10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

 

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: 001-36159

STEREOTAXIS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   94-3120386

(State of

Incorporation)

 

(I.R.S. employer

identification no.)

4320 Forest Park Avenue Suite 100

St. Louis, Missouri

  63108
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (314) 678-6100

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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     ☒   Yes      ☐   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Registration S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ☒   Yes     ☐   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

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

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

The number of outstanding shares of the registrant’s common stock on April 30, 2018 was 58,926,619.

 

 

 


Table of Contents

STEREOTAXIS, INC.

INDEX TO FORM 10-Q

 

         Page  
Part I Financial Information   

Item 1.

  Financial Statements (unaudited)   
  Balance Sheets      3  
  Statements of Operations      4  
  Statements of Cash Flows      5  
  Notes to Financial Statements      6-15  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      16-20  

Item 3.

  [Reserved]      21  

Item 4.

  Controls and Procedures      21  
Part II Other Information   

Item 1.

  Legal Proceedings      22  

Item 1A.

  Risk Factors      22  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      22  

Item 3.

  Defaults upon Senior Securities      22  

Item 4.

  [Reserved]      22  

Item 5.

  Other Information      22  

Item 6.

  Exhibits      22-23  
Signatures      24  

 

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Table of Contents
ITEM 1. FINANCIAL STATEMENTS

STEREOTAXIS, INC.

BALANCE SHEETS

 

     March 31,     December 31,  
     2018     2017  
     (Unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 11,613,713     $ 3,686,302  

Accounts receivable, net of allowance of $303,688 and $361,350 in 2018 and 2017, respectively

     6,637,588       4,287,255  

Inventories, net

     1,446,574       1,146,971  

Prepaid expenses and other current assets

     742,075       750,085  
  

 

 

   

 

 

 

Total current assets

     20,439,950       9,870,613  

Property and equipment, net

     462,213       592,688  

Intangible assets, net

     142,973       159,470  

Other assets

     282,199       44,432  
  

 

 

   

 

 

 

Total assets

   $ 21,327,335     $ 10,667,203  
  

 

 

   

 

 

 

Liabilities and stockholders’ deficit

    

Current liabilities:

    

Accounts payable

   $ 1,819,423     $ 1,654,101  

Accrued liabilities

     2,947,677       3,195,247  

Deferred revenue

     7,136,065       5,702,769  

Warrants

     —         19,574,977  
  

 

 

   

 

 

 

Total current liabilities

     11,903,165       30,127,094  

Long-term deferred revenue

     560,649       611,863  

Other liabilities

     580,866       535,369  
  

 

 

   

 

 

 

Total liabilities

     13,044,680       31,274,326  

Convertible Preferred stock:

    

Convertible Preferred stock, par value $0.001; 10,000,000 shares authorized, 23,900 shares outstanding at 2018 and 2017

     5,960,475       5,960,475  

Stockholders’ deficit:

    

Common stock, par value $0.001; 300,000,000 shares authorized, 58,901,126 and 22,805,731 shares issued at 2018 and 2017, respectively

     58,901       22,806  

Additional paid in capital

     477,872,296       450,748,403  

Treasury stock, 4,015 shares at 2018 and 2017

     (205,999     (205,999

Accumulated deficit

     (475,403,018     (477,132,808
  

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     2,322,180       (26,567,598
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity (deficit)

   $ 21,327,335     $ 10,667,203  
  

 

 

   

 

 

 

See accompanying notes.

 

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STEREOTAXIS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three Months Ended March 31,  
     2018     2017  

Revenue:

    

Systems

   $ 17,275     $ 218,895  

Disposables, service and accessories

     6,954,357       6,758,777  
  

 

 

   

 

 

 

Total revenue

     6,971,632       6,977,672  

Cost of revenue:

    

Systems

     203,602       220,443  

Disposables, service and accessories

     1,061,745       1,036,182  
  

 

 

   

 

 

 

Total cost of revenue

     1,265,347       1,256,625  

Gross margin

     5,706,285       5,721,047  

Operating expenses:

    

Research and development

     1,962,626       1,600,877  

Sales and marketing

     3,634,997       3,781,448  

General and administrative

     1,239,179       2,241,580  
  

 

 

   

 

 

 

Total operating expenses

     6,836,802       7,623,905  
  

 

 

   

 

 

 

Operating loss

     (1,130,517     (1,902,858

Other income

     2,590,361       3,129,308  

Interest expense (net)

     (24,615     (49,483
  

 

 

   

 

 

 

Net income

   $ 1,435,229     $ 1,176,967  

Cumulative dividend on convertible preferred stock

     (353,589     (363,188

Net income attributable to convertible preferred stock

     (610,280     (509,323
  

 

 

   

 

 

 

Earnings attributable to common stockholders

   $ 471,360     $ 304,456  
  

 

 

   

 

 

 

Net income per share attributable to common stockholders:

    

Basic

   $ 0.02     $ 0.01  

Diluted

   $ 0.01     $ 0.01  
  

 

 

   

 

 

 

Weighted average number of common shares and equivalents:

    

Basic

     30,957,648       22,318,000  

Diluted

     33,122,598       22,331,683  
  

 

 

   

 

 

 

Certain prior year amounts have been reclassified to conform to the 2018 presentation.

See accompanying notes.

 

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STEREOTAXIS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Three Months Ended March 31,  
     2018     2017  

Cash flows from operating activities

    

Net earnings

   $ 1,435,229     $ 1,176,967  

Adjustments to reconcile net earnings to cash used in operating activities:

    

Depreciation

     140,465       140,848  

Amortization of intangibles

     16,497       49,831  

Amortization of deferred finance costs

     24,657       24,657  

Share-based compensation

     216,586       243,161  

Loss on asset disposal

     —         14,598  

Adjustment of warrants

     (2,590,361     (3,129,308

Changes in operating assets and liabilities:

    

Accounts receivable

     (2,350,333     (650,976

Inventories

     (299,603     (277,266

Prepaid expenses and other current assets

     97,206       18,809  

Other assets

     (57,059     (2,153

Accounts payable

     165,322       (407,899

Accrued liabilities

     (247,570     (405,468

Deferred revenue

     1,382,082       536,756  

Other liabilities

     45,497       136  
  

 

 

   

 

 

 

Net cash used in operating activities

     (2,021,385     (2,667,307

Cash flows from investing activities

    

Purchase of fixed assets

     (9,990     (4,297
  

 

 

   

 

 

 

Net cash used in investing activities

     (9,990     (4,297

Cash flows from financing activities

    

Payments of deferred financing costs

     —         (100,000

Proceeds from issuance of stock, net of issuance costs

     13,622       9,336  

Proceeds from warrant exercise

     9,945,164       —    
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     9,958,786       (90,664
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     7,927,411       (2,762,268
  

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

     3,686,302       8,501,392  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 11,613,713     $ 5,739,124  
  

 

 

   

 

 

 

See accompanying notes.

 

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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Notes to Financial Statements

In this report, “Stereotaxis”, the “Company”, “Registrant”, “we”, “us”, and “our” refer to Stereotaxis, Inc. and its wholly owned subsidiaries. Epoch®, Niobe®, Odyssey®, Odyssey Cinema, Vdrive®, Vdrive Duo, V-CAS, V-Loop, V-Sono, V-CAS Deflect, QuikCAS, and Cardiodrive® are trademarks of Stereotaxis, Inc. All other trademarks that appear in this report are the property of their respective owners.

1. Description of Business

Stereotaxis designs, manufactures and markets the Epoch Solution, which is an advanced remote robotic navigation system for use in a hospital’s interventional surgical suite, or “interventional lab”, that we believe revolutionizes the treatment of arrhythmias and coronary artery disease by enabling enhanced safety, efficiency, and efficacy for catheter-based, or interventional, procedures. The Epoch Solution is comprised of the Niobe ES Remote Magnetic Navigation System (“Niobe ES system”), Odyssey Information Management Solution (“Odyssey Solution”), and the Vdrive Robotic Navigation System (“Vdrive system”), and related devices.

The Niobe system is designed to enable physicians to complete more complex interventional procedures by providing image-guided delivery of catheters and guidewires through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied magnetic fields that govern the motion of the working tip of the catheter or guidewire, resulting in improved navigation, efficient procedures, and reduced x-ray exposure. As of March 31, 2018, the Company had an installed base of 128 Niobe ES systems.

In addition to the Niobe system and its components, Stereotaxis also has developed the Odyssey Solution, which consolidates all lab information enabling doctors to focus on the patient for optimal procedure efficiency. The system also features a remote viewing and recording capability called Odyssey Cinema, which is an innovative solution delivering synchronized content for optimized workflow, advanced care, and improved productivity. This tool includes an archiving capability that allows clinicians to store and replay entire procedures or segments of procedures. This information can be accessed from locations throughout the hospital local area network and over the global Odyssey Network providing physicians with a tool for clinical collaboration, remote consultation, and training.

Our Vdrive system provides navigation and stability for diagnostic and therapeutic devices designed to improve interventional procedures. The Vdrive system complements the Niobe ES system control of therapeutic catheters for fully remote procedures and enables single-operator workflow and is sold as two options, the Vdrive system and the Vdrive Duo system. In addition to the Vdrive system and the Vdrive Duo system, we also manufacture and market various disposable components which can be manipulated by these systems.

We promote the full Epoch Solution in a typical hospital implementation, subject to regulatory approvals or clearances. The full Epoch Solution implementation requires a hospital to agree to an upfront capital payment and recurring payments. The upfront capital payment typically includes equipment and installation charges. The recurring payments typically include disposable costs for each procedure, equipment service costs beyond warranty period, and software licenses. In hospitals where the full Epoch Solution has not been implemented, equipment upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.

The core components of Stereotaxis systems, such as the Niobe system, Odyssey Solution, Cardiodrive, and various disposable interventional devices have received regulatory clearance in the U.S., Europe, Canada, China, Japan and various other countries. We have received the regulatory clearance, licensing and/or CE Mark approvals that allow us to market the Vdrive and Vdrive Duo systems with the V-CAS, V-Loop and V-Sono devices in the U.S., Canada and European Union. The V-CAS Deflect catheter advancement system has been CE Marked for sale in the European Union.

We have successfully integrated our Niobe system with digital fluoroscopy systems to provide advanced interventional lab visualization and instrument control through user-friendly computerized interfaces. The maintenance of these arrangements, or the establishment of equivalent alternatives, is critical to our commercialization efforts. The commercial availability of both currently compatible digital imaging fluoroscopy systems is unlikely to continue for multiple years and efforts are being made to ensure the availability of integrated next generation systems and/or equivalent alternatives; however, we cannot provide assurance as to the timeline of the ongoing availability of such compatible systems or our ability to obtain equivalent alternatives on competitive terms or at all.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements of Stereotaxis, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all the disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, they include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Operating results for the three month period ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 or for future operating periods.

 

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These interim financial statements and the related notes should be read in conjunction with the annual financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (SEC) on March 20, 2018.

Going Concern, Liquidity and Management’s Plan

The Company believes the cash on hand at March 31, 2018 will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. The Company has sustained operating losses throughout its corporate history and expects that its 2018 expenses will exceed its 2018 gross margin. The Company expects to continue to incur operating losses and negative cash flows until revenues reach a level sufficient to support ongoing operations or expense reductions are in place. The Company’s liquidity needs will be largely determined by the success of clinical adoption within the installed base of Niobe systems as well as by new placements of capital systems.

Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying value of such amounts reported at the applicable balance sheet dates approximates fair value.

The Company measures certain financial assets and liabilities, including warrants, at fair value on a recurring basis. General accounting principles for fair value measurement established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (“Level 1”) and the lowest priority to unobservable inputs (“Level 3”). See Note 10 for additional details.

Revenue and Costs of Revenue

The Company adopted ASC 606, Revenue from Contracts with Customers, on January 1, 2018 using the modified retrospective method. As part of the Company’s adoption of ASC 606, the Company elected to use the following practical expedients (i) applying the modified retrospective method only to open contracts as of December 31, 2017; (ii) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company’s transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (iii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less; and (iv) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer.

Upon adoption of the new revenue guidance, the Company recorded a cumulative-effect reduction to accumulated deficit of $0.3 million on January 1, 2018 relating primarily to the deferral of previously expensed costs to obtain a contract. The Company capitalized sales commissions paid in connection with multi-year service contracts and is amortizing such asset over the economic life of those contracts. Previously, sales commissions on multi-year service contracts were expensed as incurred. The impact of this change on operating expenses in any given period will depend, in part, on the amount of such commissions incurred and capitalized in relation to the amount of ongoing amortization expense. In the first quarter of 2018, the Company recorded $0.1 million less in commission expense as a result of adopting the new standard. The Company did not otherwise experience significant changes in the timing or method of revenue recognition for any of its material revenue streams.

We generate revenue from initial capital sales of systems as well as recurring revenue from the sale of our proprietary disposable devices, from royalties paid to the Company on the sale by Biosense Webster of co-developed catheters, and from other recurring revenue including ongoing license and service contracts.

We account for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We record our revenue based on consideration specified in the contract with each customer, net of any taxes collected from customers that are remitted to government authorities.

For contracts containing multiple products and services the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer.

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services and market conditions. The Company regularly reviews standalone selling prices and updates these estimates as necessary.

 

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Systems:

Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation and an implied obligation to provide software enhancements if and when available for one year following installation. Revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Revenue from the implied obligation to deliver software enhancements if and when available is recognized ratably over the first year following installation of the system as the customer receives the right to software updates throughout the period and is included in Other Recurring Revenue. The Company’s system contracts generally do not provide a right of return. Systems are generally covered by a one-year assurance type warranty; warranty costs were not material for the periods presented. Revenue from system delivery and installation represented less than 1% and 3% of revenue for the three months ended March 31, 2018 and 2017, respectively.

Disposables:

Revenue from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by an assurance type warranty that provides for the return of defective products. Warranty costs were not material for the periods presented. Disposable revenue represented 37% and 40% of revenue for the three months ended March 31, 2018 and 2017, respectively.

Royalty:

The Company is entitled to royalty payments from Biosense Webster, payable quarterly based on net revenues from sales of the co-developed catheters. Royalty revenue from the co-developed catheters represented 10% and 11% of revenue for the three months ended March 31, 2018 and 2017, respectively.

Other Recurring Revenue:

Other recurring revenue includes revenue from software licenses, product maintenance plans, and other post warranty maintenance. Revenue from services and license fees is deferred and amortized over the service or license fee period, which is typically one year. Revenue related to services performed on a time-and-materials basis is recognized when performed. Other recurring revenue represented 53% and 46% of revenue for the three months ended March 31, 2018 and 2017, respectively.

 

     Three months ended March 31,  
     2018      2017  

Systems

   $ 17,275      $ 218,895  

Disposables, service and accessories

     6,954,357        6,758,777  
  

 

 

    

 

 

 

Total revenue

   $ 6,971,632      $ 6,977,672  

Transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which the revenue has not yet been recognized. A significant portion of this amount relates to the Company’s systems contracts and obligations that will be recognized as revenue in future periods. These obligations are generally satisfied within two years after contract inception but may occasionally extend longer. Transaction price representing revenue to be earned on remaining performance obligations on system contracts was approximately $1.4 million as of March 31, 2018. Performance obligations arising from contracts for disposables, royalty and service are generally expected to be satisfied within one year after entering into the contract.

The following information summarizes the Company’s contract assets and liabilities:

 

     March 31,      December 31,  
     2018      2017  

Contract Assets - Unbilled Receivables

   $ 55,341      $ 2,917  

Product shipped, revenue deferred

     940,665        941,724  

Deferred service and license fees

     6,756,049        5,372,908  
  

 

 

    

 

 

 

Total deferred revenue

     7,696,714        6,314,632  

Less: Long-term deferred revenue

     (560,649      (611,863
  

 

 

    

 

 

 

Total current deferred revenue

   $ 7,136,065      $ 5,702,769  

 

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The Company invoices its customers based on the billing schedules in its sales arrangements. Contract assets primarily represent the difference between the revenue that was earned but not billed on service contracts and revenue from system contracts that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue is primarily related to service contracts, for which the service fees are billed up-front, generally quarterly or annually, and for amounts billed in advance for system contracts for which some performance obligations remain outstanding. For service contracts, the associated deferred revenue is generally recognized ratably over the service period. For system contracts, the associated deferred revenue is recognized when the remaining performance obligations are satisfied. The Company did not have any impairment losses on its contract assets for the periods presented.

Revenue recognized for the three months ended March 31, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each reporting period was $2,643,425 and $2,664,371, respectively.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company has determined that sales incentive programs for the Company’s sales team meet the requirements to be capitalized as the Company expects to generate future economic benefits from the related revenue generating contracts after the initial capital sales transaction. The costs capitalized as contract acquisition costs included in prepaid expenses and other current assets, in the Company’s balance sheet was $0.4 million as of March 31, 2018. The Company did not incur any impairment losses during any of the periods presented.

Costs of systems revenue include direct product costs, installation labor and other costs, estimated warranty costs, and initial training and product maintenance costs. These costs are recorded at the time of sale. Costs of disposable revenue include direct product costs and estimated warranty costs and are recorded at the time of sale. Cost of revenue from services and license fees are recorded when incurred.

Share-Based Compensation

The Company accounts for its grants of stock options, stock appreciation rights, restricted shares, and restricted stock units and for its employee stock purchase plan in accordance with the provisions of general accounting principles for share-based payments. These accounting principles require the determination of the fair value of the share-based compensation at the grant date and the recognition of the related expense over the period in which the share-based compensation vests.

The Company utilizes the Black-Scholes valuation model to determine the fair value of stock options and stock appreciation rights at the date of grant. The resulting compensation expense is recognized over the requisite service period, which is generally four years. Restricted shares granted to employees are valued at the fair market value at the date of grant. The Company amortizes the fair market value to expense over the service period. If the shares are subject to performance objectives, the resulting compensation expense is amortized over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives.

Net Earnings (Loss) per Common Share (“EPS”)

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the number of common shares outstanding during the period. In periods where there is net income, we apply the two-class method to calculate basic and diluted net income (loss) per share of common stock, as our Convertible Preferred Stock is a participating security. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. In periods where there is a net loss, the two-class method of computing earnings per share does not apply as our Convertible Preferred Stock does not contractually participate in our losses. We compute diluted net income (loss) per common share using net income (loss) as the “control number” in determining whether potential common shares are dilutive, after giving consideration to all potentially dilutive common shares, including stock options, warrants, unvested restricted stock units outstanding during the period and potential issuance of stock upon the conversion of our Convertible Preferred Stock issued and outstanding during the period, except where the effect of such securities would be antidilutive.

 

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The following table sets forth the computation of basic and diluted EPS:

 

     Three months ended March 31,  
     2018      2017  

Net income

   $ 1,435,229      $ 1,176,967  

Cumulative dividend on convertible preferred stock

     (353,589      (363,188

Net income attributable to convertible preferred stockholders

     (610,280      (509,323
  

 

 

    

 

 

 

Net income attributable to common stockholders

   $ 471,360      $ 304,456  

Shares used for basic EPS-weighted average shares

     30,957,648        22,318,000  

Restricted Stock Units

     292,891        13,683  

Warrants

     1,872,059        —    
  

 

 

    

 

 

 

Weighted average number of common shares and equivalents:

     33,122,598        22,331,683  

Basic EPS

   $ 0.02      $ 0.01  

Diluted EPS

   $ 0.01      $ 0.01  

The following potential common shares were excluded from diluted EPS for the three months ended March 31, 2018 as they were antidilutive: 1,236,445 stock options and stock appreciation rights, 280,560 restricted stock units, and 1,077,255 warrants. The following potential common shares were excluded from diluted EPS for the three months ended March 31, 2017 as they were antidilutive: 665,477 stock options and stock appreciation rights, 671,929 restricted stock units, and 38,887,708 warrants.

As of March 31, 2018, the Company had 1,236,445 shares of common stock issuable upon the exercise of outstanding options and stock appreciation rights at a weighted average exercise price of $3.27 per share, 2,949,314 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $2.32 per share, 40,081,485 shares of common stock issuable upon the conversion of Series A Convertible Preferred Stock and accumulated dividends, and 573,451 shares of unvested restricted share units.

Reclassifications

In 2018, we adjusted our operating expense categories to improve our alignment with common industry reporting practice, and as a result, certain amounts in prior periods have been reclassified to conform to the current period presentation. Regulatory and clinical research expenses were previously included in General and Administrative expense and have been reclassified to Research and Development. International training expense was previously included in General and Administrative expense and has been reclassified to Sales and Marketing expense. These reclassifications had no effect on reported income or losses.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (ASC 842),” which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective for interim and annual periods beginning after December 31, 2018 (January 1, 2019 for the Company), with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update.

3. Inventories

Inventories consist of the following:

 

     March 31, 2018      December 31, 2017  

Raw materials

   $ 2,578,473      $ 2,528,270  

Work in process

     197,820        4,836  

Finished goods

     2,779,669        2,515,637  

Reserve for obsolescence

     (4,109,388      (3,901,772
  

 

 

    

 

 

 

Total inventory

   $ 1,446,574      $ 1,146,971  
  

 

 

    

 

 

 

 

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4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

     March 31, 2018      December 31, 2017  

Prepaid expenses

   $ 458,547      $ 575,501  

Prepaid commissions

     384,879        —    

Deferred financing costs

     —          24,658  

Deposits

     180,848        194,358  
  

 

 

    

 

 

 

Total prepaid expenses and other assets

     1,024,274        794,517  

Less: Noncurrent prepaid expenses and other assets

     (282,199      (44,432
  

 

 

    

 

 

 

Total current prepaid expenses and other assets

   $ 742,075      $ 750,085  
  

 

 

    

 

 

 

Effective with the January 1, 2018 adoption of ASC 606, the Company determined that sales commissions paid in connection with multi-year service contracts met the requirements to be capitalized as the Company expects to generate future economic benefits from the related revenue generating contracts. Previously, sales commissions on multi-year service contracts were expensed as incurred. The Company is amortizing this asset over the economic life of the related contracts.

5. Property and Equipment

Property and equipment consist of the following:

 

     March 31, 2018      December 31, 2017  

Equipment

   $ 7,259,470      $ 7,295,698  

Leasehold improvements

     2,592,338        2,592,339  
  

 

 

    

 

 

 
     9,851,808        9,888,037  

Less: Accumulated depreciation

     (9,389,595      (9,295,349
  

 

 

    

 

 

 

Net property and equipment

   $ 462,213      $ 592,688  
  

 

 

    

 

 

 

6. Intangible Assets

As of March 31, 2018, the Company had total intangible assets of $3,143,291. Accumulated amortization at March 31, 2018, was $3,000,318.

7. Accrued Liabilities

Accrued liabilities consist of the following:

 

     March 31,
2018
     December 31,
2017
 

Accrued salaries, bonus, and benefits

   $ 1,376,613      $ 1,641,491  

Accrued rent

     348,690        441,417  

Accrued licenses and maintenance fees

     581,691        581,672  

Accrued warranties

     145,172        164,365  

Accrued taxes

     258,964        234,668  

Accrued professional services

     491,894        367,072  

Other

     325,519        299,931  
  

 

 

    

 

 

 

Total accrued liabilities

     3,528,543        3,730,616  

Less: Long term accrued liabilities

     (580,866      (535,369
  

 

 

    

 

 

 

Total current accrued liabilities

   $ 2,947,677      $ 3,195,247  
  

 

 

    

 

 

 

Our primary company facilities are located in St. Louis, Missouri where we currently lease approximately 52,000 square feet of office and 12,000 square feet of demonstration and assembly space. In the third quarter of 2013, the Company modified the existing lease agreement to terminate approximately 13,000 square feet of unimproved space. The costs associated with the termination were $515,138 and were accrued as a rent liability as of September 30, 2013. As of March 31, 2018, the remaining accrued costs associated with the termination were $71,592.

 

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In August 2016 the Company entered into an agreement to sublease approximately 11,000 square feet of office space immediately and an additional 16,000 square feet of office space beginning in January, 2017, with the term of the sublease ending on December 31, 2018. The initial costs associated with the sub lease were $69,180, and as of March 31, 2018, the remaining accrued costs were $19,822.

8. Long-Term Debt and Credit Facilities

The Company has had a working capital line of credit with its primary lender, Silicon Valley Bank, since 2004. The revolving line of credit is secured by substantially all of the Company’s assets. The maximum available under the line is $5.0 million subject to the value of collateralized assets. The Company is required under the revolving line of credit to maintain its primary operating account and the majority of its cash and investment balances in accounts with its primary lender. The facility was amended on March 27, 2015, extending the maturity date to March 31, 2018. On November 7, 2017, the Company and the primary lender agreed to adjust the maximum availability under the Company’s revolving line of credit from $10.0 million to $5.0 million with a pro-rata reduction in related loan costs, as well as a reduction in the interest rate floor from 7.0% to 5.75%. As of March 31, 2018, the agreement required the Company to maintain a liquidity ratio greater than 1.50:1.00, excluding certain short term advances from the calculation, and a minimum tangible net worth of not less than (no worse than) negative $24.0 million for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24.5 million for the quarters ended December 31, 2017 and March 31, 2018.

As of March 31, 2018, the Company had no outstanding balance under the revolving line of credit. Draws on the line of credit are made based on the borrowing capacity one week in arrears. As of March 31, 2018, the Company had a borrowing capacity of $4.5 million based on the Company’s collateralized assets. The Company’s total liquidity as of March 31, 2018, was $16.1 million which included cash and cash equivalents of $11.6 million. As of March 31, 2018, we were in compliance with all financial covenants of this agreement and we anticipate continued compliance throughout the remainder of 2018.

On April 26, 2018, the Company entered into a First Amendment to Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank to extend the maturity of the revolving line of credit from March 31, 2018 to April 25, 2019. The maximum availability under the revolving line of credit remains at $5.0 million, and provides for an interest rate during a “streamline period” equal to the prime rate subject to a floor of 4.5%. A “streamline period” occurs when the Company has, for each consecutive day in the immediately preceding monthly period, maintained a liquidity ratio greater than 1.75:1.00, and continuing so long as the streamline period has been maintained. Upon the termination of a streamline period, the Company must maintain the streamline threshold each consecutive day for one fiscal quarter, prior to entering into a subsequent streamline period. During non-streamline periods, the interest rate is the prime rate plus 1.5%, subject to a floor of 4.5%. In addition, the amendment eliminates the tangible net worth covenant and requires that the liquidity ratio shall at all times include not less than $1.5 million of the Borrower’s unrestricted cash and cash equivalents maintained at the Bank prior to giving effect to any advance.

9. Convertible Preferred Stock and Stockholders’ Equity

The holders of common stock are entitled to one vote for each share held and to receive dividends whenever funds are legally available and when declared by the Board of Directors subject to the rights of holders of all classes of stock having priority rights as dividends and the conditions of the revolving line of credit agreement. No dividends have been declared or paid as of March 31, 2018.

Convertible Preferred Stock and Warrants

In September, 2016, the Company issued 24,000 shares of Series A Convertible Preferred Stock, par value $0.001 with a stated value of $1,000 per share which are convertible into shares of the Company’s common stock at an initial conversion rate of $0.65 per share and (ii) warrants to purchase an aggregate of 36,923,078 shares of common stock. The convertible preferred shares are entitled to vote on an as-converted basis with the common stock, subject to specified beneficial ownership issuance limitations. The convertible preferred shares bear dividends at a rate of six percent (6%) per annum, which are cumulative and accrue daily from the date of issuance on the $1,000 stated value. Such dividends will not be paid in cash except in connection with any liquidation, dissolution or winding up of the Company or any redemption of the convertible preferred shares. Each holder of convertible preferred shares has the right to require us to redeem such holder’s convertible preferred shares upon the occurrence of specified events, which include certain business combinations, the sale of all or substantially all of the Company’s assets, or the sale of more than 50% of the outstanding shares of the Company’s common stock. In addition, the Company has the right to redeem the convertible preferred shares in the event of a defined change of control. The convertible preferred shares rank senior to our common stock as to distributions and payments upon the liquidation, dissolution, and winding up of the Company. Since the convertible preferred shares are subject to conditions for redemption that are outside the Company’s control, the convertible preferred shares are presently reported in the mezzanine section of the balance sheet.

 

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The warrants issued in conjunction with the convertible preferred stock have an exercise price equal to $0.70 per share subject to adjustments as provided under the terms of the warrants. The warrants are exercisable through September 29, 2021, subject to specified beneficial ownership issuance limitations. Prior to their modification in February, 2018, the warrants were puttable upon the occurrence of certain events outside of the Company’s control, and were classified as liabilities under ASC 480-10. The calculated fair value of the warrants was periodically re-measured with any changes in value recognized in “Other income (expense)” in the Statements of Operations. See Note 10 for additional details.

The warrants were modified on February 28, 2018 to allow for a reduction in the exercise price from $0.70 per share to $0.28 per share for a period between March 1, 2018 and March 5, 2018. Additionally, the beneficial ownership limitation related to the warrants was modified and the right of holders to require the Company to redeem their SPA Warrants in exchange for cash in certain circumstances was eliminated. Following these modifications, the warrants were no longer subject to liability accounting and were reclassified to equity. During the restricted exercise period, Stereotaxis received exercise notices for 35,791,927 warrants and received an aggregate of $10.0 million in cash from the warrant exercise. As a result of these transactions, total stockholders’ equity increased by $27 million and common shares outstanding increased by 35,791,927 shares.

Stock Award Plans

The Company has various stock plans that permit the Company to provide incentives to employees and directors of the Company in the form of equity compensation. In July 2012, the Compensation Committee of the Board of Directors adopted the 2012 Stock Incentive Plan (the “Plan”) which was subsequently approved by the Company’s shareholders. This plan replaced the 2002 Stock Incentive Plan which expired on March 25, 2012.

On June 5, 2013, June 10, 2014, May 24, 2016, and May 23, 2017, the shareholders approved amendments to the Plan, which were previously approved and adopted by the Compensation Committee of the Board of Directors of the Company. Under each of the amendments on June 5, 2013 and June 10, 2014, the number of shares authorized for issuance under the Plan was increased by one million shares. The amendment on May 24, 2016 increased the number of shares authorized for issuance under the Plan by 1.5 million shares, and the amendment on May 23, 2017 increased the number of shares authorized for issuance under the Plan by 4.0 million shares. At March 31, 2018, the Company had 4,564,502 remaining shares of the Company’s common stock to provide for current and future grants under its various equity plans.

At March 31, 2018, the total compensation cost related to options, stock appreciation rights, and non-vested stock granted to employees under the Company’s stock award plans but not yet recognized was approximately $1.0 million. This cost will be amortized over a period of up to four years over the underlying estimated service periods and will be adjusted for subsequent changes in actual forfeitures and anticipated vesting periods.

A summary of the option and stock appreciation rights activity for the three month period ended March 31, 2018 is as follows:

 

     Number of
Options/SARs
     Range of
Exercise Price
     Weighted Average Exercise
Price per Share
 

Outstanding, December 31, 2017

     413,301      $ 0.62 - $54.90      $ 9.04  

Granted

     858,500    $ 0.74 - $0.83        $ 0.74  

Exercised

     —          —          —    

Forfeited

     (35,356    $ 2.15 - $35.20      $ 9.14  
  

 

 

       

 

 

 

Outstanding, March 31, 2018

     1,236,445      $ 0.62 - $54.90      $ 3.27  
  

 

 

       

 

 

 

A summary of the restricted stock unit activity for the three month period ended March 31, 2018 is as follows:

 

     Number of Restricted
Stock Units
     Weighted Average Grant Date
Fair Value per Unit
 

Outstanding, December 31, 2017

     680,363      $ 1.11  

Granted

     212,000      $ 0.84  

Vested

     (285,662    $ 1.36  

Forfeited

     (33,250    $ 1.26  
  

 

 

    

 

 

 

Outstanding, March 31, 2018

     573,451      $ 0.88  
  

 

 

    

 

 

 

 

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10. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents and warrants. General accounting principles for fair value measurement established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (“Level 1”) and the lowest priority to unobservable inputs (“Level 3”). The three levels of the fair value hierarchy are described below:

 

  Level 1: Values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

  Level 2: Values are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or other model-based valuation techniques for which all significant assumptions are observable in the market.

 

  Level 3: Values are generated from model-based techniques that use significant assumptions not observable in the market.

The following table sets forth the Company’s assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. As required by the Fair Value Measurements and Disclosures topic of the Accounting Standards Codification, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

     Fair Value Measurement Using  
     Total      Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Liabilities at March 31, 2018:

           

Warrants issued May 2012

   $ —        $ —        $ —        $ —    

Warrants issued August 2013

     —          —          —          —    

Warrants issued September 2016

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities at fair value:

   $ —        $ —        $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities at December 31, 2017:

           

Warrants issued May 2012

   $ —        $ —        $ —        $ —    

Warrants issued August 2013

     5,746        —          —          5,746  

Warrants issued September 2016

     19,569,231        —          —          19,569,231  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities at fair value:

   $ 19,574,977      $ —        $ —        $ 19,574,977  
  

 

 

    

 

 

    

 

 

    

 

 

 

Level 1

The Company does not have any financial assets or liabilities classified as Level 1.

Level 2

The Company does not have any financial assets or liabilities classified as Level 2.

Level 3

In conjunction with the Company’s May 2012, August 2013 and September 2016 financing transactions, the Company issued warrants to purchase shares of the Company’s common stock. Due to the provisions included in the warrant agreements at the time of issuance, the warrants did not meet the exemptions for equity classification and as such, the Company accounted for these warrants as derivative instruments. The calculated fair value of the warrants issued in conjunction with the May 2012 and August 2013 financing transactions is classified as a liability and is periodically re-measured with any changes in value recognized in “Other income (expense)” in the Statements of Operations. As detailed in Note 9, the remaining warrants from the September 2016 transaction were modified on February 28, 2018 and reclassified to equity.

The remaining warrants from the May 2012 transaction (PIPE Warrants) expire in May 2018 and were revalued as of March 31, 2018 using the following assumptions: 1) volatility of 50.37%; 2) risk-free interest rate of 1.63%; and 3) a closing stock price of $0.66.

The remaining warrants from the August 2013 transaction (Exchange Warrants) expire in November 2018 and were revalued as of March 31, 2018 using the following assumptions: 1) volatility of 68.30%; 2) risk-free interest rate of 1.93%; and 3) a closing stock price of $0.66.

 

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The significant unobservable input used in the fair value measurement of the Company’s warrants is volatility. Significant increases (decreases) in the volatility in isolation would result in significantly higher (lower) liability fair value measurements.

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the three month period ended March 31, 2018:

 

     Warrants issued
May 2012
     Warrants issued
August 2013
     Warrants issued
September 2016
     Total Liabilities  

Balance at beginning of period

   $ —        $ 5,746      $ 19,569,231      $ 19,574,977  

Issues

     —          —          —          —    

Reclassifications

     —          —          (16,984,616      (16,984,616

Settlements

     —          —          —          —    

Revaluation

     —          (5,746      (2,584,615      (2,590,361
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at end of period

   $ —        $ —        $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company currently does not have derivative instruments to manage its exposure to currency fluctuations or other business risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. All derivative financial instruments are recognized in the balance sheet at fair value.

11. Product Warranty Provisions

The Company’s standard policy is to warrant all Niobe, Odyssey, and Vdrive systems against defects in material or workmanship for one year following installation. The Company’s estimate of costs to service the warranty obligations is based on historical experience and current product performance trends. A regular review of warranty obligations is performed to determine the adequacy of the reserve and adjustments are made to the estimated warranty liability as appropriate.

Accrued warranty, which is included in other accrued liabilities, consists of the following:

 

     March 31, 2018      December 31, 2017  

Warranty accrual, beginning of the fiscal period

   $ 164,365      $ 222,845  

Accrual adjustment for product warranty

     (2,640      32,679  

Payments made

     (16,553      (91,159
  

 

 

    

 

 

 

Warranty accrual, end of the fiscal period

   $ 145,172      $ 164,365  
  

 

 

    

 

 

 

12. Commitments and Contingencies

The Company at times becomes a party to claims in the ordinary course of business. Management believes that the ultimate resolution of pending or threatened proceedings will not have a material effect on the financial position, results of operations or liquidity of the Company.

13. Subsequent Events

On April 26, 2018, the Company entered into a First Amendment to Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank to extend the maturity of the revolving line of credit from March 31, 2018 to April 25, 2019. The maximum availability under the revolving line of credit remains at $5.0 million, and provides for an interest rate during a “streamline period” equal to the prime rate subject to a floor of 4.5%. A “streamline period” occurs when the Company has, for each consecutive day in the immediately preceding monthly period, maintained a liquidity ratio greater than 1.75:1.00, and continuing so long as the streamline period has been maintained. Upon the termination of a streamline period, the Company must maintain the streamline threshold each consecutive day for one fiscal quarter, prior to entering into a subsequent streamline period. During non-streamline periods, the interest rate is the prime rate plus 1.5%, subject to a floor of 4.5%. In addition, the amendment eliminates the tangible net worth covenant and requires that the liquidity ratio shall at all times include not less than $1.5 million of the Borrower’s unrestricted cash and cash equivalents maintained at the Bank prior to giving effect to any advance.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2017. Operating results are not necessarily indicative of results that may occur in future periods.

This report includes various forward-looking statements that are subject to risks and uncertainties, many of which are beyond our control. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Item 1A. Risk Factors.” Forward-looking statements discuss matters that are not historical facts. Forward-looking statements include, but are not limited to, discussions regarding our operating strategy, sales and marketing strategy, regulatory strategy, industry, economic conditions, financial condition, liquidity, capital resources, and results of operations. Such statements include, but are not limited to, statements preceded by, followed by, or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “can”, “could”, “may”, “would”, or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they are made. They give our expectations regarding the future, but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Overview

Stereotaxis designs, manufactures and markets the Epoch Solution, which is an advanced cardiology instrument control system for use in a hospital’s interventional surgical suite to enhance the treatment of arrhythmias and coronary artery disease. The Epoch Solution is comprised of the Niobe ES robotic system, Odyssey Solution, and the Vdrive system. We believe that the Epoch Solution represents a revolutionary technology in the interventional surgical suite, or “interventional lab,” and has the potential to become the standard of care for a broad range of complex cardiology procedures. We also believe that our technology represents an important advance in the ongoing trend toward digital instrumentation in the interventional lab and provides substantial, clinically important improvements, and cost efficiencies over manual interventional methods, which require years of physician training and often result in long and unpredictable procedure times and sub-optimal therapeutic outcomes.

The Niobe ES system is the latest generation of the Niobe Remote Magnetic Navigation System (“Niobe system”). This system is designed to enable physicians to complete more complex interventional procedures by providing image-guided delivery of catheters and guidewires through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied magnetic fields that govern the motion of the working tip of the catheter or guidewire, resulting in improved navigation, efficient procedures and reduced x-ray exposure. The core components of the Niobe system have received regulatory clearance in the U.S., Canada, Europe, China, Japan, and various other countries. As of March 31, 2018, the Company had an installed base of 128 Niobe ES systems.

Stereotaxis also has developed the Odyssey Solution which consolidates all lab information enabling doctors to focus on the patient for optimal procedure efficiency. The system also features a remote viewing and recording capability called Odyssey Cinema, which is an innovative solution delivering synchronized content for optimized workflow, advanced care, and improved productivity. This tool includes an archiving capability that allows clinicians to store and replay entire procedures or segments of procedures. This information can be accessed from locations throughout the hospital local area network and over the global Odyssey Network providing physicians with a tool for clinical collaboration, remote consultation, and training. The Odyssey Solution may be acquired in conjunction with a Niobe system or on a stand-alone basis for installation in interventional labs and other locations where clinicians often desire the benefits of the Odyssey Solution that we believe can improve clinical workflows and related efficiencies.

Our Vdrive system provides navigation and stability for diagnostic and therapeutic devices designed to improve interventional procedures. The Vdrive system complements the Niobe ES system control of therapeutic catheters for fully remote procedures and enables single-operator workflow and is sold as two options, the Vdrive system and the Vdrive Duo system. In addition to the Vdrive system and the Vdrive Duo system, we also manufacture and market various disposable components (V-Loop, V-Sono, V-CAS, and V-CAS Deflect) which can be manipulated by these systems.

We have successfully integrated our Niobe system with digital fluoroscopy systems to provide advanced interventional lab visualization and instrument control through user-friendly computerized interfaces. The maintenance of these arrangements, or the establishment of equivalent alternatives, is critical to our commercialization efforts. The commercial availability of both currently compatible digital imaging fluoroscopy systems is unlikely to continue for multiple years and efforts are being made to ensure the availability of integrated next generation systems and/or equivalent alternatives; however, we cannot provide assurance as to the timeline of the ongoing availability of such compatible systems or our ability to obtain equivalent alternatives on competitive terms or at all.

 

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Going Concern, Liquidity and Management’s Plan

The Company believes the cash on hand at March 31, 2018 will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. The Company has sustained operating losses throughout its corporate history and expects that its 2018 expenses will exceed its 2018 gross margin. The Company expects to continue to incur operating losses and negative cash flows until revenues reach a level sufficient to support ongoing operations or expense reductions are in place. The Company’s liquidity needs will be largely determined by the success of clinical adoption within the installed base of Niobe systems as well as by new placements of capital systems.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. We review our estimates and judgments on an on-going basis. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. We believe the following accounting policies are critical to the judgments and estimates we use in preparing our financial statements. For a complete listing of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2017.

Revenue Recognition

The Company adopted ASC 606, Revenue from Contracts with Customers, on January 1, 2018. We generate revenue from the initial capital sales of the Niobe, Odyssey, and Vdrive systems as well as recurring revenue from the sale of our proprietary disposable devices from royalties paid to the Company on the sale by Biosense Webster of co-developed catheters, and from other recurring revenue including ongoing license and service contracts.

We account for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We record our revenue based on consideration specified in the contract with each customer, net of any taxes collected from customers that are remitted to government authorities.

For contracts containing multiple products and services the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer.

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services and market conditions. The Company regularly reviews standalone selling prices and updates these estimates if necessary.

Systems:

Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation and an implied obligation to provide software enhancements if and when available for one year following installation. Revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Revenue from the implied obligation to deliver software enhancements if and when available is recognized ratably over the first year following installation of the system as the customer receives the right to software updates throughout the period and is included in Other Recurring Revenue. The Company’s system contracts generally do not provide a right of return. Systems are generally covered by a one-year warranty; warranty costs were not material for the periods presented.

Disposables:

Revenue from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by a warranty that provides for the return of defective products. Warranty costs were not material for the periods presented.

Royalty:

The Company is entitled to royalty payments from Biosense Webster, payable quarterly based on net revenues from sales of the co-developed catheters.

 

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Other Recurring Revenue:

Other recurring revenue includes revenue from software licenses, product maintenance plans, and other post warranty maintenance. Revenue from services and license fees is deferred and amortized over the service or license fee period, which is typically one year. Revenue related to services performed on a time-and-materials basis is recognized when performed.

The Company invoices its customers based on the billing schedules in its sales arrangements. Contract assets primarily represent the difference between the revenue that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue is primarily related to service contracts, for which the service fees are billed up-front, generally quarterly or annually, and for amounts billed in advance for system contracts for which some performance obligations remain outstanding. For service contracts, the associated deferred revenue is generally recognized ratably over the service period. For system contracts, the associated deferred revenue is recognized when the remaining performance obligations are satisfied. See Note 2 for additional detail on Deferred Revenue. The Company did not have any impairment losses on its contract assets for the periods presented.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company has determined that sales incentive programs for the Company’s sales team meet the requirements to be capitalized as the Company expects to generate future economic benefits from the related revenue generating contracts after the initial capital sales transaction. The costs capitalized as contract acquisition costs included in prepaid expenses and other current assets in the Company’s balance sheets were $0.4 million as of March 31, 2018. The Company did not incur any impairment losses during any of the periods presented.

Cost of Contracts

Costs of systems revenue include direct product costs, installation labor and other costs, estimated warranty costs, and initial training and product maintenance costs. These costs are recorded at the time of sale. Costs of disposable revenue include direct product costs and estimated warranty costs and are recorded at the time of sale. Cost of revenue from services and license fees are recorded when incurred.

Results of Operations

Comparison of the Three Months Ended March 30, 2018 and 2017

Revenue. Revenue remained consistent at $7.0 million for the three months ended March 31, 2017 and March 31, 2018. Revenue from the sale of systems decreased from $0.2 million to $0.02 million, a decrease of approximately 92%, primarily due to decreased sales volume. We did not recognize revenue on any Niobe systems or Odyssey systems during the 2018 period. System revenue for the prior period included a total of $0.2 million for Odyssey systems. Revenue from sales of disposable interventional devices, service, and accessories increased to $7.0 million for the three months ended March 31, 2018 from $6.8 million for the three months ended March 31, 2017, an increase of approximately 3% due to increased service revenue from time and material billings.

Cost of Revenue. Cost of revenue remained consistent at $1.3 million for the three months ended March 31, 2018 and March 31, 2017. As a percentage of our total revenue, overall gross margin remained unchanged at 82% for the three months ended March 31, 2018 and March 31, 2017. Cost of revenue for systems sold was also unchanged at $0.2 million for the three months ended March 31, 2017 and March 31, 2018. Gross margin for systems decreased to $(0.2) million for the three months ended March 31, 2018 from $0 for the three months ended March 31, 2017 due to low system sales. Cost of revenue for disposables, service, and accessories increased to $1.1 million for the three months ended March 31, 2018 from $1.0 million for the three months ended March 31, 2017 due to increased costs under time and material service contracts. Gross margin for disposables, service, and accessories remained consistent at 85% for the current quarter and for the three months ended March 31, 2017.

Research and Development Expenses. Research and development expenses increased from $1.6 million for the three months ended March 31, 2017 to $2.0 million for the three months ended March 31, 2018, an increase of approximately 23%. This increase was primarily due to spending for new projects.

Sales and Marketing Expenses. Sales and marketing expenses decreased from $3.8 million for the three months ended March 31, 2017 to $3.6 million for the three months ended March 31, 2018, a decrease of approximately 4%. This decrease was primarily due to lower headcount costs and third party consultant costs, as a result of improved efficiency of distribution of clinical sales resources.

General and Administrative Expenses. General and administrative expenses include finance, information systems, legal, and general management. General and administrative expenses decreased from $2.2 million for the three months ended March 31, 2017 to $1.2 million for the three months ended March 31, 2018, a decrease of approximately 45%. This decrease was primarily driven by reduced executive headcounts costs, including severance, as well as lower professional fees.

Other Income (Expense). Other income (expense) represents the non-cash change in market value of certain warrants classified as a derivative and recorded as a current liability under general accounting principles for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock.

Interest Expense. Interest expense was relatively unchanged at less than $0.1 million for the three months ended March 31, 2017 and March 31, 2018.

 

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Liquidity and Capital Resources

Liquidity refers to the liquid financial assets available to fund our business operations and pay for near-term obligations. These liquid financial assets consist of cash and cash equivalents. At March 31, 2018 we had $11.6 million of cash and equivalents. We had working capital of $8.5 million as of March 31, 2018 and a working capital deficit of $20.3 million as of December 31, 2017. The increase in working capital was primarily driven by the warrant exercise in March 2018.

The following table summarizes our cash flow by operating, investing and financing activities for the three months ended March 31, 2018 and 2017 (in thousands):

 

     Three Months Ended March 31,  
     2018      2017  

Cash flow used in operating activities

   $ (2,021    $ (2,667

Cash flow used in investing activities

     (10      (4

Cash flow provided by (used in) financing activities

     9,959        (91

Net cash used in operating activities. We used approximately $2.0 million and $2.7 million of cash for operating activities during the three months ended March 31, 2018 and 2017, respectively. The decrease in cash used in operating activities was driven by reduced operating losses partially offset by changes in working capital as a result of increased billings and lower collections.

Net cash used in investing activities. We used approximately $10,000 of cash during the three month period ended March 31, 2018 for the purchases of equipment, and approximately $4,000 for purchases of equipment for the three month period ended March 31, 2017.

Net cash provided by (used in) financing activities. We generated approximately $10 million of cash for the three month period ended March 31, 2018, compared to approximately $0.1 million used for the three month period ended March 31, 2017. The cash generated for the three months ended March 31, 2018 was primarily driven by the warrant exercise in March 2018. The cash used for the three months ended March 31, 2017 was driven by deferred financing costs.

The Company believes the cash on hand at March 31, 2018 will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. The Company has sustained operating losses throughout its corporate history and expects that its 2018 expenses will exceed its 2018 gross margin. The Company expects to continue to incur operating losses and negative cash flows until revenues reach a level sufficient to support ongoing operations or expense reductions are in place. The Company’s liquidity needs will be largely determined by the success of clinical adoption within the installed base of Niobe systems as well as by new placements of capital systems.

Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past and future public offerings, private sales of our equity securities and working capital, and equipment financing loans. In the future, we may finance cash needs through the sale of other equity securities or non-core assets, strategic collaboration agreements, debt financings, or through distribution rights. We cannot assure you that such additional financing will be available on a timely basis on terms acceptable to us or at all, that we will be able to engage in equity financings because our common stock is no longer listed on a national securities exchange, or that such financing will not be dilutive to our stockholders. If adequate funds are not available to us, we could be required to delay development or commercialization of new products, to license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize ourselves or to reduce the sales, marketing, customer support, or other resources devoted to our products, any of which could have a material adverse effect on our business, financial condition, and results of operations. In addition, we could be required to cease operations.

Capital Resources

As of March 31, 2018, our borrowing facilities were comprised of a revolving line of credit maintained with our primary lender, Silicon Valley Bank.

 

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Revolving Line of Credit

The Company has had a working capital line of credit with its primary lender, Silicon Valley Bank, since 2004. The revolving line of credit is secured by substantially all of the Company’s assets. The maximum available under the line is $5.0 million subject to the value of collateralized assets. The Company is required under the revolving line of credit to maintain its primary operating account and the majority of its cash and investment balances in accounts with its primary lender. The facility was amended on March 27, 2015, extending the maturity date to March 31, 2018. On November 7, 2017, the Company and the primary lender agreed to adjust the maximum availability under the Company’s revolving line of credit from $10.0 million to $5.0 million with a pro-rata reduction in related loan costs, as well as a reduction in the interest rate floor from 7.0% to 5.75%. As of March 31, 2018, the agreement required the Company to maintain a liquidity ratio greater than 1.50:1.00, excluding certain short term advances from the calculation, and a minimum tangible net worth of not less than (no worse than) negative $24.0 million for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24.5 million for the quarters ended December 31, 2017 and March 31, 2018.

As of March 31, 2018, the Company had no outstanding balance under the revolving line of credit. Draws on the line of credit are made based on the borrowing capacity one week in arrears. As of March 31, 2018, the Company had a borrowing capacity of $4.5 million based on the Company’s collateralized assets. The Company’s total liquidity as of March 31, 2018, was $16.1 million which included cash and cash equivalents of $11.6 million.

On April 26, 2018, the Company entered into a First Amendment to Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank to extend the maturity of the revolving line of credit from March 31, 2018 to April 25, 2019. The maximum availability under the revolving line of credit remains at $5.0 million, and provides for an interest rate during a “streamline period” equal to the prime rate subject to a floor of 4.5%. A “streamline period” occurs when the Company has, for each consecutive day in the immediately preceding monthly period, maintained a liquidity ratio greater than 1.75:1.00, and continuing so long as the streamline period has been maintained. Upon the termination of a streamline period, the Company must maintain the streamline threshold each consecutive day for one fiscal quarter, prior to entering into a subsequent streamline period. During non-streamline periods, the interest rate is the prime rate plus 1.5%, subject to a floor of 4.5%. In addition, the amendment eliminates the tangible net worth covenant and requires that the liquidity ratio shall at all times include not less than $1.5 million of the Borrower’s unrestricted cash and cash equivalents maintained at the Bank prior to giving effect to any advance.

Common Stock

The holders of common stock are entitled to one vote for each share held and to receive dividends whenever funds are legally available and when declared by the Board of Directors subject to the rights of holders of all classes of stock having priority rights as dividends and the conditions of the revolving line of credit agreement. No dividends have been declared or paid as of March 31, 2018.

Convertible Preferred Stock and Warrants

In September, 2016, the Company issued 24,000 shares of Series A Convertible Preferred Stock, par value $0.001 with a stated value of $1,000 per share which are convertible into shares of the Company’s common stock at an initial conversion rate of $0.65 per share and (ii) warrants to purchase an aggregate of 36,923,078 shares of common stock. The convertible preferred shares are entitled to vote on an as-converted basis with the common stock, subject to specified beneficial ownership issuance limitations. The convertible preferred shares bear dividends at a rate of six percent (6%) per annum, which are cumulative and accrue daily from the date of issuance on the $1,000 stated value. Such dividends will not be paid in cash except in connection with any liquidation, dissolution or winding up of the Company or any redemption of the convertible preferred shares. Each holder of convertible preferred shares has the right to require us to redeem such holder’s convertible preferred shares upon the occurrence of specified events, which include certain business combinations, the sale of all or substantially all of the Company’s assets, or the sale of more than 50% of the outstanding shares of the Company’s common stock. In addition, the Company has the right to redeem the convertible preferred shares in the event of a defined change of control. The convertible preferred shares rank senior to our common stock as to distributions and payments upon the liquidation, dissolution, and winding up of the Company. Since the convertible preferred shares are subject to conditions for redemption that are outside the Company’s control, the convertible preferred shares are presently reported in the mezzanine section of the balance sheet.

The warrants issued in conjunction with the convertible preferred stock have an exercise price equal to $0.70 per share subject to adjustments as provided under the terms of the warrants. The warrants are exercisable through September 29, 2021, subject to specified beneficial ownership issuance limitations. Prior to their modification in February, 2018, the warrants were puttable upon the occurrence of certain events outside of the Company’s control, and were classified as liabilities under ASC 480-10. The calculated fair value of the warrants was periodically re-measured with any changes in value recognized in “Other income (expense)” in the Statements of Operations. See Note 10 for additional details.

 

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The warrants were modified on February 28, 2018 to allow for a reduction in the exercise price from $0.70 per share to $0.28 per share for a period between March 1, 2018 and March 5, 2018 to encourage early exercise. Additionally, the beneficial ownership limitation related to the warrants was modified and the right of holders to require the Company to redeem their SPA Warrants in exchange for cash in certain circumstances was eliminated. Following these modifications, the warrants are no longer subject to liability accounting and were reclassified to equity. During the restricted exercise period, Stereotaxis received exercise notices for 35,791,927 warrants and received an aggregate of $10.0 million in cash from the warrant exercise. As a result of these transactions, total stockholders’ equity increased by $27 million and common shares outstanding increased by 35,791,927 shares. The Consent and Amendment and the Amended and Restated Form of Warrants are available in a Form 8-K filed with the Securities and Exchange Commission on March 6, 2018.

Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As a result, we are not materially exposed to any financing, liquidity, market, or credit risk that could have arisen if we had engaged in these relationships.

 

ITEM 3. [RESERVED]

None.

 

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures: The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.

Changes In Internal Control Over Financial Reporting: The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the period covered by this report.

 

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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

We are involved from time to time in various lawsuits and claims arising in the normal course of business. Although the outcomes of these lawsuits and claims are uncertain, we do not believe any of them will have a material adverse effect on our business, financial condition or results of operations.

 

ITEM 1A. RISK FACTORS

Additional Risk Factors are discussed in our Annual Report on Form 10-K for the year ended December 31, 2017.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4. [RESERVED]

None.

 

ITEM 5. OTHER INFORMATION

None.

 

ITEM 6. EXHIBITS

 

Number

  

Description

    3.1

   Restated Articles of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10-Q (File No. 000-50884) for the fiscal quarter ended September 30, 2004.

    3.2

   Certificate of Amendment to Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (File No. 000-50884) filed on July 10, 2012.

    3.3

   Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock, incorporated by reference to Exhibit 3.1 of the Registrant’s  Current Report on Form 8-K (File No. 001-36159) filed on September 30, 2016.

    3.4

   Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant’s Form 10-Q (File No. 000-50884) for the fiscal quarter ended September 30, 2004.

    4.1

   Form of Amended and Restated Warrant issued pursuant to that certain Consent and Amendment dated as of February  28, 2018, between the Company and the holders identified therein, incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36159) filed on March 6, 2018.

  10.1

   Consent and Amendment dated as of February  28, 2018, between the Company and the holders identified therein, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36159) filed on March 6, 2018.

  10.2

   Form of Lock-up Agreement between Stereotaxis, Inc. and the holders exercising the Amended and Restated Warrant, dated as of March 5, 2018, incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K (File No. 001-36159) filed on March 6, 2018.

  10.3

   Form of Incentive Stock Option Terms of Award Under Stereotaxis, Inc. 2012 Stock Incentive Plan, incorporated by reference to Exhibit 10.1f of the Registrant’s Form 10-K (File No. 001-36159) filed on March 20, 2018.

  10.4

   Form of Non-Qualified Stock Option Terms of Award Under Stereotaxis, Inc. 2012 Stock Incentive Plan, incorporated by reference to Exhibit 10.1g of the Registrant’s Form 10-K (File No. 001-36159) filed on March 20, 2018.

 

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  10.5

   First Amendment to the Third Amended and Restated Loan and Security Agreement, effective April  26, 2018, among the Company, Stereotaxis International, Inc., and Silicon Valley Bank, incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (File  No. 001-36159) filed on April 30, 2018.

  31.1

   Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section  302 of the Sarbanes-Oxley Act of 2002, executed by Chief Executive Officer).

  31.2

   Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section  302 of the Sarbanes-Oxley Act of 2002, executed by Chief Financial Officer).

  32.1

   Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Chief Executive Officer).

  32.2

   Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Chief Financial Officer).

101.INS

   XBRL Instance Document.

101.SCH

   XBRL Taxonomy Extension Schema Document.

101.CAL

   XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

   XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

   XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

   XBRL Taxonomy Extension Presentation Linkbase Document.    

 

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STEREOTAXIS, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

STEREOTAXIS, INC.

(Registrant)

Date: May 14, 2018     By:  

/s/ David L. Fischel

     

David L. Fischel

Chief Executive Officer

 

Date: May 14, 2018     By:  

/s/ Martin C. Stammer

     

Martin C. Stammer

Chief Financial Officer

 

24

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

I, David L. Fischel, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Stereotaxis, Inc.;

 

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

 

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

 

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

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

 

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

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

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

 

Date: May 14, 2018      

/s/ David L. Fischel

      David L. Fischel
      Chief Executive Officer
      Stereotaxis, Inc.
      (Principal Executive Officer)
EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

I, Martin C. Stammer, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Stereotaxis, Inc.;

 

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

 

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

 

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

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

 

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

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

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

 

Date: May 14, 2018      

/s/ Martin C. Stammer

      Martin C. Stammer
      Chief Financial Officer
      Stereotaxis, Inc.
      (Principal Financial Officer)
EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Stereotaxis, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David L. Fischel, Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

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

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

 

Date: May 14, 2018      

/s/ David L. Fischel

      David L. Fischel
      Chief Executive Officer
      Stereotaxis, Inc.
EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Stereotaxis, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martin C. Stammer, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

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

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

 

Date: May 14, 2018      

/s/ Martin C. Stammer

      Martin C. Stammer
      Chief Financial Officer
      Stereotaxis, Inc.

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