What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-08-22 compared with 2022-08-23 · 250 added, 215 removed, 581 unchanged (44% of the section changed)

10 unchanged sentences

on the Financial Statements

have audited the accompanying balance sheets of Electromed, Inc.

(the Company) as of June 30, 2022 and 2021, the related

statements of operations, shareholders’ equity and cash flows for the years then ended, and the related notes to the financial

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as of June 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity

with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

We have audited the accompanying balance sheets of Electromed, Inc.

(the Company) as of June 30, 2023 and 2022, the related statements of operations, shareholders' equity and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was

communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of

the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not,

by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts

or disclosures to which it relates.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

of Customer Revenue Net of Adjustments

6 unchanged sentences

● Selected a sample of product sales to inspect and compare to the underlying source documents and final cash collections to test the reasonableness of the contractual adjustment and collection percentage assumptions used in management’s estimate.

a sample of product sales, we traced gross revenue and adjustments to net revenue recorded

in the general ledger.

the reasonableness of management’s estimate of contractual and collection reserves

1 unchanged sentence

portfolio groups.

○ Recalculating

o Recalculating

the contractual and collection reserve estimates and compared them to the general ledger.

the quarterly trend analysis for portfolio groups for changes in historical realization

o Evaluating whether quarterly historical realization percentages were reasonable and qualitatively consistent with internal and external independent data

have served as the Company’s auditor since 2010.

June 30, 2023 and 2022

and cash equivalents

receivable (net of allowances for doubtful accounts of $ 45,000 )

expenses and other current assets

Current Assets

and equipment, net

intangible assets, net

and Shareholders’ Equity

accrued liabilities

Cash and cash equivalents

Accounts receivable (net of allowances for doubtful accounts of $ 45,000 )

Contract assets

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Finite-life intangible assets, net

Deferred income taxes

Liabilities and Shareholders’ Equity

Current Liabilities

long-term liabilities

and Contingencies

Shareholders’

stock, $ 0.01 par value, 13,000,000 shares authorized;

8,475,438 and 8,533,209 issued and outstanding, as of June 30, 2022

and June 30, 2021, respectively

paid-in capital

Accounts payable

Accrued compensation

Income tax payable

Warranty reserve

Other accrued liabilities

Total current liabilities

Other long-term liabilities

Total liabilities

Commitments and Contingencies (Note 11)

Shareholders’ Equity

liabilities and shareholders’ equity

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

8,555,238 and 8,475,438 issued and outstanding, as of June 30, 2023 and June 30, 2022, respectively

Additional paid-in capital

Retained earnings

Total shareholders’ equity

Total liabilities and shareholders’ equity

Notes to Financial Statements.

2 unchanged sentences

Ended June 30,

general and administrative

and development

Cost of revenues

Operating expenses

income before income taxes

Weighted-average

common shares outstanding:

Selling, general and administrative

Research and development

Total operating expenses

Operating income

Interest income, net

Net income before income taxes

Income tax expense

Income per share:

Weighted-average common shares outstanding:

Notes to Financial Statements.

11 unchanged sentences

as of June 30, 2022

of restricted stock

of restricted stock, net

of common stock upon exercise of options

2 unchanged sentences

of common stock

( 1,447,000 )

( 1,448,000 )

as of June 30, 2023

4 unchanged sentences

Ended June 30,

Flows from Operating Activities

to reconcile net income to net cash (used in) provided by operating activities:

of finite-life intangible assets

compensation expense

in operating assets and liabilities:

Cash Flows from Operating Activities

Adjustments to reconcile net income to net cash provided by (used in operating activities:

Amortization of finite-life intangible assets

Share-based compensation expense

Deferred income taxes

Changes in operating assets and liabilities:

Accounts receivable

( 3,078,000 )

( 4,020,000 )

Contract assets

( 1,033,000 )

expenses and other current assets

( 1,072,000 )

payable and accrued liabilities

cash (used in) provided by operating activities

Flows from Investing Activities

for property and equipment

Prepaid expenses and other current assets

( 1,322,000 )

for finite-life intangible assets

cash used in investing activities

Income tax payable

Accounts payable and accrued liabilities

Accrued compensation

Net cash provided by (used in) operating activities

Cash Flows from Investing Activities

Expenditures for property and equipment

( 1,648,000 )

Flows from Financing Activities

of common stock upon exercise of options

paid on stock options exercised on a net basis

of common stock

( 1,425,000 )

Expenditures for finite-life intangible assets

Net cash used in investing activities

( 1,716,000 )

cash used in financing activities

( 1,525,000 )

Cash Flows from Financing Activities

Issuance of common stock upon exercise of options

Taxes paid on stock options exercised on a net basis

Repurchase of common stock

( 1,448,000 )

(decrease) increase in cash

Net cash used in financing activities

( 1,525,000 )

and cash equivalents

Disclosures of Cash Flow Information

paid for income taxes

Disclosures of Noncash Investing and Financing Activities

and equipment acquisitions in accounts payable

asset acquisitions in accounts payable

assets obtained in exchange for new operating lease liabilities

Net decrease in cash

( 3,736,000 )

Cash and cash equivalents

Beginning of period

End of period

Supplemental Disclosures of Cash Flow Information

Cash paid for income taxes

Supplemental Disclosures of Noncash Investing and Financing Activities

Property and equipment acquisitions in accounts payable

Intangible asset acquisitions in accounts payable

Lease assets obtained in exchange for new operating lease liabilities

Demonstration equipment returned to inventory

Notes to Financial Statements.

Notes to Financial Statements

Nature of Business and Summary of Significant Accounting Policies

Nature of Business and Summary of Significant Accounting

Electromed, Inc.

19 unchanged sentences

These waivers were made retroactively effective to March

1, 2020 and were in place for the duration of fiscal 2021 and fiscal 2022.

Clinical indications and documentation typically required

were not enforced for respiratory related products including the Company’s SmartVest® Airway Clearance System (“SmartVest

System”) (solely with respect to direct Medicare covered patients) applicable for the Company’s home care prescriptions.

The minimum documentation now requires a valid order and documentation of a respiratory related diagnosis.

Face-to-face and in-person

requirements for respiratory devices are being waived while the waiver is in place.

The CMS waiver was recently extended in conjunction

with the extension of the federal public health emergency for an additional 90-day period beginning July 15, 2022.

suspension of a 2% tax on Medicare payments was also initiated in May 2020 and was extended through December 2021.

impact of the COVID-19 pandemic on the Company’s business remains uncertain and its effects on operational and financial

performance will depend in part on future developments, which cannot be reasonably estimated at this time.

Such future developments

include, but are not limited to, the duration, scope and severity of the COVID-19 pandemic in geographic areas in which the Company

operates or in which its patients live, actions taken to contain or mitigate its impact, the impact on governmental healthcare

programs and budgets, the deployment of treatments or vaccines, and the resumption of widespread economic activity.

inherent uncertainty of the unprecedented and evolving situation, the Company is unable to predict with confidence the likely

impact of the COVID-19 pandemic on its future operations.

1, 2020 and were in place for the duration of fiscal 2021 and fiscal 2022 and through May 11, 2023.

Clinical indications and documentation

typically required were not enforced for respiratory related products including the Company’s SmartVest® Airway Clearance

System (“SmartVest System”) (solely with respect to direct Medicare covered patients) applicable for the Company’s

home care prescriptions.

potential impact of the COVID-19 pandemic and its effects on our operational and financial performance will depend in large part

on future developments, which cannot be reasonably estimated at this time.

summary of the Company’s significant accounting policies follows:

61 unchanged sentences

of both inside and outside sales representatives, who use the equipment in the sales process.

The Company determines if an arrangement is a lease at inception.

Where an arrangement is a lease, the Company determines

if it is an operating lease or a finance lease.

At lease commencement, the Company records a lease liability and corresponding

right of use ROU asset.

Lease liabilities represent the present value of our future lease payments over the expected lease term,

which includes options to extend or terminate the lease when it is reasonably certain those options will be exercised.

value of the Company’s lease liability is determined using its incremental collateralized borrowing rate at lease inception.

ROU assets represent the Company’s right to control the use of the leased assets during the lease and are recognized in

an amount equal to the lease liability for leases with an initial term greater than 12 months.

Over the lease term (operating

leases only), the Company uses the effective interest rate method to account for the lease liability as lease payments are made

and the ROU asset is amortized to consolidated statement of operations in a manner that results in straight line expense recognition.

intangible assets :

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Ended June 30,

warranty reserve

for products sold

and costs incurred for warranty claims

warranty reserve

Beginning warranty reserve

Accrual for products sold

Expenditures and costs incurred for warranty claims

Ending warranty reserve

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary

28 unchanged sentences

Expense is recognized

on a straight-line basis over the requisite service or vesting period of the award, or at the time services are provided for non-employee

on a graded vesting basis over the requisite service or vesting period of the award, or at the time services are provided for

non-employee awards.

value of financial instruments :

24 unchanged sentences

with early adoption permitted.

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

is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable

13 unchanged sentences

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 Statements of Operations.

Shipping and handling costs associated with the shipment of the 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 Statements of Operations.

timing of revenue recognition, billings and cash collections results in accounts receivable on the Balance Sheets as further described

5 unchanged sentences

Institutional

care distributor

Home care distributor

International

1 unchanged sentence

Ended June 30,

Medicare Supplemental

in the Company’s home care, home care distributor and international markets are recognized at a point in time when control

1 unchanged sentence

Revenues in the Company’s institutional market include sales recognized

at a point in time upon shipment or delivery as well as revenues recognized over time under operating leases.

at a point in time upon shipment or delivery.

obligations and transaction price.

159 unchanged sentences

Schedule of contract assets

included in “Accounts receivable, net of allowance for doubtful accounts”

Receivables, included in “Accounts receivable, net of allowance for doubtful accounts”

Contract Assets

changes in contract assets during the period are as follows:

assets, beginning

Reclassification

of contract assets to accounts receivable

Contract assets, beginning

Reclassification of contract assets to accounts receivable

( 1,220,000 )

assets recognized

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

receivables during the period

assets, ending

Contract assets recognized

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

Contract assets, ending

components of inventory were as follows:

Schedule of components of inventories

inventory to be returned

Parts inventory

Work in process

Finished goods

Estimated inventory to be returned

Reserve for obsolescence

3 unchanged sentences

and building improvements

Demonstration

and rental equipment

Land improvements

Demonstration and rental

Accumulated depreciation

12 unchanged sentences

Ended June 30,

Balance, beginning

Amortization expense

Balance, ending

on the carrying value as of June 30, 2023, future amortization is expected to be as follows:

12 unchanged sentences

before such date.

At June 30, 2022, 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.

As of June 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.

documents governing the line of credit contain certain financial and nonfinancial covenants that include a minimum tangible net

4 unchanged sentences

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.

the authorization, the Company was originally able to repurchase up to $ 3.0 million of shares of common stock through May 26,

On May 26, 2022, our Board of Directors removed the date limitation.

30, 2022, a total of 120,416 shares have been repurchased and retired under this authorization for a total cost of $ 1,448,000 ,

or $ 12.02 per share.

Repurchased shares have been retired and constitute authorized but unissued shares.

As of June 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.

Share-Based Compensation

compensation expense for fiscal 2022 and 2021 was $ 976,000 and $ 1,024,000 , respectively, related to employee stock options and

restricted stock awards.

compensation expense for fiscal 2023 and 2022 was $ 708,000 and $ 976,000 , respectively, related to employee stock options and restricted

stock awards.

This expense is included in selling, general and administrative expense in the Statements of Operations.

As of June 30, 2022, the Company had $460,000 of unrecognized compensation expense related to non-vested equity awards, which

is expected to be recognized over a weighted-average period of 1.5 to 2.0 years related to restricted stock awards and employee

stock options, respectively.

30, 2023, the Company had $ 296,000 of unrecognized compensation expense related to non-vested equity awards, which is expected

to be recognized over a weighted-average period of 1.5 to 1.84 years related to restricted stock awards and employee stock options,

respectively.

The Company has historically granted stock options to employees as long-term incentive compensation.

2 unchanged sentences

In November 2017, the Company’s shareholders approved

the 2017 Omnibus Incentive Plan (the “2017 Plan”) which supersedes the 2014 Equity Incentive Plan (the “2014

the 2017 Omnibus Incentive Plan (the “2017 Plan”) which superseded the 2014 Equity Incentive Plan (the “2014

The 2017 Plan allows the Board to grant stock options, stock appreciation rights, restricted stock, restricted stock

22 unchanged sentences

Ended June 30,

interest rate

Risk-free interest rate

2.88 - 4.23 %

0.89 - 2.52 %

the year ended June 30, 2022, the Company had a change in estimate related to its expected volatility used to estimate the fair

value of options granted.

The change had no impact on the Financial Statements.

The following table presents employee stock option

activity for fiscal 2022 and 2021:

Expected term (years)

Expected volatility

following table presents employee stock option activity for fiscal 2023 and 2022:

Schedule of stock option transactions

Weighted-Average

Grant Date Fair Value

Weighted-Average

Exercise Price

Life (in Years)

outstanding as of June 30, 2020

outstanding as of June 30, 2021

exercisable as of June 30, 2021

outstanding as of June 30, 2022

exercisable as of June 30, 2022

Weighted-Average

Contractual Life (in Years)

Options outstanding as of June 30, 2021

Canceled or forfeited

Options outstanding as of June 30, 2022

Options exercisable as of June 30, 2022

Canceled or forfeited

Options outstanding as of June 30, 2023

Options exercisable as of June 30, 2023

intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds its exercise price.

9 unchanged sentences

a vesting term of one to three years and a fair value of $ 9.92 and $ 11.48 per share, respectively.

During fiscal 2022 and 2021,

the Company issued restricted stock awards to directors totaling 18,000 each year, with a vesting term of six months and a fair

value of $ 12.09 and $ 9.94 per share for fiscal 2022 and 2021,respectively.

Restricted stock transactions during the years ended

June 30, 2022 and 2021 are summarized as follows:

The Company issued restricted

stock awards to directors totaling 21,000 and 18,000 during fiscal 2023 and 2022, respectively, with a vesting term of six months

and a fair value of $ 9.86 and $ 12.09 per share for fiscal 2023 and 2022, respectively.

Restricted stock transactions during the

years ended June 30, 2023 and 2022 are summarized as follows:

Schedule of restricted stock transactions

Restricted Stock

of Restricted Stock

Weighted-Average

Grant Date Fair

Value per Share

as of June 30, 2020

as of June 30, 2021

as of June 30, 2022

Grant Date Fair Value per Share

Outstanding as of June 30, 2021

Outstanding as of June 30, 2022

Canceled or forfeited

Outstanding as of June 30, 2023

of the provision for income taxes were as follows:

1 unchanged sentence

Ended June 30,

Income Tax Expense

total income tax expense differed from the expected tax expense, computed by applying the federal statutory rate to the Company’s

pretax income, as follows:

Current Federal

Current State

Total Current

Deferred Federal

Deferred State

Total Deferred

Total Income Tax Expense

income tax expense differs from the expected tax expense, computed by applying the statutory federal income tax rate to the Company’s

earnings before income taxes, as follows:

Schedule of effective income tax reconciliation

Ended June 30,

expense at statutory federal rate

income tax expense, net of federal tax effect

in valuation allowance on deferred tax assets

permanent items

Tax expense at statutory federal rate

State income tax expense, net of federal tax effect

Share based compensation

Change in valuation allowance on deferred tax assets

Other permanent items

Income tax expense

effective tax rates for fiscal 2023 and 2022 were 22.5 % and 23.1 %, respectively.

1 unchanged sentence

Schedule of significant components of deferred income taxes

tax assets (liabilities):

recognition and accounts receivable reserves

and equipment

intangible assets

method change

allowance on deferred taxes

Deferred tax assets:

Company has state tax credits of $ 152,000 , net of federal taxes, which if unused, will begin to expire in calendar year 2026.

The Company has taken a full valuation allowance against these credits which relate to research and development tax credits in

Minnesota, a state in which the Company has a low state apportionment factor.

Revenue recognition and accounts receivable reserves

Accrued liabilities

Finite-life intangible assets

Stock options

Valuation allowance

Net deferred tax assets

Deferred tax liabilities:

Finite-life intangible assets

Property and equipment

Total deferred tax liabilities

Net deferred tax assets

Company has research and development state tax credit carryforwards of $ 221,000 and $ 152,000 as of June 30, 2023 and June 30,

2022, respectively.

Based on the historical use of the credits, management believes it is more likely than not these credits will

begin to expire between fiscal years 2025 and 2038.

As of June 30, 2023 and June 30, 2022, the Company had a valuation allowance

of $ 221,000 and $ 152,000 , respectively, related to its research and development state tax carryforwards.

Company applies the accounting standard for uncertain tax positions pursuant to which a more-likely-than-not threshold is utilized

5 unchanged sentences

tax positions be recognized in earnings in the period of such a change.

The Company does not have any uncertain tax positions

as of June 30, 2022 and June 30, 2021.

The Company does not believe that it has any material

uncertain tax positions as of June 30, 2023 and June 30, 2022.

Company is subject to U.S.

1 unchanged sentence

With limited exceptions,

tax years prior to the Company’s fiscal year ended June 30, 2019 are no longer open to federal, state and local examination

by taxing authorities.

The Company’s examination by the Internal Revenue Service (the “IRS”) for the fiscal

year ended June 30, 2020 is complete and the IRS has no findings.

the Company is no longer subject to federal and state income tax examinations by tax authorities for fiscal year ended prior to

June 30, 2020.

The Internal Revenue Service has completed its examination of the Company’s U.S.

federal income tax return

for the fiscal year ended June 30, 2020 without proposing any adjustments.

The Company is not under any current income tax examinations

9 unchanged sentences

The Company currently does

not have any short-term or variable lease costs.

The Company elected the practical expedient to calculate the present value of

the fixed payments without having to perform an allocation to lease and non-lease components.

not have any variable lease costs.

The Company elected the practical expedient

to calculate the present value of the fixed payments without having to perform an allocation to lease and non-lease components.

Company has recognized right of use assets associated with its operating leases of $161,000 and $120,000 as of June 30, 2023 and

June 30, 2022, respectively, which is included in other assets on the Company’s balance sheet.

Operating lease liabilities

were $ 120,000 and $ 87,000 as of June 30, 2022 and June 30, 2021, respectively, which are included in other accrued liabilities

and other long-term liabilities on the Company’s balance sheet.

Operating lease liabilities were

and $ 120,000

as of June 30, 2023 and June 30, 2022, respectively, which are included in other accrued liabilities and other long-term liabilities

on the Company’s balance sheet.

of June 30, 2023, the Company has a weighted-average lease term of 1.5 years for its operating leases, which have a weighted-average

discount rate of 4.0 %.

Operating lease payments of $ 94,000 are included in operating cash flows in fiscal 2022.

discount rate of 4.0 %.Operating lease payments of $ 82,000

are included in operating cash flows in fiscal 2023.

of lease liabilities, which are included in other accrued liabilities and other long-term liabilities on the Balance Sheet, are

Schedule of maturities of lease liabilities

years ending June 30:

lease payments

value of lease liabilities

Fiscal years ending June 30:

Total lease payments

Present value of lease liabilities

Commitments and Contingencies

12 unchanged sentences

dismiss the complaint in its entirety.

Prior to the hearing on the motion to dismiss, the parties agreed in principal to settle

The parties are continuing to negotiate the settlement agreement and expect to submit a motion to settle the class

action in the near future.

If the parties are unable to agree to the settlement terms or, if the Court does not grant the

motion for settlement, the Company will continue to vigorously defend the lawsuit;

however, at this time, the Company is unable

to determine the ultimate outcome or potential exposure to loss, if any.

Prior to the hearing on the motion to dismiss, the parties agreed in principle to settle

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.

As a result of the

judgement, there was no additional impact on the financial statements as of or for the year ended June 30, 2023.

Profit Sharing Plan:

The Company has an employee benefit plan under Section 401(k) of the Internal Revenue Code covering all

employees who are 21 years of age or older and have at least 1,000 hours of service with the Company.

The Company matches each

employee’s salary reduction contribution, not to exceed four percent of annual compensation.

Total employer contributions

to this plan for fiscal 2022 and 2021 were $ 461,000 and $ 399,000 , respectively.

The Company has entered into formal employment agreements with its President and Chief Executive Officer, its

Interim Chief Financial Officer, and its Chief Commercial Officer, as amended from time to time.

These agreements provide these

officers with, among other things, twelve to eighteen months of base salary upon a termination without “Cause” or

in the event the employee resigns for “Good Reason” or within twelve months of a “Change in Control,”

as such terms are defined in the respective employment agreements.

employees who are 21 years of age or older.

The Company matches each employee’s salary reduction contribution, not to exceed

four percent of annual compensation.

Total employer contributions to this plan for fiscal 2023 and 2022 were $ 524,000 and $ 461,000 ,

respectively.

The Company has entered into formal employment agreements with its President and Chief Executive Officer and its

Chief Financial Officer, as may be amended from time to time.

These agreements provide these officers with, among other things,

twelve and eighteen months, respectively, of base salary upon a termination without “Cause” or in the event the employee

resigns for “Good Reason” or within twelve months of a “Change in Control,” as such terms are defined

in the respective employment agreements.

Related Parties

2 unchanged sentences

Amounts due to the supplier

at June 30, 2022 were $ 160,000 , which were included in accounts payable on the Balance Sheets.

There was no amount due to the

supplier at June 30, 2021.

were $ 247,000 and $ 160,000 on June 30, 2023 and June 30 2022 respectively, which were included in accounts payable on the Balance

Subsequent Events

4 unchanged sentences

to the Financial Statements.

MacCourt, the Company’s former Chief Financial Officer, Treasurer and Secretary, ceased to serve in those positions effective

July 1, 2022 at which time the Company terminated its formal employment agreement with Mr.

in and Disagreements With Accountants on Accounting and Financial Disclosure.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data