revenue	573,000	554,000
International One [Member]
Disaggregation of Revenue [Line Items]
Revenue	$ 91,000	$ 81,000

Schedule of contract asset (Details) - USD ($)	3 Months Ended	12 Months Ended
Schedule of contract asset (Details) - USD ($)	Sep. 30, 2023	Jun. 30, 2023
Revenue from Contract with Customer [Abstract]
Contract assets beginning	$ 487,000	$ 286,000
Reclassification of contract assets to accounts receivable	(447,000)	(1,220,000)
Contract assets recognized	761,000	1,351,000
Increase (decrease) as a result of changes in the estimate of amounts to be realized frompayers, excluding amounts transferred to receivables during the period	(258,000)	71,000
Contract assets, ending	$ 544,000	$ 487,000

The components of inventory were as follows: (Details) - USD ($)	Sep. 30, 2023	Jun. 30, 2023
Inventory Disclosure [Abstract]
Parts inventory	$ 3,559,000	$ 3,420,000
Work in process	500,000	470,000
Finished goods	518,000	323,000
Estimated inventory to be returned	263,000	265,000
Less: Reserve for obsolescence	(360,000)	(257,000)
Total	$ 4,480,000	$ 4,221,000

Changes in the Company’s warranty reserve were as follows: (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2023	Jun. 30, 2023
Guarantees and Product Warranties [Abstract]
Warranty reserve, beginning	$ 1,378,000	$ 1,256,000
Accrual for products sold	153,000	416,000
Expenditures and costs incurred for warranty claims	(107,000)	(294,000)
Warranty reserve, ending	$ 1,424,000	$ 1,378,000

Income Taxes (Details Narrative) - USD ($)	3 Months Ended
Income Taxes (Details Narrative) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Income Tax Disclosure [Abstract]
Income tax expense	$ 64,000	$ (33,000)
Effective tax rate	29.30%	68.80%
Discrete current tax benefit		$ 44,000

Financing Arrangements (Details Narrative) - USD ($)	3 Months Ended
Financing Arrangements (Details Narrative) - USD ($)	Sep. 30, 2023	Jun. 30, 2023
Line of Credit Facility [Line Items]
Minimum tangible net worth to be maintained	$ 10,125,000
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 2,500,000
Credit facility effective date	Dec. 18, 2023
Line of credit balance	$ 0	$ 0
Basis spread on rate	1.00%
Available borrowing capacity	$ 2,500,000
Borrowing capacity of eligible accounts receivable percent	57.00%
Available borrowing capacity	$ 2,500,000
Revolving Credit Facility [Member] \| Prime Rate [Member]
Line of Credit Facility [Line Items]
Interest rate	8.50%

Common Stock (Details Narrative) - USD ($)	3 Months Ended
Common Stock (Details Narrative) - USD ($)	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2023	May 26, 2022
Common stock, authorized	13,000,000		13,000,000
Common stock, par value (in dollars per share)	$ 0.01		$ 0.01
Number of share repurchased	239,995
Repurchase of common stock	$ 2,725,000
Share price	$ 11.36
Board of Directors Chairman [Member]
Common stock, authorized				3,000,000
Common Stock [Member]
Common stock, authorized	13,000,000
Common stock, par value (in dollars per share)	$ 0.01
Number of share repurchased		14,568
Capital Stock [Member]
Common stock, authorized	15,000,000
Authorized Shares Undesignated Stock [Member]
Common stock, authorized	2,000,000

Schedule of stock option transactions (Details)	3 Months Ended
Schedule of stock option transactions (Details)	Sep. 30, 2023 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Option outstanding, ending	697,552
Share-Based Payment Arrangement, Option [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Option outstanding , beginning	451,570
Weighted average grant date fair value, beginning \| $ / shares	$ 6.93
Granted	255,562
Granted \| $ / shares	$ 10.71
Exercised	(2,934)
Exercised \| $ / shares	$ 9.90
Cancelled or Forfeited	(6,646)
Cancelled or Forfeited \| $ / shares	$ 10.91
Option outstanding, ending	697,552
Weighted average grant date fair value, ending \| $ / shares	$ 8.26

Schedule of assumptions were used to estimate the fair value of stock options granted (Details)	3 Months Ended	12 Months Ended
	Sep. 30, 2023	Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]
Risk free interest rate - minimum	4.07%	2.88%
Risk free interest rate - maximum	4.43%	4.23%
Expected term (years)	6 years	6 years
Expected volatility - maximum	53.00%	54.00%
Expected volatility - maximum		53.00%

Share-Based Compensation (Details Narrative) - USD ($)	3 Months Ended
Share-Based Compensation (Details Narrative) - USD ($)	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based compensation expense	$ 371,000	$ 95,000
Unrecognized compensation expense, period for recognition	3 years 2 months 30 days
Options exercisable, intrinsic value	$ 1,740,000
Shares outstanding	697,552
Vested and exercisable	375,673
Options exercisable, intrinsic value	$ 1,717,000
Unrecognized compensation expense	$ 1,444,000
Fair value of per share	$ 10.72
Share-Based Payment Arrangement, Option [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized compensation expense, period for recognition	6 years 10 months 25 days
Shares outstanding	697,552		451,570
Shares granted	255,562
Share-Based Payment Arrangement, Option [Member] \| Employee [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting term	3 years
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized compensation expense, period for recognition	2 years 6 months
Unrecognized compensation expense	$ 257,000
Restricted Stock [Member] \| Employee [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock issued	20,878
Restricted stock - unvested	39,111
Weight average fair value - unvested restricted stock (per share)	$ 10.49
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based compensation expense	$ 73,000	$ 0
Unrecognized compensation expense, period for recognition	3 years 9 months
Shares outstanding	175,000
Unrecognized compensation expense	$ 1,079,000
Fair value of per share		$ 6.58
Shares granted	175,000
Other description	The performance-based restricted stock units will be 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 grant date fair value of the awards was determined using a Monte Carlo valuation model with an expected term of four years.

Commitments and Contingencies (Details Narrative)	3 Months Ended
Commitments and Contingencies (Details Narrative)	Sep. 30, 2023 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Judgement date	July 10, 2023
Payment for settlement	$ 825,000