Stereotaxis
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S-1/A
STEREOTAXIS, INC. filed this Form S-1/A on 06/17/2004
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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS — (Continued)

(Information as of March 31, 2004 and for the three months ended
March 31, 2003 and 2004 is unaudited)

instrument issued as determined using the Black-Scholes valuation method. As of March 31, 2004, deferred compensation of $670,968 is expected to be expensed over the term of the underlying options in future years as follows:

         
2004
  $ 305,722  
2005
    283,219  
2006
    65,625  
2007
    16,402  
     
 
Total
  $ 670,968  
     
 

       Deferred compensation is recorded as a separate component of stockholders’ equity. As of December 31, 2003 and March 31, 2004, $688,851 and $548,977, respectively of deferred compensation is subject to periodic remeasurement.

       In 2003, the Company recognized additional deferred compensation of $360,297 related to modification of an option grant to allow an employee to retain and continue to vest in outstanding options upon change to nonemployee status.

 
Warrants

       As of March 31, 2004, the Company has issued warrants to purchase 1,507,791 shares of common stock at $2.17 per share exercisable through December 2006, warrants to purchase 1,605,874 shares of common stock at $2.17 exercisable through December 2007 and warrants to purchase 1,076,170 shares of common stock at 2.93 per share exercisable through February 2009. All such warrants were issued in connection with a corresponding issuance of convertible preferred stock and were credited to additional paid-in capital at their fair value with a corresponding reduction to preferred offering proceeds. Additionally, in connection with closing its credit agreements in 2002, the Company has issued to its primary lender warrants to purchase 105,560 shares of its Series D-1 preferred stock at $2.17 per share exercisable through various times in 2007. These warrants were accounted for as described in Note 7. The fair values of all warrants were estimated using the Black-Scholes valuation method. As of March 31, 2004, 4,189,835 warrants are automatically convertible into common shares pursuant to a cashless exercise feature upon the closing of an initial public offering under certain conditions.

 
10. Income Taxes

       The provision for income taxes consists of:

                           
Year Ended December 31

2001 2002 2003



Deferred:
                       
 
Federal
  $ 6,167,136     $ 7,521,820     $ 8,683,446  
 
State and local
    669,545       861,391       879,474  
     
     
     
 
      6,836,681       8,383,211       9,562,920  
Valuation allowance
    (6,836,681 )     (8,383,211 )     (9,562,920 )
     
     
     
 
    $     $     $  
     
     
     
 

F-22


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