Stereotaxis
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10-Q
STEREOTAXIS, INC. filed this Form 10-Q on 08/08/2018
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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 Income (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.

 

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

 

   Three months ended June 30,   Six months ended June 30, 
   2018   2017   2018   2017 
Net income (loss)  $(632,205)  $(177,299)  $803,025   $999,669 
Cumulative dividend on convertible preferred stock   (357,518)   (369,661)   (711,107)   (732,849)
Net income attributable to convertible preferred stockholders          (42,936)  (167,539)
Net income (loss) attributable to common stockholders  $(989,723)  $(546,960)  $48,982   $99,281 
Shares used for basic EPS-weighted average shares   58,926,545    22,581,330    45,019,358    22,450,392 
Restricted Stock Units           267,936    8,087 
Warrants           441,438     
Weighted average number of common shares and equivalents:   58,926,545    22,581,330    45,728,732    22,458,479 
Basic EPS  $(0.02)  $(0.02)  $0.00   $0.00 
Diluted EPS  $(0.02)  $(0.02)  $0.00   $0.00 

 

The following potential common shares were excluded from diluted EPS for the six months ended June 30, 2018 as they were antidilutive: 1,167,775 stock options and stock appreciation rights, 271,990 restricted stock units, and 1,853,239 warrants. The following potential common shares were excluded from diluted EPS for the six months ended June 30, 2017 as they were antidilutive: 645,885 stock options and stock appreciation rights, 628,775 restricted stock units, and 38,779,119 warrants. In addition, the Company did not include any portion of unearned restricted stock units, outstanding options, stock appreciation rights or warrants in the calculation of diluted loss per common share for the three months ended June 30, 2018 or the three months ended June 30, 2017 because all such securities are anti-dilutive for the period. The Company had no unearned restricted shares during either period.

 

As of June 30, 2018, the Company had 1,167,775 shares of common stock issuable upon the exercise of outstanding options and stock appreciation rights at a weighted average exercise price of $2.85 per share, 2,294,677 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $2.06 per share, 40,631,511 shares of common stock issuable upon the conversion of Series A Convertible Preferred Stock and accumulated dividends, and 539,926 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. For the six months ended June 30, 2017, approximately $0.9 million of regulatory and clinical research expenses previously included in General and Administrative expense have been reclassified to Research and Development expense, and approximately $0.3 million of international training expense previously included in General and Administrative expense 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.

 

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