Electromed, Inc. 10-K

Item 9A. 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 Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act, as of the end of the period subject to this Annual Report on Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting refers to the process designed by, or under the supervision of, our President and Chief Executive Officer and our Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and (3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of preventing and detecting misstatements on a timely basis. It is possible to design into the process safeguards to reduce, though not eliminate, the risk that misstatements are not prevented or detected on a timely basis. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management has concluded that, as of June 30, 2020, our internal control over financial reporting was effective. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that exempt smaller reporting companies from the auditor attestation requirement. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 22 PART III Certain information required by Part III is incorporated by reference from our definitive Proxy Statement for the Fiscal 2021 Annual Meeting of Shareholders to be held on November 13, 2020 (the “Proxy Statement”). Except for those portions specifically incorporated in this Annual Report on Form 10-K by reference to the Proxy Statement, no other portions of the Proxy Statement are deemed to be filed as part of this Annual Report on Form 10-K. Item 10. Directors, Executive Officers and Corporate Governance. Information about our Executive Officers The following sets forth certain information about our current executive officers: Kathleen S. Skarvan , age 64, joined Electromed in December 2012 as Chief Executive Officer, became a director in November 2013 and was appointed to the additional position of President in August 2015. Ms. Skarvan served as Vice President of Operations at OEM Fabricators from November 2011 until October 2012. Prior to her position with OEM Fabricators, Ms. Skarvan served in various roles at Hutchinson Technology Incorporated, most recently as the President of the Disk Drive Components Division from April 2007 until March 2011. As President of the Disk Drive Components Division, Ms. Skarvan managed a public company division with annual revenues in excess of $300 million. Ms. Skarvan also served as a Senior Vice President of Hutchinson Technology Incorporated from December 2010 to March 2011, and as Vice President of Sales & Marketing of the Disk Drive Components Division from October 2003 until April 2007. She has served on the Board of Trustees of the St. Cloud State University Foundation since June 2015. Ms. Skarvan has a bachelor’s degree from St. Cloud State University. Michael J. MacCourt , age 42, joined Electromed in May 2020 as Chief Financial Officer. Prior to joining Electromed, he served as the Senior Director of Commercial Finance at Starkey Hearing Technologies, a large private hearing aid manufacturer, since August 2019. He was responsible for partnering with Starkey’s senior leadership team to develop and execute the company’s commercial strategy. Previously, he spent more than nine years at Medtronic in roles of increasing responsibility, concluding with his service as Divisional Chief Financial Officer of the Lung Health business from May 2015 to August 2019. Mr. MacCourt also has an extensive consulting background primarily at PricewaterhouseCoopers, where he held management roles in both financial process improvement and business analytics. Mr. MacCourt started his career at Procter & Gamble and then ConAgra Foods, where he held Financial Analyst, Cost Analyst and Business Analyst positions. Mr. MacCourt graduated from Drake University with a joint degree in Accounting/Finance, and is a Certified Public Accountant (CPA), a CFA charterholder, and a Certified Management Accountant (CMA). Code of Ethics Our Board annually reviews and approves revisions to our Code of Ethics and Business Conduct (the “Code of Ethics”) that applies to all employees, directors, and officers, including the Chief Executive Officer and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer). The Code of Ethics was updated in May 2020 and is available in the “Investor Relations” section of our website at www.smartvest.com. We intend to disclose on our website any amendment to or waiver from any provision of the Code of Ethics that applies to our Chief Executive Officer or Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), and that relates to any element of the Code of Ethics identified in Item 406(b) of Regulation S-K, as promulgated by the SEC. Such disclosure will be provided promptly following the date of the amendment or waiver. The additional information required by this item is incorporated herein by reference to the sections labeled “Election of Directors,” “Corporate Governance,” “and “Security Ownership Certain Beneficial Owners and Management” and, if any, under “Delinquent Section 16(a) Reports” in the Proxy Statement. Item 11. Executive Compensation. The information required by this item is incorporated herein by reference to the sections labeled “Executive Compensation,” “Director Compensation,” and “Corporate Governance – Personnel and Compensation Committee” in the Proxy Statement. 23 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item relating to the security ownership of certain holders is incorporated herein by reference to the sections labeled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item is incorporated herein by reference to the sections labeled “Corporate Governance–Independence” and “Related Person Transaction Approval Policy” in the Proxy Statement. Item 14. Principal Accountant Fees and Services. The information required by this item is incorporated herein by reference to the section labeled “Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm – Audit Fees” in the Proxy Statement. Item 15. Exhibits and Financial Statement Schedules. (a) Documents filed as part of this report. (1) Financial Statements. The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K: ● Report of Independent Registered Public Accounting Firm ● Balance Sheets as of June 30, 2020 and 2019 ● Statements of Operations for the years ended June 30, 2020 and 2019 ● Statements of Shareholders’ Equity for the years ended June 30, 2020 and 2019 ● Statements of Cash Flows for the years ended June 30, 2020 and 2019 ● Notes to Financial Statements (2) Financial Statement Schedules. No financial statement schedule is required to be included in this Annual Report on Form 10-K. 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 Composite Bylaws, as amended through March 28, 2013 (incorporated by reference to Exhibit 3.2 to Annual Report on Form 10-K for the fiscal year ended June 30, 2015) Incorporated by Reference 4.1 Description of Securities (incorporated by reference to Exhibit 4.1 to Annual Report on Form 10-K for the fiscal year ended June 30, 2019) Incorporated by Reference 10.1 Electromed, Inc. 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 15, 2011)* Incorporated by Reference 10.2 Form of Stock Option Award Agreement under the Electromed, Inc. 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q for the quarter ended December 31, 2011)* Incorporated by Reference 10.3 Electromed, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 25, 2014)* Incorporated by Reference 24 Exhibit Number Description Method of Filing 10.4 Form of Incentive Stock Option Agreement under the Electromed, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed November 25, 2014)* Incorporated by Reference 10.5 Form of Nonqualified Stock Option Agreement under the Electromed, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed November 25, 2014)* Incorporated by Reference 10.6 Form of Restricted Stock Agreement under the Electromed, Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed November 25, 2014)* Incorporated by Reference 10.7 Electromed, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 99.1 to Registration Statement on Form S-8)* Incorporated by Reference 10.8 Form of Restricted Award Agreement under the 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 to Annual Report on Form 10-K for the year ended June 30, 2018)* Incorporated by Reference 10.9 Form of Non-Qualified Option Agreement under the 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2019)* Incorporated by Reference 10.10 Form of Restricted Stock Agreement (Non-Employee Directors) under the 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to Annual Report on Form 10-K for the year ended June 30, 2018)* Incorporated by Reference 10.11 Non-Competition, Non-Solicitation and Confidentiality Agreement with Kathleen Skarvan dated effective December 1, 2012 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed December 3, 2012)* Incorporated by Reference 10.12 Non-Competition, Non-Solicitation, and Confidentiality Agreement with Jeremy Brock dated as of October 18, 2011 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed October 19, 2011)* Incorporated by Reference 10.13 Amended and Restated Employment Agreement with Kathleen Skarvan dated as of December 2, 2019 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 6, 2019)* Incorporated by Reference 10.14 Amended and Restated Employment Agreement with Jeremy Brock dated as of December 2, 2019 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed December 6, 2019)* Incorporated by Reference 10.15 Employment Agreement with Michael J. MacCourt dated as of May 7, 2020 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed May 18, 2020)* Incorporated by Reference 10.16 Business Loan Agreement (Asset Based) with Venture Bank, dated December 18, 2016 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 16, 2016) Incorporated by Reference 10.17 Rider to Business Loan Agreement (Asset Based) with Choice Financial Group, dated December 18, 2018 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 18, 2018) Incorporated by Reference 10.18 Business Loan Agreement with Choice Financial Group, dated December 18, 2019 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 17, 2019) Incorporated by Reference 10.19 Rider to Business Loan Agreement (Asset Based) with Choice Financial Group, dated December 18, 2019 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed December 17, 2019) Incorporated by Reference 10.20 Description of Fiscal Year 2020 Officer Bonus Plan (incorporated by reference to Exhibit 10.20 to Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed August 27, 2019)* Incorporated by Reference 25 Exhibit Number Description Method of Filing 10.21 Description of Fiscal Year 2021 Officer Bonus Plan* Filed Electronically 23.1 Consent of Independent Registered Public Accounting Firm Filed Electronically 24.1 Powers of Attorney Filed Electronically 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed Electronically 31.2 Certification Pursuant to Section 302of the Sarbanes-Oxley Act of 2002 Filed Electronically 32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed Electronically 32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed Electronically 101.CAL XBRL Taxonomy Extension Calculation Linkbase Filed Electronically 101.DEF XBRL Taxonomy Extension Definition Linkbase Filed Electronically 101.INS XBRL Instance Document Filed Electronically 101.LAB XBRL Taxonomy Extension Label Linkbase Filed Electronically 101.PRE XBRL Taxonomy Extension Presentation Linkbase Filed Electronically 101.SCH XBRL Taxonomy Extension Schema Filed Electronically * Management compensatory contract or arrangement. Item 16. Form 10-K Summary. None. 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ELECTROMED, INC. Date: August 25, 2020 By /s/ Kathleen S. Skarvan Kathleen S. Skarvan President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Kathleen S. Skarvan President, Chief Executive Officer and Director August 25, 2020 Kathleen S. Skarvan (principal executive officer) /s/ Michael J. MacCourt Chief Financial Officer August 25, 2020 Michael J. MacCourt (principal financial and accounting officer) * Chairman and Director August 25, 2020 Stephen H. Craney * Director August 25, 2020 Stan K. Erickson * Director August 25, 2020 Gregory J. Fluet * Director August 25, 2020 Lee A. Jones * Director August 25, 2020 George H. Winn * The undersigned, by signing her name hereto, does hereby sign this document on behalf of each of the above-named directors of the registrant pursuant to powers of attorney duly executed by such persons. By /s/ Kathleen S. Skarvan Kathleen S. Skarvan Attorney-in-Fact 27