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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

 (Mark
 One)

 Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 For
 the Fiscal Year Ended June 30, 2024

 or

 Transition
 Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 For the Transition Period From ________ to ________.

 Commission
File number 001-34839

 Inc.

 (Exact
 Name of Registrant as Specified in its Charter)

 Minnesota

 41-1732920

 (State or other jurisdiction of

 (IRS Employer

 incorporation or organization)

 Identification No.)

Sixth Avenue NW, New Prague, MN 56071

 (Address
of principal executive offices, including zip code)

 (952) 758-9299

 (Registrant's
 telephone number, including area code)

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

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 Common
 Stock, par value $0.01 per share

 ELMD

 NYSE
 American LLC

 Securities
registered pursuant to Section 12(g) of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
 No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No

 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

 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

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.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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

 The
aggregate market value of the common stock held by non-affiliates of the registrant as of December 31, 2023 was approximately
$ 83,862,301 based upon the closing price of the registrant's common stock, as reported on the NYSE American, on such date.

 There
were 8,638,917 shares of the registrant's common stock outstanding as of August 20, 2024.

 DOCUMENTS
INCORPORATED BY REFERENCE

 Portions
of the Definitive Proxy Statement for the registrant's annual meeting of shareholders, to be filed within 120 days of June
30, 2024, are incorporated by reference into Part III of this Annual Report on Form 10-K.

Inc.

to Annual Report on Form 10-K

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties.

 Item 3.

 Legal Proceedings.

 Item 4.

 Mine Safety Disclosures.

 Item 5.

 Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 Item 6.

 [Reserved].

 Item 7.

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

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk.

 Item 8.

 Financial Statements and Supplementary Data.

 Item 9.

 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 Item 9A.

 Controls and Procedures.

 Item 9B.

 Other Information.

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

 Item 10.

 Directors, Executive Officers and Corporate Governance.

 Item 11.

 Executive Compensation.

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence.

 Item 14.

 Principal Accountant Fees and Services.

 Item 15.

 Exhibits and Financial Statement Schedules.

 Item 16.

 Form 10-K Summary.

 i

 INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS

contained in this Annual Report on Form 10-K 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 research and development
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;

 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;

 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 the results of our 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").
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.

 ii

 PART
I

 Item
1. Business.

 Overview

Inc. ("we," "our," "us," "Electromed" or the "Company") develops,
manufactures, markets and sells innovative products that provide airway clearance therapy, including the SmartVest
Airway Clearance System ("SmartVest System") to patients with compromised pulmonary function with a commitment to
excellence and compassionate service. Our goal is to make High Frequency Chest Wall Oscillation ("HFCWO") treatments
as effective, convenient, and comfortable as possible, so our patients can breathe easier and live better with improved respiratory
function and fewer exacerbations.

 We
primarily employ a direct-to-patient and provider model, through which we obtain patient referrals from clinicians, manage insurance
claims on behalf of our patients, and deliver the SmartVest System to patients, training them on proper use in their homes. This
model allows us to directly approach patients and clinicians, whereby we disintermediate the traditional durable medical equipment
("DME") channel and capture both the manufacturer and distributor margins. We also sell our products in the acute
care setting for patients in a post-surgical or intensive care unit, or who were admitted for a lung infection brought on by compromised
airway clearance. Electromed was incorporated in Minnesota in 1992. Our common stock is listed on the NYSE American under the
ticker symbol "ELMD."

 The
SmartVest System generates HFCWO, an airway clearance therapy. The SmartVest System features a programmable air pulse generator,
a therapy garment worn over the upper body and a connecting hose, which together provide safe, comfortable, and effective therapy
to clear the lung and airway from retained secretions and mucus which can harbor bacteria and lead to infection. One important
factor of respiratory health is the ability to clear secretions from airways. Impaired airway clearance, when mucus cannot be
expectorated, may result in labored breathing, inflammatory response and/or immune systems boosting mucus production that invites
bacteria trapped in stagnant secretions to cause infections. Studies show that HFCWO therapy is as effective an airway clearance
method for patients who have compromised pulmonary function as traditional chest physical therapy ("CPT") administered
by a respiratory therapist. 1 However, HFCWO can be self-administered, relieving a caregiver of participation in the
therapy, and eliminating the attendant cost of an in-home care provider. We believe that HFCWO treatments are cost-effective primarily
because they reduce a patient's risk of respiratory infections and other secondary complications that are associated with
impaired airway clearance and often result in costly hospital visits and repeated antibiotic use.

 The
SmartVest System is designed for patient comfort and ease of use which promotes adherence to prescribed treatment schedules, leading
to improved airway clearance, patient outcomes and quality of life, and a reduction in healthcare utilization. We offer a broad
range of garments, referred to as vests and wraps, in sizes for children and adults that allow for a tailored fit. User-friendly
controls allow patients to administer their daily therapy with minimal or no assistance. Our direct product support services provide
patient and clinician education, training, and follow-up to ensure that the product is integrated into each patient's daily
treatment regimen. Additionally, our reimbursement department works on behalf of the patient by processing their physician paperwork,
providing clinical support and billing the applicable insurance provider. We believe that the advantages of the SmartVest System
and the Company's customer services to the patient include:

 improved
 quality of life;

 reduction
 in healthcare utilization;

 independence
 from a dedicated caregiver;

 consistent
 treatments at home;

 improved
 comfort during therapy; and

 eligibility
 for reimbursement by private insurance, federal or state government programs or combinations
 of the foregoing.

 1 Nicolini
A, et al. Effectiveness of treatment with high-frequency chest wall oscillation in patients with bronchiectasis. BMC Pulmonary
Medicine. 2013;13(21).

 Our
Products

 Since
2000, we have marketed the SmartVest System and its predecessor products to patients suffering from bronchiectasis, cystic fibrosis,
and neuromuscular conditions such as cerebral palsy and amyotrophic lateral sclerosis ("ALS"). Our products are sold
into the home health care market and the acute care setting for patients in a post-surgical or intensive care unit, or who were
admitted for a lung infection brought on by compromised airway clearance. Accordingly, our sales points of contact include adult
pulmonology clinics, cystic fibrosis centers, neuromuscular clinics and hospitals.

 We
have received clearance from the U.S. Food and Drug Administration ("FDA") to market the SmartVest System to promote
airway clearance and improve bronchial drainage. In addition, Electromed is approved for HFCWO device sales in other, select international
countries. The SmartVest System is available only with a physician's prescription.

 The
SmartVest System is currently available in two models, The SmartVest SQL and SmartVest Clearway –
which are sold into homecare and hospital markets. In November 2022, we announced the introduction of SmartVest Clearway,
our next generation HFCWO system designed around an enhanced patient experience and modern design. We will continue to support
and service earlier SmartVest models pursuant to the applicable product warranty. As part of our growth strategies, we evaluate
opportunities involving products and services, especially those that may provide value to the respiratory homecare and hospital
market.

 The
SmartVest Clearway System

 The
SmartVest Clearway System consists of an inflatable therapy garment, a programmable air pulse generator and a patented single-hose
that delivers air pulses from the generator to the garment to create oscillatory pressure on the chest wall. The SmartVest Clearway
is designed for maximum comfort and lifestyle convenience, so patients can readily fit therapy into their daily routines. The
SmartVest Clearway was designed with patient experience in mind, continuing our history of offering the smallest, lightest weight
generator on the market and featuring an intuitive touch screen to simplify use. The enhanced features make it easier to use and
enable greater patient freedom in completing therapy.

 oscillation coverage and patented Soft Start (R) technology: All SmartVest
 garments provide 360 oscillation coverage, which delivers simultaneous treatment
 to all lobes of the lungs. The oscillatory squeeze-and-release technology delivers therapeutic
 pressure to the chest wall to loosen, sheer and propel mucus into the upper airways where
 it can be more easily expectorated. Our patented Soft Start technology gently inflates
 the garment to better acclimate the patient to therapy.

 Open
 system design with Breathing Room TM: The active inflate – active
 deflate mechanism of the SmartVest System enables patients to take deep breaths during
 therapy without feeling restricted, providing patients with a more comfortable treatment
 experience.

 Programmable
 generator with user-friendly device operation: The SmartVest Clearway introduces
 an intuitive touchscreen with single touch start. The improved user interface enhances
 device programming and simplifies everyday use. The system features multiple operating
 modes, including ramp, favorite settings designations, and options for saving, locking
 and restoring protocols. An enhanced pause feature allows the physician to program dedicated
 times for the patient to clear secretions during therapy.

 Patented
 single-hose design: A single-hose delivers oscillations to the SmartVest garment,
 which we believe provides therapy in a more comfortable and unobtrusive manner than a
 two-hose system. Oscillations are delivered evenly from the base of the SmartVest garment,
 extending the forces upward and inward in strong but smooth cycles surrounding the chest.

 Soft-fabric
 garment is lightweight and comfortable: The SmartVest garment is the lightest HFCWO
 garment available and is designed to resemble an article of clothing. The garment's
 design takes weight off of the patient's shoulders and torso, enhancing the therapy
 experience. Quick fit Velcro -like closures allow for a secure, comfortable
 fit without bulky straps and buckles. The simple design creates a broad size adjustment
 range to ensure a properly tailored fit to accommodate pediatric and adult patients.

 Smaller
 and lighter: SmartVest Clearway is the smallest and lightest HFCWO generator on the
 market, weighing less than 14 pounds. The lightweight design, ergonomic carrying handle
 and compact storage case make it easier for patients to move throughout their home as
 well as store and integrate HFCWO therapy into their daily lives.

 Other
Products

 We
market the Single Patient Use ("SPU") SmartVest and SmartVest Wrap to health care providers in the
acute care setting. Hospitals issue the SPU SmartVest or SmartVest Wrap to an individual patient for managing airway clearance
while inpatient. Both SPU products provide full coverage oscillation and facilitate continuity of care when the SmartVest System
is prescribed for patients with a chronic condition upon discharge for use in the home.

 Our
Market

 We
estimate the U.S. market for HFCWO was approximately $235 million in 2023 growing at an 8% compound annual growth rate based on
independent third-party market research 15. We believe the market for HFCWO is under recognized and underdiagnosed and
is continuing to expand due to an aging population, higher incidence of chronic lung disease, growing awareness by physicians
of diseases and conditions for which patients can benefit from using HFCWO therapy, and treatments moving to lower cost homecare
settings. Indications for when HFCWO may be prescribed are not specific to any one disease. A physician may elect to prescribe
HFCWO when they believe the patient will benefit from improved airway clearance and external chest manipulation as the best treatment
to enhance mucus transport and improve bronchial drainage.

 The
SmartVest System is primarily prescribed for patients with bronchiectasis, cystic fibrosis, and neuromuscular conditions such
as cerebral palsy and ALS. We believe that bronchiectasis represents the fastest growing diagnostic category and greatest potential
for HFCWO growth in the United States growing at 12% annually in recent years 15. Bronchiectasis is an irreversible,
chronic lung condition characterized by enlarged and permanently damaged bronchi. The condition is associated with recurrent lower
respiratory infections, inflammation, reduction in pulmonary function, impaired respiratory secretion clearance, increased hospitalizations
and medication use, and increased morbidity and mortality.

 We
are driven to make life's important moments possible, one breath at a time, by leading the HFCWO therapy market in clinical
evidence that supports the therapeutic imperative of clearing excess mucus from the lungs. Electromed continues to add to the
body of evidence in support of HFCWO with multiple published clinical outcome studies demonstrating a significant improvement
in quality of life and reduction in exacerbation rates, hospitalizations, emergency department visits, and antibiotic prescriptions
in bronchiectasis patients using the SmartVest System. This includes a 2022 publication in the American Journal of Respiratory
and Critical Care Medicine reviewing outcomes among non-cystic fibrosis bronchiectasis patients with HFCWO Therapy 2-6.
In addition, we designed and ran a quality-of-life study for COPD patients using SmartVest, which was shared at the 2023 American
Thoracic Society International Conference and published in American Journal of Respiratory and Critical Care Medicine. The study's
results demonstrated statistically significant favorable responses to HFCWO as add on therapy for patients with a primary diagnosis
of COPD. We have also shared data from our bronchiectasis quality of life trial at the 2023 World Bronchiectasis and NTM
Conference, highlighting the effects of HFCWO with SmartVest on clinical symptoms of patients with bronchiectasis. Generating
additional clinical evidence to further support the SmartVest System as a preferred treatment for bronchiectasis patients
will remain a focus in the fiscal year ended June 30, 2025 ("fiscal 2025").

 We
believe that bronchiectasis is underrecognized and under-diagnosed but is experiencing a surge in clinical interest and awareness,
including the relationship to COPD, commonly referred to as bronchiectasis COPD overlap syndrome. The overlap of bronchiectasis
and COPD increases exacerbations and hospitalizations, reduces pulmonary function, and increases mortality. Several recent studies
have estimated prevalence of bronchiectasis, which we believe are helpful for estimating a range of the overall market size.

 Weycker
 (2017) projected 4.2 million adults in the United States over the age of 40 may have
 bronchiectasis, suggesting there is a large pool of patients with undiagnosed disease. 7

 Henkle
 (2018) confirmed a high prevalence of bronchiectasis in the United States, identifying
 over 600,000 unique patients with at least one bronchiectasis claim (ICD-9 claims 494.0
 or 494.1). The study also observed that patients with dual diagnosis of bronchiectasis
 and COPD were in poorer health, with more office visits, more inpatient admissions and
 more acute respiratory infections. 8

 Seitz
 (2012) estimated that 190,000 unique cases of bronchiectasis were diagnosed in Medicare
 patients in 2007 and bronchiectasis prevalence increased 8.7% annually between 2000 and
 2007. 9 Based on historic growth in prevalence and assuming a constant growth
 rate, the estimated number of bronchiectasis diagnoses in Medicare patients in 2021 exceeded
 608,000.

 Aksamit
 (2017) found 20% (n=350) of patients with bronchiectasis enrolled in the U.S. Bronchiectasis
 Research Registry between 2008 and 2014 also had COPD and 29% (n=515) also had asthma. 7
 Other studies have found that the overlap between bronchiectasis and COPD is observed
 in 27% to 57% of patients with COPD. 10-13–8

 Chalmers
 (2017) found that prevalence of bronchiectasis in patients with COPD ranged from a low
 of 4% to as high as 69% with mean prevalence of 54%. In many studies in patients with
 COPD, the presence of bronchiectasis was associated with reduced lung function, greater
 sputum production, more frequent exacerbations and increased mortality versus those with
 COPD alone. 14

 These
studies indicate a wide range of potential prevalence of bronchiectasis patients in the United States. We also believe that it
is difficult to estimate from these studies which patients will need or benefit from HFCWO. Internal company estimates derived
from a 2023 analysis of claims data indicate a 15% penetration of HFCWO within the 824,000 diagnosed Bronchiectasis population
(see Figure 1 below). We believe that bronchiectasis is underdiagnosed in the U.S. based on clinical study and epidemiology evidence
with an even greater number of patients that could potentially benefit from diagnosis and treatment. We believe that HFCWO is
under prescribed for bronchiectasis patients resulting in a large, underpenetrated US market opportunity and growth potential
for HFCWO therapy.

 2 Sievert
C, et al. Using High Frequency Chest Wall Oscillation in a Bronchiectasis Patient Population: An Outcomes-Based Case Review. Respiratory
Therapy Journal. 2016;11(4): 34–38.

 3 Sievert
C, et al. Cost-Effective Analysis of Using High Frequency Chest Wall Oscillation (HFCWO) in Patients with Non-Cystic Fibrosis
Bronchiectasis. Respiratory Therapy Journal. 2017;12(1): 45–49.

 4 Sievert
C, et al. Incidence of Bronchiectasis-Related Exacerbation Rates After High Frequency Chest Wall Oscillation (HFCWO) Treatment
— A Longitudinal Outcome-Based Study. Respiratory Therapy Journal. 2018;13(2): 38–41.

 5 Powner
J, et al. Employment of an algorithm of care including chest physiotherapy results in reduced hospitalizations and stability
of lung function in bronchiectasis. BMC Pulmonary Medicine. 2019;19(82).

 DeKoven M, Mandia K, DeFabis N, Chen J, Ruscio A. Patient Characteristics, Healthcare Resource Utilization And Outcomes
Among Non-Cystic Fibrosis Bronchiectasis Patients With High Frequency Chest Wall Oscillation (HFCWO) Therapy. American Journal
of Respiratory and Critical Care Medicine. 2022. Vol 205:A3090

 7 Weycker
D, Hansen G, Seifer F. Prevalence and incidence of noncystic fibrosis bronchiectasis among US adults in 2013. Chronic Respiratory
Disease. 2017; 14(4):377-384.

 8 Henkle
E, et al. Characteristics and Health-care Utilization History of Patients with Bronchiectasis in US Medicare Enrollees With Prescription
Drug Plans, 2006 to 2014. Chest. 2018;154(6), 1311–1320.

 9 Seitz
A, et al. Trends in Bronchiectasis Among Medicare Beneficiaries in the United States, 2000 to 2007. Chest. 2012;142(2),
432–439.

 10 Aksamit
T, et al. Bronchiectasis Research Registry C. Adult Patients With Bronchiectasis: A First Look at the US Bronchiectasis Research
Registry. Chest. 2017;151:982-92.

 11 Patel
I.S., et al. Bronchiectasis, exacerbation indices, and inflammation in chronic obstructive pulmonary disease. Am J Respir Crit
Care Med. 2004;170:400-7.

 12 O'Brien
C, et al. Physiological and radiological characterization of patients diagnosed with chronic obstructive pulmonary disease in
primary care. Thorax. 2000;55:635-42.

 13 Bafadhel
M, et al. The role of CT scanning in multidimensional phenotyping of COPD. Chest. 2011;140:634-42.

 14 Chalmers
J. and Sethi S. Raising awareness of bronchiectasis in primary care: overview of diagnosis and management strategies in adults.
 NPJ Prim Care Respir Med. 2017;27:18.

 Internal company estimates derived from VGM claims database

 M. Bruner, C. Bazan, B. Liu, C. Marion, K.S. Skarvan, L. Edwards, G. Solomon. Effects of High Frequency Chest Wall Oscillation
(HFCWO) on Clinical Symptoms in COPD. American Journal of Respiratory and Critical Care Medicine. 2023. Vol 207:C96

 C. Cheng, M. Bruner, C. Bazan, B. Liu, C. Marion, L. Edwards, G. Solomon. Effects of High Frequency Chest Wall Oscillation
(HFCWO) on Quality of Life in Bronchiectasis. 6th World Bronchiectasis & NTM Conference. 2023. Poster Abstract 310-B

 Internal company estimates derived from Guidehouse 2023 literature review and 2023 CDC NHANES data

 Estimated
HFCWO Market Opportunity - Bronchiectasis Patients (U.S.) – Figure 1

 The
heightened awareness of bronchiectasis speaks to the growing body of clinical evidence supporting treatments to improve symptoms
and manage disease progression.

 In
 2019, an observational comparative retrospective cohort study published in BMC Pulmonary
 Medicine evaluated the efficacy of a treatment algorithm in 65 patients with radiographic
 and symptom confirmed bronchiectasis, centered on initiation of HFCWO therapy with the
 SmartVest System. 5 Patients were treated per the algorithm if they reported
 greater than two exacerbations in the previous year and symptoms, including chronic cough,
 sputum production, or dyspnea. Results show that at one-year: exacerbations requiring
 hospitalization and antibiotic use were significantly reduced and mean forced expiratory
 volume remained stable post enrollment, suggesting early initiation of HFCWO therapy
 with SmartVest may slow the otherwise normal progression of the disease.

 In
 2022, the American Journal of Respiratory and Crucial Care Medicine published the results
 of a third-party retrospective cohort analysis of 101 qualifying NCFBE patients who received
 HFCWO. Key findings revealed that patients who used HFCWO therapy experienced improved
 health outcomes, a reduction in healthcare resource utilization and reduction in medication
 usage. 6

 Marketing,
Sales and Distribution

 Our
sales and marketing efforts are focused on driving adoption of our products and services with physicians, clinicians, patients,
and third-party payers and building market awareness to the benefits of HFCWO for treatment of bronchiectasis. Because the sale
of the SmartVest System requires a physician's prescription, we market to physicians and health care providers as well as
directly to patients. Most of our revenue comes from domestic homecare sales through a physician referral model. We have established
our own domestic sales force and support network, which we believe is able to provide superior education, support, and training
to our customers.

 Our
direct U.S. sales force works with physicians and clinicians, primarily pulmonologists, in defined territories to help them understand
our products and services and the value they provide to their respective patients. As of June 30, 2024, we had 62 field sales
employees, including six regional sales managers, 53 clinical area managers ("CAMs") and three clinical educators.
We also have developed a network of approximately 170 respiratory therapists across the U.S. to assist with in-home SmartVest
System patient training on a non-exclusive, independent contractor basis. These independent contractors are credentialed by the
National Board for Respiratory Care as either Certified Respiratory Therapists or Registered Respiratory Therapists and provide
national coverage to an internal team of Registered Respiratory Therapists dedicated to supporting SmartVest patients. Additionally,
Electromed employs a team of reimbursement specialists dedicated to managing insurance and payer relations and supporting prescribers
and patients in navigating financial considerations. The availability of reimbursement is an important consideration for health
care professionals and patients. Because our product has an assigned Healthcare Common Procedure Coding System ("HCPCS")
code, a claim can be billed for reimbursement using that code. We must demonstrate the effectiveness of our products to public
and private insurance providers. The availability of reimbursement exists primarily due to an established HCPCS code for HFCWO.
A HCPCS code is assigned to services and products by the Centers for Medicare and Medicaid Services ("CMS").

 Of
the $54.2 million of our revenue derived from the U.S. in fiscal 2024, approximately 94.7% represented homecare, inclusive of
homecare distributor sales, and 4.7% represented hospital sales. We expect to achieve future sales, earnings, and overall market
share growth through a continued focus on product innovation, differentiation and improved patient experiences and outcomes in
the homecare market. We believe that our position in the market, direct sales team and a dedication to advancing education on
HFCWO awareness positions us to drive market awareness and growth to the benefits of HFCWO in treatment of bronchiectasis. We
believe that dedicated service to our providers and patients is a key component of achieving future sales. Providers seek companies
that are easy to work with, are responsive and care for their patients as an extension of their practices.

 We
generate sales interest through multiple channels that include visits to pulmonology clinics and medical centers, participation
in medical conferences, maintenance of industry contacts to increase the visibility and acceptance of our products by physicians
and health care professionals, support of industry through the COPD Foundation, as well as through a focus on increasing patients
by word of mouth and traffic to our website and social media channels. We continue to evaluate opportunities to offer the SmartVest
System through selected Home Medical Equipment ("HME") distributors. We maintain agreements with a limited number
of HME distributors to distribute and sell the SmartVest System in the United States homecare market. We expect to continue our
direct sales channel as our primary homecare revenue source.

 Approximately
1.0% of our net revenues were from sales outside of the U.S. in both of our fiscal 2024 and our fiscal year ended June 30, 2023
("fiscal 2023"), respectively. We sell our products outside of the U.S. primarily through independent distributors
specializing in respiratory products. Through June 30, 2024, most of our distributors operated in exclusive territories. Our principal
distributors are located in Europe, the Arab states of the Persian Gulf, Southeast Asia, and Central America. Units are sold at
a fixed contract price with payments made directly from the distributor, rather than being tied to reimbursement rates of a patient's
insurance provider as is the case for domestic sales. Our sales strategy outside of the U.S. is to support our current distributors
with less emphasis on contracting with new distributors.

 Third-Party
Reimbursement

 In
the U.S., individuals who use the SmartVest System generally rely on third-party payers, including private payers and governmental
payers such as Medicare and Medicaid, to cover and reimburse all or part of the cost of using the SmartVest System. Our homecare
revenue comes from reimbursement from commercial payers, Medicare, Medicaid, Veterans Affairs and direct patient payments. Reimbursement
for HFCWO therapy and the SmartVest System varies among public and private insurance providers.

 A
key strategy to grow sales is achieving world class customer service and support for our patients and clinicians and increasing
the number of covered lives across a broad payer market. We do this with an established and effective reimbursement department
working on behalf of the patient by processing physician paperwork, seeking insurance authorization and processing claims. The
skill and knowledge gained and offered by our reimbursement department is an important factor in building our revenue and serving
patients' financial interests. Our payment terms generally allow patients to acquire the SmartVest System over a period
of one to 15 months, which is consistent with reimbursement procedures followed by Medicare and other third parties. The payment
amount we receive for any single referral may vary based on several factors, including Medicare and third-party reimbursement
processes and policies. The reimbursement department includes our payer relations function working directly with all payer types
to increase the covered lives for the SmartVest System with national and regional private insurers and applicable state and federal
government entities as well as to maintain the current licenses with state and federal government and payer contracts.

 Our
SmartVest System is reimbursed under HCPCS code E0483. Currently, the Medicare total allowable amount of reimbursement for this
billing code is approximately $15,000. The allowed amount for state Medicaid programs ranges from approximately $8,000 to $15,000,
which is similar to commercial payers. Actual reimbursement from third-party payers can vary and can be significantly less than
the full allowable amount. Deductions from the allowable amount, such as co-payments, deductibles and/or maximums on durable medical
equipment, decrease the reimbursement received from the third-party payer. Collecting a full allowable amount depends on our ability
to obtain reimbursement from the patient's secondary and/or supplemental insurance if the patient has additional coverage,
or our ability to collect amounts from individual patients.

 Most
patients can qualify for reimbursement and payment from Medicare, Medicaid, private insurance or combinations of the foregoing.
Our sales continue to be dependent, in part, on the availability of coverage and reimbursement from third-party payers, even though
our devices have been cleared for marketing by the FDA. The way reimbursement is sought and obtained varies based upon the type
of payer involved and the setting in which the procedure is furnished.

 Research
and Development

 Our
research and development ("R&D") capabilities consist of full-time engineering staff and several consultants.
We periodically engage consultants and contract engineering employees to supplement our development initiatives. Our team has
a demonstrated record of developing new products that receive the appropriate product approvals and regulatory clearances around
the world as demonstrated by the FDA 510(k) clearance for the SmartVest Clearway Airway Clearance System received November 2022.

 During
fiscal 2024 and 2023, we incurred R&D expenses of approximately $656,000 and $916,000, or 1.2% and 1.9% of our net revenues,
respectively.

 Intellectual
Property

 As
of June 30, 2024, we held 12 United States and 44 foreign-issued patents covering the SmartVest System and its underlying technology.
These patents and patent applications offer coverage in the field of air pressure pulse delivery to a human in support of airway
clearance.

 We
generally pursue patent protection for patentable subject matter in our proprietary devices in foreign countries that we have
identified as key markets for our products. These markets include the European Union, Japan, and other countries.

 We
have 13 U.S. trademark registrations along with 111 foreign trademark registrations.

 Manufacturing

 Our
headquarters in New Prague, Minnesota includes a dedicated manufacturing and engineering facility of more than 14,000 square feet,
and we are certified on an annual basis to be compliant with International Organization for Standardization ("ISO")
13485 quality system standards. Our site has been audited regularly by the FDA and Notified Body, in accordance with their practices,
and we maintain our operations in a manner consistent with their requirements for a medical device manufacturer. While components
are outsourced to meet our detailed specifications, each SmartVest System is assembled, tested, and approved for final shipment
at our manufacturing site in New Prague, consistent with FDA, Underwriters Laboratory, and ISO standards. Many of our strategic
suppliers are located within 100 miles of our headquarters, which enables us to closely monitor our component supply chain. We
continually review our suppliers and component sources to ensure adequate availability of critical components and we maintain
established inventory levels for critical components and finished goods to assure continuity of supply.

 Product
Warranties

 We
provide a warranty on the SmartVest System that covers the cost of replacement parts and labor, or a new SmartVest System in the
event we determine a full replacement is necessary. For each homecare SmartVest System initially purchased and currently located
in the U.S., we provide a lifetime warranty to the individual patient for whom the SmartVest System is prescribed. For sales to
hospitals and HME distributors within the U.S., and for all international sales, we provide a one to five year warranty.

 Competition

 The
original HFCWO technology was licensed to American Biosystems, Inc. (formerly Hill-Rom Holdings, Inc., now part of Baxter International
Inc.) ("Baxter"), which, until the introduction of our original MedPulse Respiratory Vest System in
2000, was the only manufacturer of a product with HFCWO technology cleared for market by the FDA (Hill Rom's The Vest
 Airway Clearance System). Respiratory Technologies, Inc. (formerly RespirTech, now part of Koninklijke Phillips N.V.) ("Philips")
received FDA clearance to market their HFCWO product, the inCourage Airway Clearance Therapy in 2005. Both Baxter
and Philips employ a direct-to-patient model, with Philips additionally offering its HFCWO device through selected DME distributors.

 The
AffloVest from Tactile Systems Technology Inc. ("Tactile Medical") also participates in the same market
as our SmartVest System. Tactile Medical primarily sells its device through HME companies who distribute homecare medical devices
and supplies.

 Alternative
products for administering pulmonary therapy include: Positive Expiratory Pressure, Intrapulmonary Percussive Ventilation, CPT
and breathing techniques. Physicians may prescribe some or all of these devices and techniques, depending upon each patient's
health status, severity of disease, compliance, or personal preference.

 Key
drivers of HFCWO product sales continue to be improved quality of life through documented clinical outcomes and reduction in healthcare
costs through resource utilization evidence. Technology innovations and enhancements to the patient experience such as size and
weight of the generator, as well as optimized user interaction increase product reputation and patient satisfaction. We believe
we distinguish ourselves in these areas with competitive advantages over alternative treatments ultimately improving the patient
comfort, ease of use, and the effectiveness of HFCWO treatment. Because HFCWO is not "technique dependent," as compared
to most other alternative pulmonary therapy products, therapy remains consistent and controlled for the duration of treatment.

 Governmental
Regulation

 Medicare
and Medicaid

 Recent
government and private sector initiatives in the U.S. and foreign countries aim at limiting the growth of health care costs including
price regulation, competitive pricing, coverage and payment policies, comparative effectiveness of therapies, technology assessments,
and managed-care arrangements. These initiatives are causing the marketplace to put increased emphasis on the delivery of more
cost-effective medical devices that result in better clinical outcomes. Government programs, including Medicare and Medicaid,
have attempted to control costs by limiting the amount of reimbursement the program will pay for procedures or treatments, restricting
coverage for certain products or services, and implementing other mechanisms designed to constrain utilization and contain costs.
Many private insurance programs look to Medicare as a guide in setting coverage policies and payment amounts. These initiatives
have created an increasing level of price sensitivity among our customers.

 Home
Medical Equipment Licensing

 Although
we do not fall under competitive bidding for Medicare, we often must satisfy the same licensing requirements as other HME providers
that qualify for competitive bidding. In response to out-of-state businesses winning the competitive bidding process, which had
a significant impact on small local HME businesses, many states have enacted regulations that require a HME provider to have an
in-state business presence, specifically through state HME licensing boards or through state Medicaid programs. In order to do
business with any patients in the state or to be a provider for the state Medicaid program, a HME provider must have an in-state
presence. In addition to Minnesota, the location of our corporate headquarters, we have a licensed in-state presence in seven
other states. We also maintain an in-state presence in California to meet their state Medicaid requirements. In-state presence
requirements vary from state to state, but generally require a physical location that is staffed and open during regular business
hours. We are licensed to do business in all 50 states.

 Product
Regulations

 Our
medical devices are subject to regulation by numerous government agencies, including the FDA and comparable foreign regulatory
agencies. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development,
testing, manufacturing, labeling, marketing, and distribution of our medical devices, and compliance with these laws and regulations
entails significant costs for us. Our regulatory and quality assurance departments provide detailed oversight in their areas of
responsibility to support required clearances and approvals to market our products.

 In
addition to the clearances and approvals discussed below, we obtained ISO 13485 certification in January 2005 and receive annual
certification of our compliance to the current ISO quality standards.

 FDA
Requirements

 We
have received clearance from the FDA to market our products, including the SmartVest System. We may be required to obtain additional
FDA clearance before marketing a new or modified product in the U.S., either through the 510(k)-clearance process or the more
complex premarket approval process. The process may be time consuming and expensive, particularly if human clinical trials are
required. Failure to obtain such clearances or approvals could adversely affect our ability to grow our business.

 Continuing
Product Regulation

 In
addition to its approval processes for new products, the FDA may require testing and post-market surveillance programs to monitor
the safety and effectiveness of previously cleared products that have been commercialized and may prevent or limit further marketing
of products based on the results of post-mark surveillance results. At any time after marketing clearance of a product, the FDA
may conduct periodic inspections to determine compliance with both the FDA's Quality System Regulation ("QSR")
requirements and current medical device reporting regulations. Product approvals by the FDA can be withdrawn due to failure to
comply with regulatory standards or the occurrence of unforeseen problems following initial market clearance. The failure to comply
with regulatory standards or the discovery of previously unknown problems with a product or manufacturer could result in fines,
delays or suspensions of regulatory clearances, seizures or recalls of products (with the attendant expenses), the banning of
a particular device, an order to replace or refund the cost of any device previously manufactured or distributed, operating restrictions
and criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims.

 We
must register annually with the FDA as a device manufacturer and, as a result, are subject to periodic FDA inspection for compliance
with the FDA's QSR requirements that require us to adhere to certain extensive regulations. In addition, the federal Medical
Device Reporting regulations require us to provide information to the FDA whenever there is evidence that reasonably suggests
that a device may have caused or contributed to a death or serious injury or, if a malfunction were to occur, could cause or contribute
to a death or serious injury. We also must maintain certain certifications to sell products internationally, and we undergo periodic
inspections by notified bodies to obtain and maintain these certifications.

 Advertising
and marketing of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission
and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies
have been the subject of enforcement action brought under health care reimbursement laws and consumer protection statutes. Competitors
and others also can initiate litigation relating to advertising and/or marketing claims. If the FDA were to determine our promotional
or training materials constitute promotion of an unapproved or uncleared claim of use, it is possible we would need to modify
our training or promotional materials or be subject to regulatory or enforcement actions that could result in civil fines or criminal
penalties. Other federal, state or foreign enforcement authorities could also take similar action if they were to determine that
our promotional or training materials constitute promotion of an unapproved use, which could result in significant fines or penalties.

 Federal
Physician Payments Sunshine Act

 The
Federal Physician Payments Sunshine Act (Section 6002 of the PPACA) (the "Sunshine Act") was adopted on February 1,
2013, to create transparency for the financial relationship between medical device companies and physicians and/or teaching hospitals
(covered recipients). In January 2021, the Sunshine Act was expanded to cover payments made to these additional covered recipients,
physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse midwives. The
Sunshine Act requires all manufacturers of drugs and medical devices to annually report to CMS any payments or any other "transfers
of value" made to any covered recipients, including but not limited to consulting fees, grants, clinical research support,
royalties, honoraria, meals, and value of long-term use (over 90 days) of evaluation equipment. This information is then posted
on a public website so that consumers can learn how much was paid to their physician by drug and medical device companies. The
Sunshine Act requires ongoing data collection and annual management and reporting by us and imposes civil penalties for manufacturers
that fail to report timely, accurately, or completely to CMS.

 Fraud
and Abuse Laws

 Federal
health care laws apply to the marketing of our products and when we or our customers submit claims for items or services that
are reimbursed under Medicare, Medicaid or other federally funded health care programs. The principal applicable federal laws
include:

 the
 False Claims Act, which prohibits the submission of false or otherwise improper claims
 for payment to a federally funded health care program;

 the
 Anti-Kickback Statute, which prohibits offers to pay or receive remuneration of any kind
 for the purpose of inducing or rewarding referrals of items or services reimbursable
 by a federal health care program; and

 the
 Stark Law, which prohibits physicians from profiting (actually or potentially) from their
 own referrals.

 There
are often similar state false claims, anti-kickback, and anti-self-referral and insurance laws that apply to state-funded Medicaid
and other health care programs and private third-party payers. In addition, the U.S. Foreign Corrupt Practices Act can be used
to prosecute companies in the U.S. for arrangements with physicians, or other parties outside the U.S. if the physician or party
is a government official of another country and the arrangement violates the law of that country. Enforcement of these regulations
has become increasingly stringent, particularly due to more prevalent use of the whistleblower provisions under the False Claims
Act, which allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted
a false claim to the federal government and to share in any monetary recovery. If a governmental authority were to conclude that
we are not in compliance with applicable laws and regulations, we and our officers and employees could be subject to severe criminal
and civil penalties and disbarment from participation as a supplier of product to beneficiaries covered by Medicare or Medicaid.

 Health
care fraud and false statement statutes, such as the Health Insurance Portability and Accountability Act of 1996 and its implementing
regulations ("HIPAA") and the Health Information Technology for Economic and Clinical Health Act ("HITECH"),
also prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health
care benefit program, including private payers, and knowingly and willfully falsifying, concealing, or covering up a material
fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of or
payment for health care benefits, items or services.

 HIPAA,
HITECH and Other Privacy Regulations

 Federal
and state laws protect the confidentiality of certain patient health information, including patient records, and restrict the
use and disclosure of such information. HIPAA and HITECH set forth privacy and security standards that govern the use and disclosure
of protected electronic health information by "covered entities," which include healthcare providers, health plans
and healthcare clearinghouses. Because we provide our products directly to patients and bill third-party payers such as Medicare,
Medicaid, and insurance companies, we are a "covered entity" and must comply with these standards. Failure to comply
with HIPAA and HITECH or any state or foreign laws regarding personal data protection may result in significant fines or penalties
and/or negative publicity. In addition to federal regulations issued under HIPAA and HITECH, some states have enacted privacy
and security statutes or regulations that, in some cases, are more stringent than those issued under HIPAA and HITECH. In those
cases, it may be necessary to modify our planned operations and procedures to comply with the more stringent state laws. If we
fail to comply with applicable state laws and regulations, we could be subject to additional sanctions.

 Environmental
Laws

 We
are subject to various environmental laws and regulations both within and outside the U.S. Like other medical device companies,
our operations involve the use of substances regulated under environmental laws, primarily manufacturing, sterilization, and disposal
processes. We do not expect that compliance with environmental protection laws will have a material impact on our results of operations,
financial position, or cash flows.

 Human
Capital

 We
believe that our dedicated, talented employees are our most valuable resource and a key strength in accomplishing our collective
mission and goals. As of June 30, 2024, we had 174 employees, who are in 31 states throughout the United States. 18 of our
employees were respiratory therapists licensed by appropriate state professional organizations. We also had approximately 170
respiratory therapists and health care professionals retained on a non-exclusive, independent contractor basis to provide training
to our customers in the U.S. None of our employees are covered by a collective bargaining agreement. We believe our relations
with our employees are good.

 We
are committed to attracting, retaining, and developing diverse and high-performing talent that includes a strong focus on performance
and development, total rewards, diversity, inclusion and equity, and employee safety. These serve as the pillars to our human
capital management framework.

 We
understand that our success and growth depend on attracting, retaining, and developing talent across all levels of the organization.
Our recruitment strategies are continuously reviewed with leadership and partners to ensure our practices align with our mission,
purpose, and values.

 We
believe in ensuring that employees understand our mission, purpose, and goals as well as their impact on our success. We use an
annual performance review process to support development and performance discussions with employees. In addition, every employee
is eligible to participate in our incentive plan, which allows us to share the rewards of the company with the people who significantly
contribute to our success.

 To
cultivate a learning culture that provides enhancement and growth for our people, we offer educational assistance, online training,
seminars, specific skill training, and participation in business and industry organizations. We are also committed to contributing
our talents and resources to serve the communities in which we live and work through various charitable campaigns, employee programs
and volunteerism. We believe that this commitment assists in our efforts to attract and retain employees.

 We
believe that sharing rewards is essential to increasing employee engagement and improving morale and creating a positive culture.
We also offer our employees a competitive salary and benefits package and are committed to continuous review of these programs.
These benefits include but are not limited to retirement savings, a variety of health insurance options and other benefits programs,
including dental and vision, disability insurance, contributions to health savings accounts, paid maternity/paternity leave, and
wellness resources. In addition, we offer opportunities for remote work and flexible schedules and location, depending on business
needs and the specific role.

 We
are committed to ensuring a diverse workforce in a safe environment by maintaining compliance with applicable employment laws
and governmental regulations. Treating employees with dignity and equality is of utmost importance in everything we do. We take
pride in the fact that women represent 54% of our total managerial roles. We pride ourselves on accepting, hearing, and celebrating
multiple approaches and points of view and building on an inclusive and diverse culture.

 Safety
is a vital aspect of the success of our people and business. We are proud of our employees' collective commitment to secure
and maintain safe work practices within our manufacturing operations. We also provide wellbeing services to support each employee's
physical and mental health and will continue to emphasize the importance of the safety and health of our employees in all we do.

 Available
Information

 Our
Internet address is www.smartvest.com. We have made available on our website, free of charge, our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports, as soon as reasonably
practicable after we electronically file these materials with, or furnish them to, the SEC. Reports of beneficial ownership filed
by our directors and executive officers pursuant to Section 16(a) of the Exchange Act are also available on our website. We are
not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on
Form 10-K. The SEC also maintains an Internet site that contains our reports, proxy and information statements, and other information
we file or furnish with the SEC, available at www.sec.gov.

 Item
 1A.
 Risk
 Factors.

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

 Item
 1B.
 Unresolved
 Staff Comments.

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

 Item
1C. Cybersecurity.

 Protecting
the privacy of customer and personnel information is important to us, and we maintain security protocols and processes, including
ongoing training and education for all personnel, designed to combat the risk of unauthorized access or inadvertent disclosure.
Our business operations involve confidential information, including patient health information subject to regulation as discussed
under " HIPAA, HITECH and Other Privacy Regulations " above. Our information technology infrastructure is designed
to offer reliability, scalability, performance, security and privacy for our personnel, clients, and third-party contractors.

 Cybersecurity
Risk Management and Strategy

 We
have designed and implemented a cybersecurity risk management program to help us identify, assess, and mitigate cybersecurity
risks relevant to our business, based on the National Institute of Standards and Technology (NIST) Cyber Security Framework. The
cybersecurity risk management program is integrated into our Enterprise Risk Management (ERM) program.

 Our
cybersecurity risk management program includes:

 dedicated
 cybersecurity professionals who analyze cybersecurity threats, define cybersecurity policy
 and requirements, implement protections, and monitor and respond to cybersecurity incidents;

 cybersecurity
 regulatory-based risk assessments for the Company's systems and applications (where
 required);

 a
 formal incident response plan, in which incidents are classified based upon the severity,
 impact, and the potential harm that can be caused by the incident;

 monthly
 information security training program for all employees, including phishing awareness
 training; and

 engagement
 of third-party service providers to conduct assessments of the Company's cybersecurity
 risk management program, penetration testing, and vulnerability testing.

 To
date, the Company is not aware of any cybersecurity incident that has had or is reasonably likely to have a material impact on
the Company's business strategy, results of operations or financial condition. However, despite our security measures, there
can be no assurance that the Company, or the third parties with which we interact, will not experience a cybersecurity incident
in the future that may materially affect us.

 Cybersecurity
Governance

 The
Audit Committee and the Board of Directors provide oversight of cybersecurity risk management. The cybersecurity risk management
program is co-led by senior leaders of our management and third-party service providers. Between our senior leaders, there is
a combined 30+ years of experience assisting public and privately held companies in a variety of industries, leading several enterprise-wide
transformation initiatives to adapt to changing cybersecurity threats. Our Director of IT leads the IT organization, reports directly
to the Chief Financial Officer and works closely with the President and Chief Executive Officer to guide strategic direction and
IT decisions to drive business outcomes. Our Board of Directors is engaged in the Company's Enterprise Risk Management (ERM)
program and receives briefings on the outcomes of the ERM program and the steps the Company takes to mitigate risks that the program
identifies. The Audit Committee oversees the Company's cybersecurity strategies, systems, and controls to ensure reliability
and prevent unauthorized access. The Audit Committee discusses policies with respect to risk assessment and risk management, including
risks associated with the reliability and security of the Company's information technology and security systems, and the
steps management has undertaken to monitor and control such exposures. The Audit Committee and Board of Directors receives regular
updates on the Company's cybersecurity risk management program from the Chief Financial Officer, Director of IT and third
party managed service provider CISO.

 Item
 2.
 Properties.

 We
own our principal headquarters and manufacturing facilities, consisting of approximately 37,000 square feet, which are located
on an approximately 2.3-acre parcel in New Prague, Minnesota. Nearly all of the Company's revenues, profits, and assets
are associated with this facility. We believe that our facilities are satisfactory for our long-term growth plans.

 Item
 3.
 Legal
 Proceedings.

 The
disclosure regarding legal proceedings set forth in Note 11 to our Financial Statements in Part II, Item 8 of this Annual Report
on Form 10-K 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 the 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
 4.
 Mine
 Safety Disclosures.

 None.

 PART
II

 Item
 5.
 Market
 For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
 of Equity Securities.

 Market
Information

 Our
common stock is listed on the NYSE American under the symbol "ELMD".

 As
of August 20, 2024, there were 53 registered holders of our common stock.

 Dividends

 We
have never paid cash dividends on any of our shares of common stock. We currently intend to retain any earnings for use in operations
and do not anticipate paying cash dividends to our shareholders in the foreseeable future. The agreement governing our credit
facility restricts our ability to pay dividends.

 Recent
Sales of Unregistered Equity Securities

 None.

 Purchases
of Equity Securities by the Company and Affiliated Purchasers

 On
May 26, 2021, our Board of Directors approved a stock repurchase authorization. Under the authorization, we were originally able
to repurchase up to $3.0 million of outstanding shares of our common stock through May 26, 2022. On May 26, 2022, our Board of
Directors removed the date limitation. The shares of our common stock may be repurchased on the open market or in privately negotiated
transactions subject to applicable securities laws and regulations. As of June 30, 2024, a total of 258,356 shares have been repurchased
and retired under this authorization for a total cost of $3.0 million. As a result, the authorization has been exhausted in its
entirety. The following table sets forth information concerning purchases of shares of our common stock for the three months ended
June 30, 2024:

 Period

 Total
 Number of Shares Purchased

 Average
 Price Paid
 per Share

 Total
 Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 Approximate
 Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs

 April
 1 – April 30, 2024

 —

 $

 —

 —

 $

 275,000

 May
 1 – May 31, 2024

 —

 —

 —

 $

 275,000

 June
 1 – June 30, 2024

 18,361

 14.95

 18,361

 $

 —

 Total

 18,361

 $

 14.95

 18,361

 Item
 6.
 [Reserved].

 Item
 7.
 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
financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K. The forward-looking statements
include statements that reflect management's good faith beliefs, plans, objectives, goals, expectations, anticipations and
intentions with respect to our future development plans, capital resources and requirements, results of operations, and future
business performance. Our actual results could differ materially from those anticipated in the forward-looking statements included
in this discussion as a result of certain factors, including, but not limited to, those discussed in the section entitled "Information
Regarding Forward-Looking Statements" immediately preceding Part I of this Annual Report on Form 10-K.

 Overview

 Electromed
develops and provides innovative airway clearance products applying HFCWO technologies in pulmonary care for patients of all ages.

 We
manufacture, market and sell products that provide HFCWO, including the SmartVest System that includes our newest generation SmartVest
Clearway, previous generation SmartVest SQL and related products, to patients with compromised
pulmonary function. The SmartVest Clearway is an updated and modern approach to HFCWO focused on an enhanced patient experience
and proven patient outcomes. The product delivers effective 360 o oscillatory pressure through our proprietary rapid
inflate-deflate technology which improves the patient's ability to breathe deeply during therapy. SmartVest Clearway is
the smallest, and lightest generator on the market, and is designed with an intuitive touchscreen to simplify programing and everyday
use. Our products are sold in both the homecare market and the hospital market. The SmartVest SQL has been sold in the domestic
homecare market since 2014. In 2015, we launched the SmartVest SQL into hospital and certain international markets. In June 2017,
we announced the launch of the SmartVest SQL with SmartVest Connect wireless technology, which allows data connection between
physicians and patients to track therapy performance and collaborate in treatment decisions. In 2022, we launched the SmartVest
Clearway to adult pulmonary, pediatric and cystic fibrosis patients for use in the home. We have marketed the SmartVest System
and its predecessor products since 2000 to patients suffering from cystic fibrosis, bronchiectasis and repeated episodes of pneumonia.
Additionally, we offer our products to a patient population that includes neuromuscular disorders such as cerebral palsy, muscular
dystrophies, ALS, and patients with post-surgical complications or who are ventilator dependent or 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 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.

 We
have primarily employed a direct-to-patient and provider model, through which we obtain patient referrals from clinicians, manage
insurance claims on behalf of our patients and their clinicians, deliver our solutions to patients and train them on proper use
in their homes. This model allows us to directly approach patients and clinicians, whereby we disintermediate the traditional
durable medical equipment channel and capture both the manufacturer and distributor margins. We have engaged a limited number
of regional durable medical equipment distributors focused on respiratory therapies as an alternate sales channel.

 Our
key growth strategies for fiscal 2025 are to accelerate our revenue growth by taking market share and expanding the addressable
population for the largest and fastest growing segments of the market: adult pulmonology/bronchiectasis. Actions to support accelerating
our revenue growth include the following:

 Expand
 our sales force in targets geographies with high potential, adding an additional three
 territories and direct sales reps;

 Increase
 SmartVest brand awareness through direct-to-consumer and physician marketing, and peer
 to peer education;

 Provide
 best-in-class customer care and support; and

 Develop
 and promulgate the body of bronchiectasis clinical evidence to increase physician adoption
 of the SmartVest System for patients.

 Impacts
of Certain Macro-Economic Conditions and the Supply Chain on Our Business and Operations

 We
observed increased lead times for certain components in our supply chain and increased material costs and shipping rates during
the second half of fiscal 2022 and all of fiscal 2023. The changes to our supply chain lead times resulted in a temporary interruption
that impacted product availability for certain customers beginning in September 2022 and continued through June 2023. In fiscal
2024, we experienced a return to normal supply chain lead times through renegotiated supplier agreements and improved long-term
material requirements planning. We expect that material costs and shipping rates will continue to be a challenge during fiscal
2025 relating to supply chain availability and inflationary trends in electronic components and may extend to other components.
In certain instances, we have purchased key materials in advance to ensure adequate future supply and mitigate the risk of potential
supply chain disruptions. It is possible that these macro-economic conditions could have a greater adverse impact on our supply
chain in the future, including impacts associated with preventative and precautionary measures taken by other businesses and applicable
governments. A reduction or further interruption in any of our manufacturing processes could have a material adverse effect on
our business. Any significant increases to our raw material or shipping costs could reduce our gross margins.

 Critical
Accounting Estimates

 During
the preparation of our financial statements, we are required to make estimates, assumptions and judgment that affect reported
amounts. Those estimates and assumptions affect our reported amounts of assets and liabilities, our disclosure of contingent assets
and liabilities, and our reported revenues and expenses. We update these estimates, assumptions, and judgments as appropriate.
Some of our accounting policies and estimates require us to exercise significant judgment in selecting the appropriate assumptions
for calculating financial statements. Such judgments are subject to an inherent degree of uncertainty. Among other factors, these
judgments are based upon our historical experience, known trends in our industry, terms of existing contracts and other information
from outside sources, as appropriate. The following is a summary of our primary critical accounting policies and estimates. See
also Note 1 to the Financial Statements, included in Part II, Item 8, of this Annual Report on Form 10-K.

Recognition

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 to 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.

 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," or the requirements under other applicable accounting 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 System after control has transferred to a customer are accounted for as a fulfillment cost and are included in cost
of revenues.

 We
request that customers return previously sold units that are no longer in use to us to limit the possibility that such units would
be resold by unauthorized parties or used by individuals without a prescription. The customer is under no obligation to return
the product; however, we do reclaim the majority of previously sold units upon the discontinuance of patient usage. We are certified
to recondition and resell returned SmartVest System units. Returned units are typically reconditioned and resold or used for demonstration
equipment and warranty replacement parts.

 Inventory
Valuation

 Inventories
are stated at the lower of cost (first-in, first-out method) or net realizable value. Work in process and finished goods are carried
at standard cost, which approximates actual cost, and includes materials, labor and allocated overhead. The reserve for obsolescence
is determined by analyzing the inventory on hand and comparing it to expected future sales. Estimated inventory to be returned
is based on the number of devices that have shipped that are expected to be returned prior to completion of the insurance reimbursement
process.

 Warranty
Reserve

 The
Company provides a lifetime warranty on its products to the prescribed patient for homecare sales within the U.S. and a one to
five-year warranty for all homecare distributor, hospital and other sales. 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.

 Share-Based
Compensation

 Share-based
payment awards consist of options to purchase shares of our common stock issued to employees, restricted stock awards, and performance-based
awards. Expense for options is estimated using the Black-Scholes pricing model at the date of grant and expense for restricted
stock is determined by the closing price on the day the grant is made. Expense is recognized 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. Expenses for performance-based
awards with market conditions is estimated using the Monte-Carlo pricing model at the date of grant and expense is recognized
on a straight-line basis. In determining the fair value of options and performance-based awards with market conditions, we make
various assumptions using the Black-Scholes and Monte-Carlo pricing models respectively, including expected risk-free interest
rate, stock price volatility, and life. See Note 8 to the Financial Statements included in Part II, Item 8, of this Annual Report
on Form 10-K for a description of these assumptions.

 Results
of Operations

 Fiscal
Year Ended June 30, 2024 Compared to Fiscal Year Ended June 30, 2023

 Revenues

for the fiscal years ended June 30, 2024 and 2023 are summarized in the table below.

 Fiscal Years Ended June 30,

 2024

 2023

 Increase (Decrease)

 Homecare Revenue

 $
 49,503,000

 $
 43,945,000

 $
 5,558,000

 12.6
 %

 Hospital Revenue

 2,535,000

 2,080,000

 455,000

 21.9
 %

 Homecare Distributor Revenue

 1,852,000

 1,618,000

 234,000

 14.5
 %

 Other Revenue

 826,000

 424,000

 402,000

 94.8
 %

 Total Revenue

 $
 54,716,000

 $
 48,067,000

 $
 6,649,000

 13.8
 %

Revenue. Homecare revenue increased by $5,558,000, or 12.6%, in fiscal 2024 compared to fiscal 2023. The increase in revenue
was due to an increase in direct sales representatives, higher quality referrals, and efficiencies recognized within our reimbursement
department. Efficiencies were due to recent investments aimed at increasing referral conversion rates and decreasing conversion
processing time resulting in recognizing revenue on more units in fiscal 2024.

 Hospital
Revenue. Hospital revenue increased by $455,000, or 21.9%, in fiscal 2024 compared to fiscal 2023. Hospital revenue includes
sales to hospitals, rental companies and other institutions. The increase was primarily
due to an increase in sales representatives focused on the hospital market as well as increased capital and disposable demand.

Distributor Revenue. Homecare distributor revenue increased by $234,000, or 14.5%, in fiscal 2024 compared to fiscal 2023.
The revenue increase in fiscal 2024 was due to increased demand from one of our primary homecare distribution partners. We sell
to a limited number of home medical equipment distributors, who in turn sell our SmartVest System in the U.S. homecare market.

 Other
Revenue. Other revenue increased by $402,000, or 94.8%, in fiscal 2024 compared to fiscal 2023. The increase in other revenue
was primarily due to increased demand of international distributor purchases and purchases by customers that do not fall within
the other markets described above.

 Gross
Profit

 Gross
profit increased to $41,726,000 in fiscal 2024, or 76.3% of net revenues, from $36,519,000 or 76.0% of net revenues, in fiscal
2023. The increase in gross profit was primarily due to increased revenue in fiscal 2024, decreased shipping expenses and increased
material costs in the prior year to expedite inventory purchases which did not recur in the current year.

 Operating
Expenses

 Selling,
General and Administrative Expenses

 Selling,
general and administrative ("SG&A") expenses were $34,489,000 in fiscal 2024, representing an increase of $2,894,000
or 9.2% from $31,595,000 in fiscal 2023.

 SG&A
payroll and compensation-related expenses including health insurance benefits and other compensation increased by $2,885,000,
or 14.0%, to $23,437,000 in fiscal 2024, compared to $20,552,000 in fiscal 2023. The increase
in the current year was primarily due to increases in share-based compensation, salaries, and incentive compensation related to
the higher average number of sales, sales support, marketing, and reimbursement personnel to process higher patient referrals.
We have also continued to provide regular merit-based increases for our employees and are regularly benchmarking our compensation
ranges including share-based compensation for new and existing employees to ensure we can hire and retain the talent needed to
drive growth in our business. Field sales employees totaled 62, of which 53 were direct sales, as of June 30, 2024, compared
to 55 as of June 30, 2023, of which 46 were direct sales. We expect to continue to expand our salesforce to align with our revenue
growth projections.

 Travel,
meals and entertainment expenses increased $352,000, or 11.8%, to $3,342,000 for fiscal 2024 compared to $2,990,000 in fiscal
2023. The increase in the current year was primarily due to a higher average number of direct sales representatives, higher travel
costs, an increased number of sales territories and a mid-year sales meeting held in fiscal 2024.

 Professional
and legal fees, including recruiting and insurance expenses, decreased by $456,000, or 8.6%, to $4,828,000 in fiscal 2024, compared
to $5,284,000 in fiscal 2023. Professional fees include services related to legal costs, shareowner services and reporting requirements,
information technology technical support and consulting fees. The decrease was primarily related to fiscal 2023 costs such as
legal and consulting costs associated with the termination of the Public Health Emergency for COVID-19, recruiting costs for multiple
senior leadership positions and legal fees related to a reimbursement project, all of which did not recur in fiscal 2024.

 Total
discretionary marketing expenses increased by $452,000, or 43.7% to $1,487,000 in fiscal 2024, compared to $1,035,000 in fiscal
2023. The increase in the current year was primarily due to an investment in market research, direct-to-consumer and direct-to-physician
marketing.

 Research
and Development Expenses

 R&D
expenses decreased by $260,000, or 28.4%, to $656,000 in fiscal 2024 compared to $916,000 in fiscal 2023. The decrease in the
current year was primarily due to reduced costs associated with our SmartVest Clearway platform
development in the prior year which has now been launched into the Homecare and Hospital markets.

 Interest
Income, net

 Net
interest income was approximately $455,000 in fiscal 2024 compared to net interest income of $78,000 in fiscal 2023. The increase
in the current year was primarily due to increased savings rates on higher cash balances.

Tax Expense

tax expense in fiscal 2024 was $1,886,000, which includes a current tax expense of $2,457,000 and a deferred benefit of $571,000.
Estimated income tax expense includes a current federal and state tax benefit of approximately $103,000 related to the excess
tax benefit for fully vested stock options and non-qualified stock options that were exercised during the period.

tax expense in fiscal 2023 was $920,000, which includes a current tax expense of $963,000 and a deferred benefit of $43,000. Estimated
income tax expense includes a current federal and state tax benefit of approximately $250,000 related to the excess tax benefit
for fully vested stock options and non-qualified stock options that were exercised during the period.

 The
effective tax rates were 26.8% and 22.5% for fiscal 2024 and 2023, respectively. The effective tax rates differ from the statutory
federal rate because of state income taxes, R&D tax credits, and other permanent items that are non-deductible for tax purposes
relative to the amount of taxable income.

 Net

 Net
income for fiscal 2024 was $5,150,000, compared to net income of $3,166,000 in fiscal 2023. The increase of $1,984,000, or 62.7%
in the current year net income was primarily due to revenue growth, decreased professional fees, and increased interest income.

 Liquidity
and Capital Resources

 Cash
Flows and Sources of Liquidity

 Cash
Flows from Operating Activities

 Net
cash provided by operating activities in fiscal 2024 was $9,067,000. Cash flows from operating activities consisted of net income
of $5,150,000, non-cash expenses of approximately $1,962,000, a decrease in prepaid expenses and other assets of $1,321,000,
a decrease in accounts receivable of $797,000, a decrease in inventories of $459,000 and an increase in accrued compensation of
$875,000. These cash flows from operating activities were offset by a decrease in accounts payable and accrued liabilities of
$1,206,000, an increase of $232,000 in contract assets and a decrease in income tax payable of $59,000.

 Cash
Flows from Investing Activities

 Net
cash used in investing activities in fiscal 2024 was approximately $395,000. Cash used in investing activities consisted of approximately
$287,000 in expenditures for property and equipment, which included approximately $62,000 for software and $225,000 for equipment,
and $108,000 in payments for patent and trademark costs.

 Cash
Flows from Financing Activities

 Net
cash provided by financing activities in fiscal 2024 was approximately $36,000, consisting of $311,000 received from the issuance
of common stock upon the exercise of options, partially offset by $275,000 used for our share repurchase program.

 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 approximately
$36,496,000 and available borrowings under our existing credit facility will provide sufficient liquidity to meet our anticipated
working capital and other liquidity needs for at least the next twelve months from the date of this report.

 Effective
December 13, 2023, we renewed our credit facility, which provides us with a revolving line of credit. Interest on borrowings on
the line of credit accrues at the prime rate (8.50% as of June 30, 2024) less 1.0% and is payable monthly. There was no outstanding
principal balance on the line of credit as of June 30, 2024, or June 30, 2023. The amount eligible for borrowing on the line of
credit is limited to the lesser of $2,500,000 or 57.0% of eligible accounts receivable, and the line of credit expires on December
18, 2025, if not renewed. As of June 30, 2024, 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.

 During
fiscal 2024 and 2023, we spent approximately $287,000 and $1,648,000, respectively, on property and equipment. We currently expect
to finance planned equipment purchases with cash flows from operations or borrowings under our credit facility. We may need to
incur additional debt if we have an unforeseen need for additional capital equipment or if our operating performance does not
generate adequate cash flows.

 While
the impact of macroeconomic conditions and other 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 at least the next twelve months
from the date of this report.

 Accounting
Standards Recently Issued But Not Yet Adopted by the Company

 See
Note 1 of the Notes to our Financial Statements in this Annual Report on Form 10-K for information on new accounting standards
adopted in fiscal 2024 or pending adoption.

 Item
 7A.
 Quantitative
 and Qualitative Disclosures About Market Risk.

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

 Item
 8.
 Financial
 Statements and Supplementary Data.

to Financial Statements

 Report
 of Independent Registered Public Accounting Firm

 Balance
 Sheets

 of Operations

 of Shareholders' Equity

 of Cash Flows

 Notes
 to Financial Statements

 F- 1

 Report
of Independent Registered Public Accounting Firm

 Shareholders
and Board of Directors

Inc.

 Opinion
on the Financial Statements

 We
have audited the accompanying balance sheets of Electromed, Inc. (the Company) as of June 30, 2024 and 2023, 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, 2024 and 2023, 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.

 Basis
for Opinion

 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.

 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.

 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

 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.

 Measurement
of Customer Revenue Net of Adjustments

 As
discussed in Note 2 to the financial statements, revenues are recognized at a point in time when control passes to the customer
upon product shipment or delivery. Net patient revenues (patient revenue less estimated adjustments) are recognized at the estimated
net realizable amounts from third-party payers and customers in exchange for the product. The Company has agreements with third-party
payers that provide for payments at amounts different from its established rates. Each quarter, the Company estimates its adjustments
for each sale based on the terms of third-party payer contracts and historical collections experience, then applies an estimate
for an adjustment reserve percentage to the gross accounts receivable balances.

 F- 2

 We
identified the measurement of the adjustment reserve related to customer revenue as a critical audit matter due to the audit effort,
degree of auditor judgment, and subjectivity involved in evaluating the audit evidence related to management's estimate.

 Our
audit procedures related to the Company's measurement of the adjustment reserve included the following, among others.

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

 Selected
 samples of product sales, additional revenue collections and writeoffs, to inspect and
 compare to the underlying source documents and to test the reasonableness of the contractual
 adjustment and collection percentage assumptions used in management's estimate.

 Evaluated
 the reasonableness of management's estimate of contractual and collection reserves
 by:

 –
 Comparing
 the estimates of realization percentages to historical net collection percentages for
 portfolio groups.

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

 /s/
 RSM US LLP

 We
have served as the Company's auditor since 2010.

 Rochester,
Minnesota

 F- 3

Inc.

 Balance
Sheets
 June 30, 2024 and 2023

 2024

 2023

 Assets

 Current Assets

 Cash and cash equivalents

 $
 16,080,000

 $
 7,372,000

 Accounts receivable (net of allowances for credit losses of $ 45,000)

 23,333,000

 24,130,000

 Contract assets

 719,000

 487,000

 Inventories

 3,712,000

 4,221,000

 Prepaid expenses and other current assets

 329,000

 1,577,000

 Total current assets

 44,173,000

 37,787,000

 Property and equipment, net

 5,165,000

 5,672,000

 Finite-life intangible assets, net

 657,000

 605,000

 Other assets

 87,000

 161,000

 Deferred income taxes

 2,152,000

 1,581,000

 Total assets

 $
 52,234,000

 $
 45,806,000

 Liabilities and Shareholders' Equity

 Current Liabilities

 Accounts payable

 $
 1,010,000

 $
 1,372,000

 Accrued compensation

 3,893,000

 3,018,000

 Income tax payable

 277,000

 336,000

 Warranty reserve

 1,567,000

 1,378,000

 Other accrued liabilities

 930,000

 1,949,000

 Total current liabilities

 7,677,000

 8,053,000

 Other long-term liabilities

 12,000

 86,000

 Total liabilities

 7,689,000

 8,139,000

 Shareholders' Equity

 Common stock, $ 0.01 par value, 13,000,000 shares authorized; 8,637,883 and 8,555,236 issued and outstanding, as of June 30, 2024 and June 30, 2023, respectively

 87,000

 86,000

 Additional paid-in capital

 20,790,000

 18,788,000

 Retained earnings

 23,668,000

 18,793,000

 Total shareholders' equity

 44,545,000

 37,667,000

 Total liabilities and shareholders' equity

 $
 52,234,000

 $
 45,806,000

 See
Notes to Financial Statements.

 F- 4

Inc.

of Operations
 Years Ended June 30, 2024 and 2023

 2024

 2023

 Net revenues

 $
 54,716,000

 $
 48,067,000

 Cost of revenues

 12,990,000

 11,548,000

 Gross profit

 41,726,000

 36,519,000

 Operating expenses

 Selling, general and administrative

 34,489,000

 31,595,000

 Research and development

 656,000

 916,000

 Total operating expenses

 35,145,000

 32,511,000

 Operating income

 6,581,000

 4,008,000

 Interest income, net

 455,000

 78,000

 Net income before income taxes

 7,036,000

 4,086,000

 Income tax expense

 1,886,000

 920,000

 Net income

 $
 5,150,000

 $
 3,166,000

 Income per share:

 Basic

 $
 0.60

 $
 0.37

 Diluted

 $
 0.58

 $
 0.36

 Weighted-average common shares outstanding:

 Basic

 8,562,245

 8,463,684

 Diluted

 8,864,585

 8,700,833

 See
Notes to Financial Statements.

 F- 5

Inc.
 Statements of Shareholders' Equity
 Years Ended June 30, 2024 and 2023

 Common Stock

 Additional

 Retained

 Total

 Shareholders'

 Shares

 Amount

 Paid-in Capital

 Earnings

 Equity

 Balance as of June 30, 2022

 8,475,436

 $
 85,000

 $
 18,308,000

 $
 15,780,000

 $
 34,173,000

 Net income

 —

 —

 —

 3,166,000

 3,166,000

 Issuance of restricted stock, net

 28,701

 —

 —

 —

 —

 Issuance of common stock upon exercise of options

 66,467

 1,000

 82,000

 —

 83,000

 Taxes paid on stock option exercised on a net basis

 —

 —

 ( 310,000
)

 —

 ( 310,000
)

 Share-based compensation expense

 —

 —

 708,000

 —

 708,000

 Repurchase of common stock

 ( 15,368
)

 —

 —

 ( 153,000
)

 ( 153,000
)

 Balance as of June 30, 2023

 8,555,236

 86,000

 18,788,000

 18,793,000

 37,667,000

 Net income

 —

 —

 —

 5,150,000

 5,150,000

 Issuance of restricted stock, net

 44,428

 —

 —

 —

 —

 Issuance of common stock upon exercise of options

 56,580

 1,000

 310,000

 —

 311,000

 Share-based compensation expense

 —

 —

 1,692,000

 —

 1,692,000

 Repurchase of common stock

 ( 18,361
)

 —

 —

 ( 275,000
)

 ( 275,000
)

 Balance as of June 30, 2024

 8,637,883

 $
 87,000

 $
 20,790,000

 $
 23,668,000

 $
 44,545,000

 See
Notes to Financial Statements.

 F- 6

 Electromed, Inc.
 Statements of Cash Flows
 Years Ended June 30, 2024 and 2023

 2024

 2023

 Cash Flows from Operating Activities

 Net income

 $
 5,150,000

 $
 3,166,000

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

 Depreciation

 789,000

 550,000

 Amortization of finite-life intangible assets

 52,000

 63,000

 Share-based compensation expense

 1,692,000

 708,000

 Deferred income taxes

 ( 571,000
)

 ( 43,000
)

 Changes in operating assets and liabilities:

 Accounts receivable

 797,000

 ( 3,078,000
)

 Contract assets

 ( 232,000
)

 ( 201,000
)

 Inventories

 459,000

 ( 1,033,000
)

 Prepaid expenses and other assets

 1,321,000

 202,000

 Income tax payable

 ( 59,000
)

 285,000

 Accounts payable and accrued liabilities

 ( 1,206,000
)

 420,000

 Accrued compensation

 875,000

 276,000

 Net cash provided by operating activities

 9,067,000

 1,315,000

 Cash Flows from Investing Activities

 Expenditures for property and equipment

 ( 287,000
)

 ( 1,648,000
)

 Expenditures for finite-life intangible assets

 ( 108,000
)

 ( 68,000
)

 Net cash used in investing activities

 ( 395,000
)

 ( 1,716,000
)

 Cash Flows from Financing Activities

 Issuance of common stock upon exercise of options

 311,000

 83,000

 Taxes paid on stock options exercised on a net basis

 —

 ( 310,000
)

 Repurchase of common stock

 ( 275,000
)

 ( 153,000
)

 Net cash provided by (used in) financing activities

 36,000

 ( 380,000
)

 Net increase (decrease) in cash

 8,708,000

 ( 781,000
)

 Cash and cash equivalents

 Beginning of period

 7,372,000

 8,153,000

 End of period

 $
 16,080,000

 $
 7,372,000

 Supplemental Disclosures of Cash Flow Information

 Cash paid for income taxes

 $
 2,514,000

 $
 676,000

 Supplemental Disclosures of Noncash Investing and Financing Activities

 Property and equipment acquisitions in accounts payable

 $
 4,000

 $
 60,000

 Intangible asset acquisitions in accounts payable

 $
 —

 $
 4,000

 Lease assets obtained in exchange for new operating lease liabilities

 $
 —

 $
 120,000

 Demonstration equipment transferred from inventory to property and equipment

 $
 50,000

 $
 10,000

 See
Notes to Financial Statements.

 F- 7

Inc.
 Notes to Financial Statements

 Note 1.

 Nature of Business and Summary of Significant Accounting
Policies

 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 homecare and hospital markets. The Company also sells internationally through
distributors. International sales were $ 470,000 and $ 424,000 for the fiscal years ended June 30, 2024 ("fiscal 2024")
and June 30, 2023 ("fiscal 2023"), respectively.

 Since
its inception, the Company has operated in a single industry segment: developing, manufacturing, and marketing medical equipment.

 A
summary of the Company's significant accounting policies follows:

 Use
of estimates: Management uses estimates and assumptions in preparing the financial statements in accordance with U.S. generally
accepted accounting principles ("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 financial statements include revenue recognition and the related estimation
of variable consideration, inventory valuation, share-based compensation and warranty reserve.

recognition: 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 noncash consideration, consideration
paid or payable to 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. See Note 2 for information on revenue.

 Shipping
and handling expense: Shipping and handling charges incurred by the Company are included in cost of revenues and were $ 383,000
and $ 896,000 for fiscal 2024 and 2023, respectively.

 Cash
and cash equivalents: Cash and cash equivalents consist of cash in bank deposits and money market funds with original maturities
of three months or less at the time of purchase. The Company has not experienced any losses in these accounts.

 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 receivable 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 credit losses. Management determines
the allowance for credit losses by regularly evaluating individual customer accounts and separately considering macroeconomic
trends in determining expected losses. Receivables are written off when deemed uncollectible. Recoveries of receivables previously
written off are recorded when received.

 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.

 Inventories:
 Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Work in process and finished
goods are carried at standard cost, which approximates actual cost, and includes materials, labor and allocated overhead. Standard
costs are reviewed at least annually by management, or more often in the event circumstances indicate a change in cost has occurred.
The reserve for obsolescence is determined by analyzing the inventory on hand and comparing it to expected future sales. Estimated
inventory to be returned is based on how many devices that have shipped that are expected to be returned prior to completion of
the insurance reimbursement process.

 F- 8

 Property
and equipment: Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of
their estimated useful lives or the remaining lease term. The Company retains ownership of demonstration equipment in the possession
of both inside and outside sales representatives, who use the equipment in the sales process.

 Leases:
 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.
The present 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.

 Finite-life
intangible assets: Finite-life intangible assets include patents and trademarks. These intangible assets are amortized on
a straight-line basis over their estimated useful lives, as described in Note 5.

 Long-lived
assets: Long-lived assets, primarily property and equipment and finite-life intangible assets, are evaluated for impairment
when significant events or changes in circumstances indicate the carrying value of an asset or asset group may not be recoverable.
In evaluating recoverability, the following factors, among others, are considered: a significant change in the circumstances used
to determine the amortization period, an adverse change in legal factors or in the business climate, a transition to a new product
or service strategy, a significant change in customer base, and a realization of failed marketing efforts. The recoverability
of an asset or asset group is measured by a comparison of the carrying value of the asset to future undiscounted cash flows.

 The
amount of the impairment loss to be recorded, if any, is calculated as the excess of the asset's or assets group's
carrying amount over its estimated fair value.

 In
addition, we periodically reassess the estimated remaining useful lives of our long-lived and finite-life intangible assets. Changes
to estimated useful lives would impact the amount of depreciation and amortization expense recorded in earnings. We have experienced
no significant changes in the carrying amount or estimated remaining useful lives of our long-lived or amortizable intangible
assets.

 Warranty
liability: The Company provides a lifetime warranty on its products to the prescribed patient for homecare sales within the
U.S. and a one to five-year warranty for all homecare distributor, hospital and other sales. 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 or delivered.
Factors that affect the Company's warranty liability 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 liability and adjusts the amounts as necessary.

 Changes
in the Company's warranty liability were as follows:

 Schedule of changes in warranty liability

 2024

 2023

 Beginning warranty reserve

 $
 1,378,000

 $
 1,256,000

 Accrual for products sold

 559,000

 416,000

 Expenditures and costs incurred for warranty claims

 ( 370,000
)

 ( 294,000
)

 Ending warranty reserve

 $
 1,567,000

 $
 1,378,000

 F- 9

taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The Company reverses a valuation allowance if it determines, based
on the weight of all available evidence, including when cumulative losses become positive income, that it is more likely than
not that some or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment.

 The
Company recognizes tax liabilities when the Company believes that certain positions may not be fully sustained upon review by
tax authorities. Benefits from tax positions are measured at the largest amount of benefit that is greater than 50 percent likely
of being realized upon settlement. To the extent that the final tax outcome of these matters is different than the amounts recorded,
such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any,
related to accrued liabilities for potential tax assessments are included in income tax expense.

 Research
and development: Research and development costs include the costs of research activities as well as engineering and technical
efforts required to develop new products or make improvements to existing products. Research and development costs are expensed
as incurred.

 Advertising
costs: Advertising costs are expensed when incurred. Advertising, marketing and trade show costs for fiscal 2024 and 2023
were $ 1,487,000 and $ 1,244,000, respectively.

 Share-based
payments: Share-based payment awards consist of options to purchase shares of common stock, performance-based share awards
and restricted shares of common stock issued to employees for services. Expense for options is estimated using the Black-Scholes
pricing model at the date of grant, expenses for performance-based awards with market conditions is estimated using the Monte-Carlo
pricing model at the date of grant and expense for restricted stock is determined by the closing price on the day the grant is
made. Expense is recognized on a graded vesting basis over the requisite service or vesting period of the award, on a straight-line
basis for performance-based awards, or at the time services are provided for non-employee awards.

 Fair
value of financial instruments: The carrying values of cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses approximate their fair value due to the short-term nature of these instruments.

 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 shares of common stock at the beginning of the
period unless their effect is anti-dilutive. Common stock equivalents included in the calculation of diluted earnings per share
were 302,340 and 237,149 shares for fiscal 2024 and 2023, respectively. Common stock equivalents excluded from the calculation
of diluted earnings per share because their impact was anti-dilutive were 288,792 and 194,154 shares for fiscal 2024 and 2023,
respectively.

 Recently
Issued Accounting Standards

 Accounting
Standards Update ("ASU") 2016-13 – Credit Losses: Measurement of Credit Losses on Financial Instruments (subsequently
amended by ASU 2018-19, 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. This standard was adopted
July 1, 2023 and does not have a material impact on the financial statements.

 ASU
2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

 The
standard introduces increased disclosure requirements primarily related to significant segment expenses, along with disclosure
of key criteria and metrics utilized by the Chief Operating Decision Maker ("CODM"). It is effective for annual periods
beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adoption and
additional disclosure requirements.

 F- 10

 ASU
2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures

 The
standard introduces increased transparency about income tax information through the requirement of increased disclosures around
specific categories in the rate reconciliation and requiring additional information on reconciling items. It is effective for
annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact
of adoption and additional disclosure requirements.

 Note 2.

 Revenues

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 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.

 The
timing of revenue recognition, billings and cash collections results in accounts receivable on the Balance Sheets as further described
above under Accounts receivable and Contract assets in Note 1.

 Disaggregation
of revenues. In the following table, revenue is disaggregated by market:

 Schedule of disaggregated revenue

 2024

 2023

 $
 49,503,000

 $
 43,945,000

 Hospital

 2,535,000

 2,080,000

 Homecare distributor

 1,852,000

 1,618,000

 Other

 826,000

 424,000

 Total

 $
 54,716,000

 $
 48,067,000

 F- 11

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

 2024

 2023

 Commercial

 $
 24,215,000

 $
 18,481,000

 Medicare

 18,627,000

 18,682,000

 Medicare Supplemental

 4,706,000

 5,000,000

 Medicaid

 1,114,000

 941,000

 Other

 841,000

 841,000

 Total

 $
 49,503,000

 $
 43,945,000

 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:

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.

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 or delivery 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.

 F- 12

 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, 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.

 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 many 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 the SmartVest System sales 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.

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 a right to a higher discount on purchases in excess
of 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 institutions are negotiated with the individual institution or with group purchasing
organizations, with payments received directly from the institution. No insurance reimbursement is involved. Generators are either
sold or leased to the institutions and associated hoses and wraps (used in institutional settings rather than vests) are sold
separately. Accordingly, each product is distinct and considered a separate performance obligation in sales to institutional customers.
The agreements with institutions 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 30 days.

 F- 13

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

 Other
Revenue. Sales to international or other customers are 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 customer 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.

 Contract
balances. The following table provides information about accounts receivable and contracts assets from contracts with customers:

 Schedule of contract assets

 2024

 2023

 Receivables, included in "Accounts receivable, net of allowance for credit losses"

 $
 23,333,000

 $
 24,130,000

 Contract Assets

 $
 719,000

 $
 487,000

 Total
Accounts receivable, net of allowances for credit losses, as of June 30, 2022 were $21,052,000.

 F- 14

 Significant
changes in contract assets during the period are as follows:

 Year Ended
 June 30, 2024

 Year Ended
 June 30, 2023

 Increase (decrease)

 Increase (decrease)

 Contract assets, beginning

 $
 487,000

 $
 286,000

 Reclassification of contract assets to accounts receivable

 ( 2,325,000
)

 ( 1,220,000
)

 Contract assets recognized

 2,840,000

 1,351,000

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

 ( 283,000
)

 70,000

 Contract assets, ending

 $
 719,000

 $
 487,000

 Note 3.

 Inventories

 The
components of inventory were as follows:

 Schedule of components of inventories

 2024

 2023

 Parts inventory

 $
 2,556,000

 $
 3,420,000

 Work in process

 454,000

 470,000

 Finished goods

 834,000

 323,000

 Estimated inventory to be returned

 265,000

 265,000

 Less: Reserve for obsolescence

 ( 397,000
)

 ( 257,000
)

 Total

 $
 3,712,000

 $
 4,221,000

 Note 4.

 Property and Equipment

 Property
and equipment were as follows:

 Schedule of property and equipment, including assets under capital leases

 Estimated Useful

Lives (Years)

 2024

 2023

 Building and building improvements

 15 - 40

 $
 3,448,000

 $
 3,427,000

 Land

 N/A

 200,000

 200,000

 Land improvements

 15 - 20

 173,000

 173,000

 Equipment

 3 - 10

 3,101,000

 3,024,000

 Software

 3 - 7

 2,236,000

 2,166,000

 Demonstration and rental equipment

 1,105,000

 1,090,000

 Construction in progress

 N/A

 72,000

 8,000

 10,335,000

 10,088,000

 Less: Accumulated depreciation

 ( 5,170,000
)

 ( 4,416,000
)

 Net property and equipment

 $
 5,165,000

 $
 5,672,000

 F- 15

 Note 5.

 Finite-life Intangible Assets

 The
carrying value of patents and trademarks includes the original cost of obtaining the patents, periodic renewal fees, and other
costs associated with maintaining and defending patent and trademark rights. Patents and trademarks are amortized over their estimated
useful lives, generally 15 and 12 years, respectively. Accumulated amortization was $ 273,000 and $ 224,000 as of June 30, 2024,
and 2023, respectively.

 The
activity and net balances of finite-life intangible assets were as follows:

 Schedule of activity and balances of finite-life intangible assets

 2024

 2023

 Balance, beginning

 $
 605,000

 $
 599,000

 Additions

 104,000

 69,000

 Amortization expense

 ( 52,000
)

 ( 63,000
)

 Balance, ending

 $
 657,000

 $
 605,000

 Based
on the carrying value as of June 30, 2024, future amortization is expected to be as follows:

 Schedule of future amortization of finite-life intangible assets

 Fiscal years ending June 30:

 2025

 $
 49,000

 2026

 49,000

 2027

 48,000

 2028

 47,000

 2029

 44,000

 Thereafter

 420,000

 Total

 $
 657,000

 Note 6.

 Financing Arrangements

 The
Company has a credit facility that provides for a revolving line of credit and a term loan. Effective December 13, 2023,
the Company renewed its $ 2,500,000 revolving line of credit. There was no outstanding principal balance on the line of credit
as of June 30, 2024, or June 30, 2023. Interest on borrowings under the line of credit, if any, accrues at the prime rate ( 8.50 %
as of June 30, 2024) less 1.0 % and is payable monthly. The amount eligible for borrowing on the line of credit is limited to the
lesser of $ 2,500,000 or 57.0 % of eligible accounts receivable and the line of credit expires on December 18, 2025, if not renewed
before such date. As of June 30, 2024, 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, our Board of Directors removed the date limitation. As of June 30, 2024, a total of 258,356 shares have
been repurchased and retired under this authorization for a total cost of $ 3,000,000, or $ 11.61 per share. Repurchased shares
have been retired and constitute authorized but unissued shares.

 F- 16

 Note 8.

 Share-Based Compensation

 Share-based
compensation expense for fiscal 2024 and 2023 was $ 1,692,000 and $ 708,000, respectively, related to employee stock options, performance-based
restricted stock units and restricted stock awards. This expense is included in selling, general and administrative expense in
the Statements of Operations. As of June 30, 2024, the Company had $ 1,659,000 of unrecognized compensation expense related to
non-vested equity awards, which is expected to be recognized over a weighted-average period of 3.0, 1.99 and 2.59 years related
to performance-based restricted stock units, restricted stock awards and employee stock options, respectively.

 Employee
options: The Company has historically granted stock options to employees as long-term incentive compensation. Options expire
ten years from the grant date and vest over a period of three years. In November 2023, the Company's shareholders approved
the 2023 Equity Incentive Plan (the "2023 Plan") which superseded the 2017 Omnibus Incentive Plan (the "2017
Plan") and the 2014 Equity Incentive Plan (the "2014 Plan"). The 2023 Plan allows the Board to grant stock options,
stock appreciation rights, restricted stock, restricted stock units and other stock-based awards, as well as cash incentive awards
to all employees, non-employee directors, and advisors or consultants of the Company. The vesting schedule and term for each award
are determined by the Board upon each grant. Upon vesting, and the Company's determination that any necessary conditions
precedent to the exercise of shares (such as satisfaction of tax withholding and compliance with applicable legal requirements)
have been satisfied, shares purchased are delivered to the participant in a manner prescribed or permitted by the Board. The maximum
number of shares of common stock available for issuance under the 2023 Plan is (i) 850,000 new shares of common stock, (ii) up
to 192,018 shares of common stock that remained available for issuance under the 2017 Plan as of the approval date of the 2023
Plan, and (iii) up to 360,856 shares of common stock that were subject to outstanding awards under the 2017 Plan as of the approval
date of the 2023 Plan, which shares will be available for future grants under the 2023 Plan to the extent that, on or after the
approval date of the 2023 Plan, such awards expire, are cancelled, are forfeited or are settled for cash. There were 458,973 options
granted under the 2017 Plan and prior plans outstanding as of June 30, 2024. There were 1,100 options issued under the 2023 Plan
outstanding and 1,031,734 shares available for grant under the 2023 Plan as of June 30, 2024.

 The
Company recognizes compensation expense related to share-based payment transactions in the financial statements based on the estimated
fair value of the award issued. The fair value of each option is estimated using the Black-Scholes pricing model at the time of
award grant. The Company estimates the expected life of options based on the expected holding period by the option holder. The
risk-free interest rate is based upon observed U.S. Treasury interest rates for the expected term of the options. The Company
makes assumptions with respect to expected stock price volatility based upon the historical volatility of its stock price. Forfeitures
are accounted for as they occur.

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

 Schedule of assumptions used to estimate fair value of options granted

 Years
 Ended June 30,

 2024

 2023

 Risk-free
 interest rate

 3.85 - 4.64 %

 2.88 - 4.23 %

 Expected
 term (years)

 Expected
 volatility

 51 - 52 %

 53 - 54 %

 F- 17

 The
following table presents employee stock option activity for fiscal 2024 and 2023:

 Schedule of stock option transactions

 Number of
 Shares

 Weighted-
 Average
 Grant Date
 Fair Value

 Weighted-
 Average
 Exercise Price

 Weighted-
 Average
 Remaining
 Contractual
 Life (in Years)

 Options outstanding as of June 30, 2022

 502,084

 $
 3.71

 $
 5.82

 5.35

 Granted

 104,325

 $
 5.35

 $
 9.93

 —

 Exercised

 ( 101,357
)

 $
 1.44

 $
 2.21

 —

 Canceled or forfeited

 ( 53,482
)

 $
 6.33

 $
 11.29

 —

 Options outstanding as of June 30, 2023

 451,570

 $
 4.28

 $
 6.93

 5.53

 Options exercisable as of June 30, 2023

 377,875

 $
 4.00

 $
 6.25

 4.90

 Granted

 263,162

 $
 5.78

 $
 10.70

 —

 Exercised

 ( 56,580
)

 $
 3.66

 $
 5.50

 —

 Canceled or forfeited

 ( 23,079
)

 $
 5.81

 $
 10.46

 —

 Options outstanding as of June 30, 2024

 635,073

 $
 4.91

 $
 8.49

 6.40

 Options exercisable as of June 30, 2024

 378,270

 $
 4.34

 $
 7.03

 4.68

 The
intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds its exercise price. At
June 30, 2024, the weighted average remaining contractual term for all outstanding stock options was 6.4 years and their aggregate
intrinsic value was $ 4,154,000. Outstanding at June 30, 2024 were 635,073 stock options issued to employees, of which 378,270
were vested and exercisable and had an aggregate intrinsic value of $ 3,029,000.

 Restricted
stock: The 2023 Plan permits the Personnel and Compensation Committee of the Board to grant other stock-based awards, including
shares of restricted stock. The Company makes restricted stock grants to key employees and non-employee directors that vest over
six months to three years following the applicable grant date.

 The
Company issued restricted stock awards to employees totaling 23,428 and 32,400 during fiscal 2024 and 2023, respectively, with
a vesting term of three years and a fair value of $ 10.74 and $ 9.92 per share, respectively. The Company issued restricted stock
awards to directors totaling 21,000 and 21,000 during fiscal 2024 and 2023, respectively, with a vesting term of six months and
a fair value of $ 10.44 and $ 9.86 per share for fiscal 2024 and 2023, respectively. Restricted stock transactions during the years
ended June 30, 2024 and 2023 are summarized as follows:

 Schedule of restricted stock transactions

 Shares of

 Restricted Stock

 Weighted-Average

 Grant Date Fair

 Value per Share

 Unvested awards outstanding as of June 30, 2022

 34,684

 $
 12.59

 Granted

 53,400

 $
 9.90

 Vested

 ( 45,152
)

 $
 11.05

 Canceled or forfeited

 ( 24,699
)

 $
 11.33

 Unvested awards outstanding as of June 30, 2023

 18,233

 $
 10.23

 Granted

 44,428

 $
 10.60

 Vested

 ( 40,034
)

 $
 10.45

 Canceled or forfeited

 —

 —

 Unvested awards outstanding as of June 30, 2024

 22,627

 $
 10.57

 F- 18

 Performance-Based
Restricted Stock Units

 The
Company granted 175,000 performance-based restricted stock units ("PSUs") to our President and Chief Executive Officer
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.

 The
weighted average grant date fair value per unit was $ 6.58 per unit and as of June 30, 2024, there are 175,000 PSUs outstanding.
On June 30, 2024, there was approximately $ 863,000 of total unrecognized compensation expense related to outstanding PSUs that
is expected to be recognized over a period of 3.00 years.

 Note 9.

 Income Taxes

 Components
of the provision for income taxes were as follows:

 Schedule of components of the provision for income taxes

 2024

 2023

 Current:

 Current Federal

 $
 1,935,000

 $
 744,000

 Current State

 522,000

 219,000

 Total Current

 2,457,000

 963,000

 Deferred:

 Deferred Federal

 ( 516,000
)

 ( 20,000
)

 Deferred State

 ( 55,000
)

 ( 23,000
)

 Total Deferred

 ( 571,000
)

 ( 43,000
)

 Total Income Tax Expense

 $
 1,886,000

 $
 920,000

 Actual
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

 2024

 2023

 Tax expense at statutory federal rate

 $
 1,477,000

 $
 858,000

 State income tax expense, net of federal tax effect

 369,000

 155,000

 Share based compensation

 (82,000
)

 (212,000
)

 Disallowed meal expenses

 169,000

 69,000

 Change in valuation allowance on deferred tax assets

 —

 11,000

 Other permanent items

 ( 47,000
)

 39,000

 Income tax expense

 $
 1,886,000

 $
 920,000

 The
effective tax rates for fiscal 2024 and 2023 were 26.8 % and 22.5 %, respectively.

 F- 19

 The
significant components of deferred income taxes were as follows:

 Schedule of significant components of deferred income taxes

 2024

 2023

 Deferred tax assets:

 Revenue recognition and accounts receivable reserves

 $
 1,361,000

 $
 1,292,000

 Accrued liabilities

 335,000

 252,000

 Finite-life intangible assets

 262,000

 126,000

 Stock based compensation

 768,000

 516,000

 Tax credits

 258,000

 221,000

 Other

 77,000

 35,000

 Subtotal

 3,061,000

 2,442,000

 Less: Valuation allowance

 ( 258,000
)

 ( 221,000
)

 Net deferred tax assets

 2,803,000

 2,221,000

 Deferred tax liabilities:

 Property and equipment

 ( 651,000
)

 ( 640,000
)

 Total deferred tax liabilities

 ( 651,000
)

 ( 640,000
)

 Net deferred tax assets

 $
 2,152,000

 $
 1,581,000

 The
Company has research and development state tax credit carryforwards of $ 258,000 and $ 221,000 as of June 30, 2024, and June 30,
2023, respectively. Based on the historical use of the credits, management believes it is more likely than not these credits will
begin to expire unused between fiscal years 2025 and 2038. As of June 30, 2024, and June 30, 2023, the Company had a valuation
allowance of $ 258,000 and $ 221,000, respectively, related to its research and development state tax carryforwards.

 The
Company applies the accounting standard for uncertain tax positions pursuant to which a more-likely-than-not threshold is utilized
to determine the recognition and derecognition of uncertain tax positions. Once the more-likely-than-not threshold is met, the
amount of benefit to be recognized is the largest amount of tax benefit that is greater than 50 percent likely of being ultimately
realized upon settlement. It further requires that a change in judgment related to the expected ultimate resolution of uncertain
tax positions be recognized in earnings in the period of such a change. The Company does not believe that it has any material
uncertain tax positions as of June 30, 2024, and June 30, 2023.

 The
Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. With limited exceptions,
the Company is no longer subject to federal and state income tax examinations by tax authorities for fiscal year ended prior to
June 30, 2021. 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, 2021, without proposing any adjustments. The Company is not under any current income tax examinations
by any other 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.

 F- 20

 Note 10.

 Leases

 The
Company has leases for office and warehouse space and office equipment that require monthly payments. These leases have payments
ranging from $ 200 to $ 5,300 per month which expire through December 2025 and are recognized on a straight-line basis over the
life of the lease. All leases are classified as operating leases which do not include renewal options. The Company currently does
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.

 The
Company has recognized right of use assets associated with its operating leases of $ 87,000 and $ 161,000 as of June 30, 2024, and
June 30, 2023, respectively, which is included in other assets on the Company's balance sheet. Operating lease liabilities
were $87,000 and $161,000 as of June 30, 2024, and June 30, 2023, respectively, which are included in other accrued liabilities
and other long-term liabilities on the Company's balance sheet.

 As
of June 30, 2024, and June 30, 2023, the Company had a weighted-average lease term of 1.1 and 1.5 years, respectively, for its
operating leases, which had a weighted-average discount rate of 4.0 % and 4.0 %, respectively. Operating lease payments of $ 78,000
are included in operating cash flows in fiscal 2024.

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

 Schedule of maturities of lease liabilities

 Fiscal years ending June 30:

 2025

 $
 80,000

 2026

 9,000

 Total lease payments

 89,000

 Less: Interest

 ( 2,000
)

 Present value of lease liabilities

 $
 87,000

 Note 11.

 Commitments and Contingencies

 Litigation:
 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.

 401(k)
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. 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 2024 and 2023 were $ 598,000 and $ 524,000,
respectively.

 Employment
Agreements: The Company is party to 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 months
of base salary upon a termination of employment 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.

 Note 12.

 Related Parties

 The
Company uses a parts supplier whose founder and president was a director of the Company through November 12, 2021. The former
director has remained a beneficial owner of greater than 5% of the Company's outstanding common stock through June 30, 2024.
The Company made payments to the supplier of $ 2,051,000 and $ 1,857,000 during fiscal years 2024 and 2023, respectively. Amounts
due to the supplier were $ 18,000 and $ 247,000 on June 30, 2024, and June 30, 2023 respectively, which were included in accounts
payable and other accrued liabilities on the Balance Sheets.

 F- 21

 Note 13.

 Segment Reporting

 Our
President and Chief Executive Officer is our chief operating decision maker ("CODM"). The CODM reviews financial information,
including long-lived assets, presented on a consolidated basis, accompanied by information about revenue by market, for purposes
of allocating resources and evaluating financial performance. We have a single active product and engage in the single business
activity of [selling and supporting that single product]. There are no segment managers who are held accountable for operations,
operating results or plans for levels or components below the consolidated level. Accordingly, we have determined that we have
a single reportable and operating segment structure. We and our CODM evaluate performance based on revenue from our single product
in the markets in which the Company operates. Revenue by market is described above in Note 2.

 Note 14.

 Subsequent Events

 The
Company evaluates, as of each reporting period, events or transactions that occur after the balance sheet date through the date
the financial statements are issued for either disclosure or adjustment to the Company's financial results. Except as described
below, there have been no events subsequent to June 30, 2024, which would require recognition in the Financial Statements or Notes
to the Financial Statements.

 F- 22

 Item
 9.
 Changes
 in and Disagreements With Accountants on Accounting and Financial Disclosure.

 None.

 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, 2024, 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 2024 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 Item
 9B.
 Other
 Information.

 During
the three months ended June 30, 2024, 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
 9C.
 Disclosure
 Regarding Foreign Jurisdictions that Prevent Inspections.

 Not
applicable.

 PART
III

 Certain
information required by Part III is incorporated by reference from our definitive Proxy Statement for the annual meeting of shareholders
to be held in 2024 (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:

 James
L. Cunniff, age 59, joined Electromed in July 2023 as the Company's President and Chief Executive Officer. Prior to
joining Electromed, Mr. Cunniff most recently served as President and Chief Executive Officer of Provista Inc., from 2017 to May
2022. Previously, he served as President and Chief Executive Officer at Denver Solutions, LLC (d/b/a Leiters Health) from 2015
to 2017 and as Senior Vice President, Americas, at Acelity L.P. Inc., from 2012 to 2014. Mr. Cunniff holds a bachelor's
degree in advertising and business from the University of Illinois Urbana-Champaign and has completed the Advanced Management
Program at Harvard Business School.

 Bradley
M. Nagel, age 42, joined Electromed in November 2022 as the Company's Chief Financial Officer, Treasurer and Secretary.
Prior to joining Electromed, Mr. Nagel most recently served as Divisional Chief Financial Officer of Global Lung Health and Visualization
at Medtronic plc from June 2018 to November 2022. Previously, he served at Medtronic as Sr. Manager, Accounting and Sales Operations
from 2016 to June 2018 and Accounting Manager from 2015 to 2016. Before joining Medtronic, Mr. Nagel held various roles of increasing
responsibility in sales, operations and accounting at Target Corporation and TCF Financial Corporation. Mr. Nagel holds a bachelor's
degree in business & finance from Calvin University.

 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 the Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer). The Code of Ethics 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 our 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.

 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.

 Our
independent registered public accounting firm is RSM US LLP, Rochester, MN

 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.

 PART
IV

 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, PCAOB ID: 49

 Balance
 Sheets as of June 30, 2024 and 2023

 of Operations for the years ended June 30, 2024 and 2023

 of Shareholders' Equity for the years ended June 30, 2024 and 2023

 of Cash Flows for the years ended June 30, 2024 and 2023

 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

 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)

 Exhibit

Number

 Method
 of Filing

 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)

 4.1

 of Securities (incorporated by reference to Exhibit 4.1 to Annual Report on Form 10-K for the fiscal year ended June 30,
 2019)

 10.1

 Inc. 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 25,
 2014)*

 10.2

 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)*

 10.3

 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)*

 10.4

 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)*

 10.5

 Inc. 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 99.1 to Registration Statement on Form S-8 filed December
 4, 2017)*

 10.6

 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 fiscal year ended June 30, 2018)*

 10.7

 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)*

 10.8

 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 fiscal year ended June 30, 2018)*

 10.9

 Form
 of Performance Stock Unit Agreement (Inducement Grant) (incorporated by reference to Exhibit 10.11 to Annual Report on Form
 10-K for the fiscal year ended June 30, 2023)*

 10.10

 Form
 of Non-Qualified Stock Option Agreement (Inducement Grant) (incorporated by reference to Exhibit 10.12 to Annual Report on
 Form 10-K for the fiscal year ended June 30, 2023)*

 10.11

 Employment
 Agreement with Bradley M. Nagel, dated October 19, 2022 (incorporated by reference to Exhibit 10.1 to Current Report on Form
 8-K filed October 24, 2022)*

 Incorporated by Reference

 10.12

 Letter
 Agreement with Kathleen S. Skarvan, dated February 14, 2023 (incorporated by reference to Exhibit 10.1 to Current Report on
 Form 8-K filed February 14, 2023)*

 Incorporated by Reference

 10.13

 Employment
 Agreement with James Cunniff, dated May 22, 2023 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K
 filed June 5, 2023)*

 Incorporated by Reference

 Exhibit

Number

 Method
 of Filing

 10.14

 Letter
 Agreement with James Cunniff, dated May 22, 2023 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K
 filed June 5, 2023)*

 Incorporated by Reference

 10.15

 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)

 10.16

 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)

 10.17

 Rider
 to Business Loan Agreement (Asset Based) with Choice Financial Group, dated December 16, 2020 (incorporated by reference to
 Exhibit 10.2 to Current Report on Form 8-K filed December 17, 2020)

 10.18

 Rider
 to Business Loan Agreement (Asset Based) with Choice Financial Group, dated December 17, 2021 (incorporated by reference to
 Exhibit 10. 1 to Current Report on 8-K filed December 17, 2021)

 10.19

 Rider
 to Business Loan Agreement (Asset Based) with Choice Financial Group, dated December 13, 2023 (incorporated by reference to
 Exhibit 10.2 to Current Report on Form 8-K filed December 15, 2023)

 10.20

 Inc. 2023 Equity Incentive Plan (incorporated by reference to Exhibit 4.3 to Registration Statement on Form S-8 filed November
 30, 2023)*

 10.21

 Form
 of Restricted Stock Agreement (Non-Employee Directors) under the 2023 Equity Incentive Plan (incorporated by reference to
 Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended December 31, 2023)*

 10.22

 of Fiscal Year 2024 Officer Bonus Plan (incorporated by reference to Exhibit 10.26 to Annual Report on Form 10-K for the fiscal
 year ended June 30, 2023)*

 10.23

 of Fiscal Year 2025 Officer Bonus Plan*

 Filed

 Insider
 Trading Policy

 Filed

 23.1

 Consent
 of Independent Registered Public Accounting Firm

 Filed

 24.1

 Powers
 of Attorney

 Filed

 31.1

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

 Filed

 31.2

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

 Filed

 32.1

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

 Furnished

 32.2

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

 Furnished

 Compensation
 Recoupment Policy

 Filed

 Exhibit

Number

 Method
 of Filing

 Financial
 statements from the annual report on Form 10-K for the year ended June 30, 2024, as filed with the Securities and Exchange
 (iii) Statements of Shareholders' Equity, (iv) Statements of Cash Flows, and (v) Notes to Financial Statements

 Filed

 Cover

 Filed
 electronically

 *
 Management
 compensatory contract or arrangement.

 Item
 16.
 Form
 10-K Summary.

 None.

 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 27, 2024

 By

 /s/

 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/

 President
 and Chief Executive Officer and Director

 (principal
 executive officer)

 /s/
 Bradley M. Nagel

 Chief
 Financial Officer

 Bradley M. Nagel

 (principal
 financial and accounting officer)

 *

 Stan K. Erickson

 *

 Gregory J. Fluet

 *

 Joseph L. Galatowitsch

 *

 Kathleen S. Skarvan

 *

 Andrew J. Summers

 *

 Kathleen A. Tune

 *

 Andrea M. Walsh

 *
 The
 undersigned, by signing his 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/

 Attorney-in-Fact