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STEREOTAXIS, INC. filed this Form S-1/A on 06/17/2004
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and components. See “Risk Factors” for a discussion of various risks associated with our manufacturing strategy.

Sales and Marketing

       We market our products in the U.S. and Europe through a direct sales force of 17 senior sales specialists, supported by five account managers that provide training, clinical support, and other services to our customers. In addition, our strategic alliances form an important part of our sales and marketing strategy. We leverage the sales forces of Siemens and Philips to co-market integrated systems on a worldwide basis. This approach allows us to coordinate our marketing efforts with our strategic partners while still dealing directly with the customer. J&J will exclusively distribute our electrophysiology mapping and ablation catheters, co-developed pursuant to our alliance with them. We intend to increase our sales personnel and the number of account managers significantly over the next 24 months and to enter into distribution arrangements to market our products in the rest of the world.

       Our sales and marketing process has two important steps: (1) selling systems directly and through co-marketing agreements with our imaging partners, Siemens and Philips; and (2) leveraging our installed base of systems to drive recurring sales of disposable interventional devices, software and service.

       Step One: System sales. Our system sales strategy involves both direct selling, through our own sales force, and co-marketing with our strategic imaging partners, by leveraging these relationships to identify new or replacement cath labs being installed and then co-marketing integrated systems to the customer. Siemens and Philips have a major share of the cath lab installation market and therefore compete for a substantial number of potential cath lab installations on a worldwide basis, which gives us access to a large number of potential customers. These customers fall into three broad categories:

  •  leading research institutions with physician thought leaders who are interested in performing complex new procedures enabled by our system;
  •  high-volume commercial institutions interested in the efficiency benefits of our system; and
  •  medium volume regional centers that are competing intensely for patients, attempting to minimize referrals of complex cases to other centers and focusing on gaining market share in their regional markets.

       Once we have identified potential customers, we approach capital equipment sales in five stages that bring significant predictability to our sales process. This allows us to measure the progress of each account in discrete steps through our sales funnel, and tailor our sales activity at each stage. The five-stage process includes the following, and has taken an average of 18 months for our 13 systems delivered to date:

  •  Build initial customer interest: presentation of our value proposition;
  •  Gain commitment: formal proposal with cost justification rationale;
  •  Secure capital budget allocation: customer begins formal budget approval process for system acquisition;
  •  Receive institutional approval: customer completes budget approval process and executes purchase order; and
  •  System installation: installation begins as part of overall cath lab construction or refurbishment.

       As of March 31, 2004, we had purchase orders and other commitments for $16.6 million of our Stereotaxis Systems. There can be no assurance that we will recognize revenue in any particular


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