UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30,~~MARCH 31, ~~2022~~2023

☐	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 the Registrant as Specified in its Charter)

delaware

94-3120386

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

710 North Tucker Boulevard, Suite 110

St. Louis, MO 63101

(Address of Principal Executive Offices including Zip Code)

(314) 678-6100

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		STXS		NYSE American LLC

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T “See 232.405 of this Chapter” during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated Filer ☐		Non-accelerated filer ☒		Smaller reporting company ☒
Emerging growth company ☐

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

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

The number of outstanding shares of the registrant’s common stock on ~~July 31, 2022~~April 30, 2023 was ~~74,790,074~~80,678,375.

STEREOTAXIS, INC.

INDEX TO FORM 10-Q

		Page

Part I Financial Information

Item 1.	Financial Statements (unaudited)	3
	Balance Sheets	3
	Statements of Operations	4
	Statements of Convertible Preferred Stock and Stockholders’ Equity	~~5-6~~5
	Statements of Cash Flows	76
	Notes to Financial Statements	~~8-18~~7-19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~19-24~~20-25
Item 3.	[Reserved]	2425
Item 4.	Controls and Procedures	2425

Part II Other Information

Item 1.	Legal Proceedings	2526
Item 1A.	Risk Factors	2526
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2526
Item 3.	Defaults upon Senior Securities	2526
Item 4.	[Reserved]	2526
Item 5.	Other Information	2526
Item 6.	Exhibits	~~25-26~~26
Signatures		27

ITEM 1. FINANCIAL STATEMENTS

STEREOTAXIS, INC.

BALANCE SHEETS


							March 31, 2023			December 31, 2022
(in thousands, except share amounts)	June 30, 2022			December 31, 2021				(Unaudited)
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	33,498		$	38,739		$	5,623		$	8,586
Restricted cash - current		618			454			525			525
Accounts receivable, net of allowance of $225 and $180 at 2022 and 2021, respectively		3,748			5,406
Short-term investments								20,041			19,844
Accounts receivable, net of allowance of $341 and $235 at 2023 and 2022, respectively								4,874			5,090
Inventories, net		7,786			4,433			8,510			7,876
Prepaid expenses and other current assets		991			2,356			1,332			1,325
Total current assets		46,641			51,388			40,905			43,246
Property and equipment, net		3,260			2,632			3,722			3,831
Restricted cash		1,006			952			612			744
Operating lease right-of-use assets		5,553			5,735			5,288			5,384
Prepaid and other non-current assets		218			278			184			208
Total assets	$	56,678		$	60,985		$	50,711		$	53,413

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,244		$	4,189		$	3,535		$	3,270
Accrued liabilities		2,126			2,528			2,804			3,306
Deferred revenue		6,959			6,277			7,545			7,342
Current portion of operating lease liabilities		328			268			385			373
Total current liabilities		13,657			13,262			14,269			14,291
Long-term deferred revenue		1,630			2,238			1,711			1,654
Operating lease liabilities		5,663			5,842			5,387			5,488
Other liabilities		202			219			51			51
Total liabilities		21,152			21,561			21,418			21,484

Series A - Convertible preferred stock:
Convertible preferred stock, Series A, par value $0.001; 22,386 and 22,387 shares outstanding at 2022 and 2021, respectively		5,584			5,584
Convertible preferred stock, Series A, par value $0.001; 22,383 shares outstanding at 2023 and 2022								5,583			5,583

Stockholders’ equity:
Convertible preferred stock, Series B, par value $0.001; 10,000,000 shares authorized, 5,610,121 shares outstanding at 2022 and 2021		6			6
Convertible preferred stock, Series B, par value $0.001; 10,000,000 shares authorized, 5,610,121 shares outstanding at 2023 and 2022								6			6

Common stock, par value $0.001; 300,000,000 shares authorized, 74,686,056 and 74,618,240 shares issued at 2022 and 2021, respectively		75			75
Common stock, par value $0.001; 300,000,000 shares authorized, 75,059,499 and 74,874,459 shares issued at 2023 and 2022, respectively								75			75
Additional paid in capital		537,963			532,641			546,149			543,438
Treasury stock, 4,015 shares at 2022 and 2021		(206	)		(206	)
Treasury stock, 4,015 shares at 2023 and 2022								(206	)		(206	)
Accumulated deficit		(507,896	)		(498,676	)		(522,314	)		(516,967	)
Total stockholders’ equity		29,942			33,840			23,710			26,346
Total liabilities and stockholders’ equity	$	56,678		$	60,985		$	50,711		$	53,413

See accompanying notes.

STEREOTAXIS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per share amounts)	2022			2021			2022			2021

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
(in thousands, except share and per share amounts)	2022			2021			2022			2021			2023			2022
Revenue:
Systems	$	602		$	2,686		$	2,236		$	5,289		$	1,821		$	1,634
Disposables, service and accessories		5,550			6,118			10,953			11,892			4,727			5,403
Sublease		-			247			-			493
Total revenue		6,152			9,051			13,189			17,674			6,548			7,037

Cost of revenue:
Systems		509			1,390			1,801			2,825			1,697			1,292
Disposables, service and accessories		973			882			1,794			1,808			975			821
Sublease		-			247			-			493
Total cost of revenue		1,482			2,519			3,595			5,126			2,672			2,113

Gross margin		4,670			6,532			9,594			12,548			3,876			4,924

Operating expenses:
Research and development		2,893			2,717			5,340			5,084			2,746			2,447
Sales and marketing		3,279			3,045			6,225			5,992			3,148			2,946
General and administrative		3,677			4,161			7,297			6,391			3,601			3,620
Total operating expenses		9,849			9,923			18,862			17,467			9,495			9,013
Operating loss		(5,179	)		(3,391	)		(9,268	)		(4,919	)		(5,619	)		(4,089	)

Interest income (expense), net		45			(3	)		48			(7	)
Gain on extinguishment of debt		-			2,183			-			2,183
Interest income, net														272			3
Net loss	$	(5,134	)	$	(1,211	)	$	(9,220	)	$	(2,743	)	$	(5,347	)	$	(4,086	)

Cumulative dividend on convertible preferred stock		(335	)		(335	)		(666	)		(668	)		(331	)		(331	)
Net loss attributable to common stockholders	$	(5,469	)	$	(1,546	)	$	(9,886	)	$	(3,411	)	$	(5,678	)	$	(4,417	)

Net loss per share attributable to common stockholders:
Basic	$	(0.07	)	$	(0.02	)	$	(0.13	)	$	(0.05	)	$	(0.07	)	$	(0.06	)
Diluted	$	(0.07	)	$	(0.02	)	$	(0.13	)	$	(0.05	)	$	(0.07	)	$	(0.06	)

Weighted average number of common shares and equivalents:
Basic		75,953,916			75,547,574			75,915,864			75,362,521			76,500,965			75,877,391
Diluted		75,953,916			75,547,574			75,915,864			75,362,521			76,500,965			75,877,391

See accompanying notes.

STEREOTAXIS, INC

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(Unaudited)

Three Months Ended ~~June 30, 2021~~March 31, 2022

Shares Amount Shares Amount Shares Amount Amount Amount Amount Amount
(in thousands, except share amounts) Convertible Preferred Stock Series A (Mezzanine) Convertible Preferred Stock Series B Common Stock Additional Paid-In Treasury Accumulated Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount Capital Stock Deficit (Deficit)
Balance at December 31, 2021 22,387 $ 5,584 5,610,121 $ 6 74,618,240 $ 75 $ 532,641 $ (206 ) $ (498,676 ) $ 33,840
Stock issued for the exercise of stock options and stock appreciation rights 10,294 18 18
Stock-based compensation 10,699 2,514 2,514
Components of net loss - - - - (4,086 ) (4,086 )
Employee stock purchase plan 6,071 36 36
Preferred stock conversion (1 ) 2,025 0
Balance at March 31, 2022 22,386 $ 5,584 5,610,121 $ 6 74,647,329 $ 75 $ 535,209 $ (206 ) $ (502,762 ) $ 32,322
Three Months Ended March 31, 2023
Shares Amount Shares Amount Shares Amount Amount Amount Amount Amount
(in thousands, except share amounts) Convertible Preferred Stock Series A (Mezzanine) Convertible Preferred Stock Series B Common Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Total Stockholders’ Equity (Deficit)
Shares Amount Shares Amount Shares Amount Amount Amount Amount Amount
Balance at March 31, 2021 22,408 $ 5,578 5,610,121 $ 6 74,089,659 $ 74 $ 524,389 $ (206 ) $ (489,492 ) $ 34,771
Issuance of common stock - - - 89,778 87 - 87
Share-based compensation - 242,250 2,785 2,785
Components of net loss - (1,211 ) (1,211 )
Employee stock purchase plan - 5,204 33 33
Preferred stock conversion (1 ) - 1,974 -
Balance at June 30, 2021 22,407 $ 5,578 5,610,121 $ 6 74,428,865 $ 74 $ 527,294 $ (206 ) $ (490,703 ) $ 36,465
Three Months Ended June 30, 2022

Convertible Preferred Stock Series A (Mezzanine) Convertible Preferred Stock Series B Common Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Total Stockholders’ Equity (Deficit)
(in thousands, except share amounts) Shares Amount Shares Amount Shares Amount Amount Amount Amount Amount

Balance at March 31, 2022 22,386 $ 5,584 5,610,121 $ 6 74,647,329 $ 75 $ 535,209 $ (206 ) $ (502,762 ) $ 32,322
Issuance of common stock - - - - 30,229 26 - 26
Share-based compensation - - 2,698 2,698
Components of net loss - - (5,134 ) (5,134 )
Employee stock purchase plan - - 8,498 30 30
Preferred stock conversion - - -
Balance at June 30, 2022 22,386 $ 5,584 5,610,121 $ 6 74,686,056 $ 75 $ 537,963 $ (206 ) $ (507,896 ) $ 29,942
(in thousands, except share amounts) Convertible Preferred Stock Series A (Mezzanine) Convertible Preferred Stock Series B Common Stock Additional Paid-In Treasury Accumulated Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount Capital Stock Deficit (Deficit)

Balance at December 31, 2022 22,383 $ 5,583 5,610,121 $ 6 74,874,459 $ 75 $ 543,438 $ (206 ) $ (516,967 ) $ 26,346
Stock issued for the exercise of stock options 29,188 33 33
Stock-based compensation 144,054 2,655 2,655
Components of net loss - - - - (5,347 ) (5,347 )
Employee stock purchase plan 11,798 23 23
Balance at March 31, 2023 22,383 $ 5,583 5,610,121 $ 6 75,059,499 $ 75 $ 546,149 $ (206 ) $ (522,314 ) $ 23,710

See accompanying notes.

5

~~STEREOTAXIS, INC~~
~~STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY~~
~~(Unaudited)~~
Six Months Ended June 30, 2021

(in thousands, except share amounts) Convertible Preferred Stock Series A (Mezzanine) Convertible Preferred Stock Series B Common Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Total Stockholders’ Equity (Deficit)
Shares Amount Shares Amount Shares Amount Amount Amount Amount Amount
Balance at December 31, 2020 22,513 $ 5,605 5,610,121 $ 6 73,694,203 $ 74 $ 522,710 $ (206 ) $ (487,960 ) $ 34,624
Issuance of common stock - - - 244,584 340 - 340
Share-based compensation - 272,500 4,156 - 4,156
Components of net loss - - (2,743 ) (2,743 )
Employee stock purchase plan 11,207 61 - 61
Preferred stock conversion (106 ) (27 ) 206,371 27 - 27
Balance at June 30, 2021 22,407 $ 5,578 5,610,121 $ 6 74,428,865 $ 74 $ 527,294 $ (206 ) $ (490,703 ) $ 36,465
Six Months Ended June 30, 2022

Convertible Preferred Stock Series A (Mezzanine) Convertible Preferred Stock Series B Common Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Total Stockholders’ Equity (Deficit)
(in thousands, except share amounts) Shares Amount Shares Amount Shares Amount Amount Amount Amount Amount

Balance at December 31, 2021 22,387 $ 5,584 5,610,121 $ 6 74,618,240 $ 75 $ 532,641 $ (206 ) $ (498,676 ) $ 33,840
Issuance of common stock - - - 40,523 45 - 45
Share-based compensation - 10,699 5,211 - 5,211
Components of net loss - - (9,220 ) (9,220 )
Employee stock purchase plan - 14,569 66 - 66
Preferred stock conversion (1 ) - 2,025 - -
Balance at June 30, 2022 22,386 $ 5,584 5,610,121 $ 6 74,686,056 $ 75 $ 537,963 $ (206 ) $ (507,896 ) $ 29,942
~~See accompanying notes.~~
6
STEREOTAXIS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)

(in thousands) 2022 2021

Six Months Ended June 30, Three Months Ended March 31,
(in thousands) 2022 2021 2023 2022
Cash flows from operating activities
Net loss $ (9,220 ) $ (2,743 ) $ (5,347 ) $ (4,086 )
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation 194 54 160 100
Non-cash lease (expense) 63 (26 )
Share-based compensation 5,211 4,156
Gain on debt extinguishment - (2,183 )
Non-cash interest - 25
Non-cash lease expense 7 33
Stock-based compensation 2,655 2,514
Accretion and short-term investment discount (197 ) -
Changes in operating assets and liabilities:
Accounts receivable 1,658 (1,137 ) 216 713
Inventories (3,353 ) (851 ) (97 ) (417 )
Prepaid expenses and other current assets 1,365 (931 ) (7 ) 478
Compensating cash arrangement - (1 )
Other assets 60 25 24 25
Accounts payable 1,037 (484 ) 563 (871 )
Accrued liabilities (403 ) (352 ) (1,547 ) (561 )
Deferred revenue 75 4,102 768 (104 )
Other liabilities (17 ) 75 - (17 )
Net cash used in operating activities (3,330 ) (271 ) (2,802 ) (2,193 )
Cash flows from investing activities
Purchase of property and equipment (1,804 ) (150 ) (349 ) (1,154 )
Net cash used in investing activities (1,804 ) (150 ) (349 ) (1,154 )
Cash flows from financing activities
Proceeds from issuance of stock, net of issuance costs 111 402 56 54
Net cash provided by financing activities 111 402 56 54
Net decrease in cash, cash equivalents, and restricted cash (5,023 ) (19 ) (3,095 ) (3,293 )
Cash, cash equivalents, and restricted cash at beginning of period 40,145 43,940 9,855 40,144
Cash, cash equivalents, and restricted cash at end of period $ 35,122 $ 43,921 $ 6,760 $ 36,851

Supplemental disclosure of cash flow information:
Purchase of property and equipment included in accounts payable $ 116 $ - $ 15 $ 699

Reconciliation of cash, cash equivalents, and restricted cash to balance sheet as of June 30th:
Reconciliation of cash, cash equivalents, and restricted cash to balance sheet as of March 31st:
Cash and cash equivalents $ 33,498 $ 42,054 $ 5,623 $ 35,095
Restricted cash - current 618 1,484 525 618
Restricted cash 1,006 383 612 1,138
Total cash, cash equivalents, and restricted cash $ 35,122 $ 43,921 $ 6,760 $ 36,851

See accompanying notes.

76

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. Genesis RMN^®, Niobe^®, Navigant^®, Odyssey^®, Odyssey Cinema^™, Vdrive^®, Vdrive Duo^™, V-CAS^™, V-Loop^™, V-Sono^™, 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 ~~is a pioneer~~designs, manufactures and ~~global leader in surgical robotics for minimally invasive endovascular intervention. We design, manufacture and market~~markets robotic systems, instruments and information systems for the interventional laboratory. Our proprietary robotic technology, Robotic Magnetic Navigation, fundamentally transforms endovascular interventions using precise computer-controlled magnetic fields to directly control the tip of flexible interventional catheters or devices. Direct control of the tip of an interventional device, in contrast to all manual hand-held devices that are controlled from their handle, can improve the precision, stability, reach and safety of these devices during procedures.

Our primary clinical focus has been electrophysiology, specifically cardiac ablation procedures for the treatment of arrhythmias. Cardiac ablation has become a well-accepted therapy for arrhythmias and a multi-billion-dollar medical device market with expectations for substantial long-term growth. We have shared our aspiration and a product strategy to expand the clinical focus of our technology to several additional endovascular indications including coronary, neuro, and peripheral interventions.

There is substantial real-world evidence and clinical literature for Robotic Magnetic Navigation in electrophysiology. Hundreds of electrophysiologists at over one hundred hospitals globally have treated over 100,000 arrhythmia patients with our robotic technology. Clinical use of our technology has been documented in over 400 clinical publications. Robotic Magnetic Navigation is designed to enable physicians to complete more complex interventional procedures with greater success and safety by providing image-guided delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied computer-controlled magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation. The more flexible atraumatic design of catheters driven using magnetic fields may reduce the risk of patient harm and other adverse events. Performing the procedure from a control cockpit enables physicians to complete procedures in a safe location protected from x-ray exposure, with greater ergonomics, and improved efficiency. We believe these benefits can be applicable in other endovascular indications where navigation through complex vasculature is often challenging or unsuccessful and generates significant x-ray exposure.

Our primary products include the Genesis RMN System, the Odyssey Solution, and other related devices. We also offer to our customers the Stereotaxis Imaging Model S x-ray System and other accessory devices.

The Genesis RMN System is designed to enable physicians to complete more complex interventional procedures by providing image-guided delivery of catheters 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, resulting in improved navigation, efficient procedures, and reduced x-ray exposure.

The Odyssey Solution consolidates lab information onto one large integrated display, enabling physicians to view and control all the key information in the operating room. This is designed to improve lab layout and procedure efficiency. The system also features a remote viewing and recording capability called Odyssey Cinema, which is an innovative solution that delivers 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 Stereotaxis Imaging Model S provides an integrated complete solution for a robotic interventional operating room. It is a single-plane, full-power x-ray system and includes the c-arm, powered table, motorized boom, and large high-definition monitors. Stereotaxis Imaging Model S incorporates modern fluoroscopy technology to support high quality imaging while minimizing radiation exposure for patients and physicians. The combination of RMN Systems with Stereotaxis Imaging Model S is designed to reduce the cost of acquisition, the ongoing cost of ownership, and the complexity of installation of a robotic electrophysiology practice.
We promote our full suite of products in a typical hospital implementation, subject to regulatory approvals or clearances. This 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 ongoing software updates. In hospitals where our full suite of products has not been implemented, equipment upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.
7

We have received regulatory clearances and registration ~~approvals~~ necessary for us to market the Genesis RMN System in the U.S. and Europe, and we are in the process of obtaining necessary registrations for extending our markets in other countries. ~~The~~Our prior generation robotic magnetic navigation system, the Niobe System, the 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-Sonodevices in the U.S., Canada and Europe. The Stereotaxis Imaging Model S x-ray System is CE marked and ~~FDA cleared.~~cleared by the FDA.

We have strategic relationships with technology leaders and innovators in the global interventional market. Through these strategic relationships we provide compatibility between our robotic magnetic navigation system and digital imaging and 3D catheter location sensing technology, as well as disposable interventional devices. The maintenance of these strategic relationships, or the establishment of equivalent alternatives, is critical to our commercialization efforts. There are no guarantees that any existing strategic relationships will continue, and efforts are ongoing to ensure the availability of integrated systems and devices and/or equivalent alternatives. 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.
8
2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements of Stereotaxis, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all the disclosures required by GAAP 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 ~~six-month~~three-month period ended ~~June 30, 2022,~~March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022,~~2023, or for future operating periods.

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, ~~2021,~~2022, as filed with the Securities and Exchange Commission (SEC) on March ~~10, 2022.~~9, 2023.

Risks and Uncertainties
The ~~novel coronavirus COVID-19 (“COVID-19”) pandemic has resulted, and~~global healthcare system is ~~likely~~continuing to ~~continue to result, in significant disruptions~~respond to the ~~economy, as well as business and capital markets around~~unprecedented challenges posed by the ~~world. The full extent~~COVID-19 pandemic. While we cannot reliably estimate the duration of the impact, or the severity of ~~the COVID-19 pandemic~~ongoing resurgences, we continue to anticipate periodic disruptions to our manufacturing operations, supply chains, procedures volumes, service activities, and capital system orders and placements, any of which could have a material adverse effect on our business, financial condition, results of operations, or cash flows. In 2022, procedure volumes were challenged by periodic resurgences of COVID-19, ongoing hospital staffing issues and ~~financial condition will depend on numerous evolving factors that we may not~~other factors. Procedure volumes continue to be ~~able to accurately predict.~~challenged in 2023 by supply chain delays, ongoing hospital staffing issues and other factors.

~~As a result of the COVID-19 outbreak,~~ To-date, we have experienced ~~business~~challenges and disruptions due to the pandemic and other macroeconomic factors, such as periodic worldwide supply chain disruptions, including ~~travel restrictions on~~shortages and inflationary pressures, and logistics delays which makes it difficult for us to source parts and ship our ~~third-party distributors,~~products. Our customers have also experienced similar supply chain issues as well as labor shortages, both of which have ~~negatively affected our complex sales, marketing, installation, distribution and service network relating~~contributed to our products and services. The COVID-19 pandemic may continue to negatively affect demand for both our systems and our disposable products by limiting the ability of our sales personnel to maintain their customary contacts with customers as governmental authorities institute prolonged quarantines, travel restrictions, and shelter-in-place orders, or as our customers impose limitations on contacts and in-person meetings that go beyond those imposed by governmental authorities.
~~In addition, many of our~~delayed hospital ~~customers, for whom the purchase of our system involves a significant capital purchase which may be part of a larger~~ construction project ~~at the customer site (typically the construction of~~timelines. We have been generally able to conduct normal business activities albeit in a new building), may themselves be under economic pressures. This may cause delays or cancellations of current purchase orders and other commitments, and may exacerbate the long and variable sales and installation cycles for our robotic magnetic navigation systems. We may also experience significant reductions in demand for our disposable products as our healthcare customers (physicians and hospitals) continue to re-prioritize the treatment of patients and divert resources away from non-coronavirus areas, which we anticipate will leadmore deliberate manner than prior to the performance of fewer procedures in which our disposable products are used. In addition, patients may consider foregoing or deferring procedures utilizing our products, even if physicians and hospitals are willingpandemic, including taking action to ~~perform them, which could also reduce demand for, and sales of, our disposable products.~~
~~As of the date of the filing of this Quarterly Report on Form 10-Q, we believe our manufacturing operations and supply chains have been manageably impacted,~~increase inventory levels, but we cannot guarantee that they will not be impacted more severely in the future. If our manufacturing operations or supply chains are materially interrupted, it may not be possible for us to timely manufacture relevant products at required levels, or at all. Changes in economic conditions and supply chain constraints could lead to higher inflation than previously experienced or expected, which could, in turn, lead to an increase in costs. We may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation. A material reduction or interruption toin any of our manufacturing processes or a substantial increase in costs would have a material adverse effect on our business, operating results, and financial condition.

AsWe have experienced business disruptions, including travel restrictions on us and our third-party distributors, which have negatively affected our complex sales, marketing, installation, distribution and service network relating to our products and services. The COVID-19 pandemic, or other macroeconomic or geopolitical factors, may continue to negatively affect demand for both our systems and our disposable products.
Hospitals are experiencing challenges with staffing and cost pressures as supply chain constraints and inflation drive up operating costs. Many of our hospital customers, for whom the purchase of our system involves a significant capital purchase which may be part of a larger construction project at the customer site (typically the construction of a new building), may themselves be under economic pressures. This may cause delays or cancellations of current purchase orders and other commitments and may exacerbate the long and variable sales and installation cycles for our robotic magnetic navigation systems. Our hospital customers are also experiencing challenges in sourcing supplies, such as catheters, needed to perform procedures. Such shortages have, and may continue to, put pressure on procedures and our disposable revenue. We may also experience significant reductions in demand for our disposable products if our healthcare customers (physicians and hospitals) re-prioritize the treatment of patients and divert resources away from non-coronavirus areas, which we anticipate could lead to the performance of fewer procedures in which our disposable products are used. Significant decreases to our capital or recurring revenues could have a material adverse effect on our business, operating results, and financial condition.
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If governmental authorities around the world ~~continue to institute~~reinstitute preventative and precautionary measures such as prolonged mandatory closures, social distancing protocols and shelter-in-place orders, or as private parties on whom we rely to operate our business put in place their own protocols that go beyond those instituted by relevant governmental authorities, our ability to adequately staff and maintain our operations or further our product development could be negatively impacted.

Any disruption to the capital markets could negatively impact our ability to raise capital. If the capital markets are disrupted for an extended period of time and we need to raise additional capital, such capital may not be available on acceptable terms, or at all. Continued disruptions to the capital markets and other financing sources could also negatively impact our hospital customers’ ability to raise capital or otherwise obtain financing to fund their operations and capital projects. Such could result in delayed spending on current projects, a longer sales cycle for new projects where a large capital commitment is required, and decreased demand for our disposable products as well as an increased risk of customer defaults or delays in payments for our systems installation, service contracts and disposable products.

WeWhile we cannot reliably estimate the ultimate duration of the impact or the severity of ongoing periodic resurgences thereof, we continue to ~~evaluate~~anticipate periodic disruptions to our manufacturing operations, supply chains, procedures volumes, service activities, and ~~where appropriate, take actions to reduce costs~~capital system orders and ~~spending across our organization. We will continue to actively monitor the situation and may take further actions that alter~~placements, any of which could have a material adverse effect on our business, financial condition, results of operations, ~~that may be required by federal, state,~~ or ~~local governmental authorities that may be implemented by our vendors, supplier or customers, or that we determine are in the best interests of our employees, customers, suppliers and stockholders.~~cash flows.
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Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. Our investments may include, at any time, a diversified portfolio of cash equivalents and short-term and long-term investments in a variety of high-quality securities, including money market funds, U.S. treasury and U.S. government agency securities, corporate notes and bonds, commercial paper, non-U.S. government agency securities, and municipal notes. The Company’s exposure to any individual corporate entity is limited by policy. Deposits may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC). The Company is closely monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, including Silicon Valley Bank. On March 10, 2023, Silicon Valley Bank (“SVB”), where the Company maintained accounts with a cash balance of less than 6% of the Company’s total cash, cash equivalents and marketable securities, was closed by the California Department of Financial Protection and Innovation and the FDIC was appointed as receiver. On March 12, 2023, the U.S. Department of the Treasury, Federal Reserve Board, and FDIC released a joint statement announcing that the FDIC would complete its resolution of SVB in a manner that fully protected all depositors at SVB and that depositors would have access to all of their money starting March 13, 2023. On March 26, 2023, it was announced that First-Citizens Bank & Trust Company would assume all of SVB’s deposits and loans as of March 27, 2023. The Company does not believe that it has exposure to loss as a result of SVB’s receivership. During the periods presented, the Company has not experienced any losses on its deposits of cash, cash equivalents or marketable securities.
Cash and Cash Equivalents

~~The Company considers all short-term~~Cash and cash equivalents include cash on hand, money market instruments, and other highly liquid investments ~~purchased~~ with original maturities of three months or ~~less to be cash equivalents. The Company places its cash with high-credit-quality financial institutions and invests primarily in money market accounts.~~less.

Restricted Cash

Restricted cash primarily consists of cash that the Company is obligated to maintain in accordance with contractual obligations. The Company’s restricted cash was $~~1.6~~1.1 million and $~~1.4~~1.3 million ~~at June 30, 2022~~as of March 31, 2023, and December 31, ~~2021,~~2022, respectively.

Investments
Our investments may include, at any time, a diversified portfolio of cash equivalents and short- and long-term investments in a variety of high-quality securities, including money market funds, U.S. treasury and U.S. government agency securities, corporate notes and bonds, commercial paper, non-U.S. government agency securities, and municipal notes. As of March 31, 2023, the Company’s short-term investments consisted of U.S. treasury securities and fixed maturity, marketable debt securities with original maturities of one year or less, but greater than 90 days. These investments are classified as held to maturity. Securities classified as held to maturity are securities that the Company has the ability and intent to hold to maturity or redemption and are carried at amortized cost.
Amortized cost of U.S. treasury securities and marketable debt securities are based on the Company’s purchase price adjusted for accrual of discount, or amortization of premium, and recognition of impairment charges, if any. The amortized cost of securities the Company purchases at a discount or premium will equal the face or par value at maturity or the call date, if applicable. Stated interest on investments is reported as income when earned and is adjusted for amortization or accretion of any premium or discount. Accrued interest receivable on investments, included in other current assets, was less than $0.1 million as of March 31, 2023 and December 31, 2022.
Effective January 1, 2023, the Company reports held to maturity investments net of an allowance for expected credit losses in accordance with Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses (“ASC 326”). The adoption of ASC 326 had no material impact on the Company’s financial results for any prior periods, therefore no cumulative adjustment to beginning retained earnings was recorded. The Company segments its portfolio based on the underlying risk profiles of the securities and has a zero-loss expectation for U.S. treasury and U.S. government agency securities. The Company regularly reviews the securities using the probability of default method and analyzes the unrealized loss positions and evaluates the current expected credit loss by considering factors such as credit ratings, issuer-specific factors, current economic conditions, and reasonable and supportable forecasts. The Company did not have any material expected credit losses on investments or material expected credit losses on accrued interest related to investments during the three months ended March 31, 2023 and year ended December 31, 2022.
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Fair Value Measurements

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

The Company measures certain financial assets and liabilities at fair value on a recurring basis. General accounting principles for fair value measurement ~~established~~establishes 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 Company’s financial assets consist~~
As of ~~restricted cash and cash equivalents invested in money market funds which totaled $1.6~~ ~~million and $1.4~~ ~~million as of June 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively. The~~2022, financial assets ~~consisting of cash equivalents invested in money market funds~~that are classified as Level 2 ~~as described above~~include money market funds, U.S. treasury securities and ~~total interest income recorded~~corporate debt securities. The Company reviews trading activity and pricing for these investments ~~was insignificant~~as of the measurement date. When sufficient quoted pricing for ~~the six months ended June 30, 2022 and 2021. As of June 30, 2022 and 2021,~~identical securities is not available, the Company ~~did not~~uses market pricing and other observable market inputs for similar securities. These inputs either represent quoted prices for similar assets in active markets or have ~~any financial liabilities valued at~~been derived from observable market data. This approach results in the Level 2 classification of these securities within the fair value hierarchy.
Accounts Receivable, Contract Assets, and Allowance for Credit Losses
Accounts receivable primarily include amounts due from hospitals and distributors for acquisition of magnetic systems, associated disposable device sales and service contracts, net of allowances for expected credit losses. Credit is granted on a ~~recurring basis.~~limited basis, with balances due generally within 30 days of billing. 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. Effective January 1, 2023, the Company reports accounts receivable and contract assets net of an allowance for expected credit losses in accordance with Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses (“ASC 326”). The adoption of ASC 326 had no material impact on the Company’s financial results for any prior periods, therefore no cumulative adjustment to beginning retained earnings was recorded. The provision for credit loss is based upon management’s assessment of historical and expected net collections considering business and economic conditions and other collection indicators. We assess collectability by reviewing the accounts receivable aging schedule on an aggregated basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. Amounts deemed uncollectible are recorded as an allowance for expected credit losses.

Revenue and Costs of Revenue

The Company accounts for revenue in accordance with Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers”.

We generate revenue from the 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 of various devices as provided by ~~Biosense Webster of co-developed catheters,~~co-development and co-placement arrangements, and from other recurring revenue including ongoing software updates 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 arrangements with multiple performance obligations, 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.

Our revenue recognition policy affects the following revenue streams in our business as follows:

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 enhancements throughout the period and is included in Other Recurring Revenue. The Company’s system contracts do not provide a right of return. Systems are generally covered by a one-year assurance type warranty; warranty costs were less than $0.1 ~~million and $0.1~~ million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021 respectively.~~2022. Revenue from system delivery and installation represented 1728%% and 3023%% of revenue for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.
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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 ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. Disposable revenue represented 3124%% and 2529%% of revenue for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Royalty:

The Company isreceives royalties on the sale of various devices as provided by co-development and co-placement arrangements with various manufacturers. The Company was entitled to royalty payments from Biosense Webster, payable quarterly based on net revenues from sales of the co-developed ~~catheters.~~catheters, during the term of the agreement. Royalty revenue from ~~the co-developed catheters~~co-development and co-placement arrangements represented less than 81% and approximately 78%% of revenue for the ~~six-month periods~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.
Other Recurring Revenue:

Other recurring revenue includes revenue from product maintenance plans, other post warranty maintenance, and the implied obligation to provide software enhancements if and when available for a specified period, typically one year following installation of our systems. Revenue from services and software enhancements is deferred and amortized over the service or update 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 4448%% and 3540%% of revenue for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.
~~Sublease Revenue:~~
A portion of our former principal executive office was subleased to a third party through 2021. The sublease ended December 31, 2021. In accordance with Accounting Standards Update (ASU) 2016-02, “Leases” (Topic 842), the Company recorded sublease income as revenue. Sublease revenue represented 3~~% of revenue for the six months ended June 30, 2021.~~

The following table summarizes the Company’s revenue for systems, disposables, and service and accessories ~~and sublease~~ for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):
Schedule of Revenue Disaggregated by Type
2022 2021 2022 2021 2023 2022
Three Months Ended June 30 Six Months Ended June 30, Three Months Ended March 31,
2022 2021 2022 2021 2023 2022
Systems $ 602 $ 2,686 $ 2,236 $ 5,289 $ 1,821 $ 1,634
Disposables, service and accessories 5,550 6,118 10,953 11,892 4,727 5,403
Sublease - 247 - 493
Total revenue $ 6,152 $ 9,051 $ 13,189 $ 17,674 $ 6,548 $ 7,037
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 $~~14.2~~15.1 million as of ~~June 30, 2022.~~March 31, 2023. 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 table summarizes the Company’s contract assets and liabilities (in thousands):
Summary of Contract Assets and Liabilities
June 30, 2022 December 31, 2021 March 31, 2023 December 31, 2022
Contract Assets - unbilled receivables $ 208 $ 178 $ 659 $ 539

Customer deposits $ 1,234 $ 925 $ 2,144 $ 2,339
Product shipped, revenue deferred 1,794 1,794 1,389 1,389
Deferred service and license fees 5,561 5,796 5,723 5,268
Total deferred revenue $ 8,589 $ 8,515 $ 9,256 $ 8,996
Less: Long-term deferred revenue (1,630 ) (2,238 ) (1,711 ) (1,654 )
Total current deferred revenue $ 6,959 $ 6,277 $ 7,545 $ 7,342

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 satisfied performance obligations and the contractual billing terms in the arrangements. Customer deposits primarily relate to future system sales but can also include deposits on disposable sales. 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~~credit losses on its contract assets for the periods ~~presented.~~presented therefore no allowance for credit losses was recorded as of March 31, 2023, or December 31, 2022.
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Revenue recognized for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ that was included in the deferred revenue balance at the beginning of each reporting period was $~~4.6~~3.0 million and $~~4.0~~3.2 million, 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 assets, in the Company’s balance sheet was $0.2 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. 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 recognized at the time of sale. Costs of disposable revenue include direct product costs and estimated warranty costs and are recognized at the time of sale. Cost of revenue from services and license fees are recognized when incurred.

Leasing Arrangements
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company accounts for leases in accordance with Accounting Standards Update No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842 (“ASC 842”). The Company determines if an arrangement contains a lease at inception.
The Company leases its facilities under operating leases. In accordance with ASC 842, operating lease agreements are recognized on the balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability. These leases generally do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions. Many of our leases include both lease (i.e., fixed payments including rent, taxes, and insurance costs) and non-lease components (i.e., common-area or other maintenance costs) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases.
The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less) on the balance sheet.
The calculated amounts of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum lease payments. ASC 842 requires the use of the discount rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception.
Stock-Based Compensation

The Company accounts for its grants of stock options, stock appreciation rights, restricted shares, 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~~stock-based compensation at the grant date and the recognition of the related expense over the period in which the ~~share-based~~stock-based compensation vests.

For time-based awards, 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 weighted average assumptions and fair value for options granted during the three months ended March 31, 2023, were 1) expected dividend rate of 0%; 2) expected volatility of 76% based on the Company’s historical volatility; 3) risk-free interest rate based on the Treasury yield on the date of grant; and 4) expected term of 6.25 years. The resulting compensation expense is recognized over the requisite service period, which is generally four years. Restricted shares and units 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.

For market-based awards, stock-based compensation expense is recognized over the minimum service period regardless of whether or not the market target is probable of being achieved. The fair value of such awards is estimated on the grant date using Monte Carlo simulations.

Shares purchased by employees under the ~~2009 and~~ 2022 Employee Stock Purchase Plans are considered to be non-compensatory.
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Net Earnings (Loss) per Common Share

Basic earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average 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 (in thousands except for share and per share amounts):
Schedule of Computation of Basic and Diluted Earnings Per Share
2022 2021 2022 2021
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net loss $ (5,134 ) $ (1,211 ) $ (9,220 ) $ (2,743 )
Cumulative dividend on Series A Convertible Preferred Stock (335 ) (335 ) (666 ) (668 )
Net loss attributable to common stockholders $ (5,469 ) $ (1,546 ) $ (9,886 ) $ (3,411 )

Weighted average number of common shares and equivalents: 75,953,916 75,547,574 75,915,864 75,362,521
Basic EPS $ (0.07 ) $ (0.02 ) $ (0.13 ) $ (0.05 )
Diluted EPS $ (0.07 ) $ (0.02 ) $ (0.13 ) $ (0.05 )

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2023 2022
Three Months Ended March 31,
2023 2022
Net loss $ (5,347 ) $ (4,086 )
Cumulative dividend on convertible preferred stock (331 ) (331 )
Net loss attributable to common stockholders $ (5,678 ) $ (4,417 )

Weighted average number of common shares and equivalents: 76,500,965 75,877,391
Basic EPS $ (0.07 ) $ (0.06 )
Diluted EPS $ (0.07 ) $ (0.06 )

The Company did not include any portion of unearned restricted shares, outstanding options, stock appreciation rights, warrants or convertible preferred stock in the calculation of diluted loss per common share because all such securities are anti-dilutive for all periods presented. The application of the two-class method of computing earnings per share under general accounting principles for participating securities is not applicable during these periods because those securities do not contractually participate in its losses.

As of ~~June 30, 2022,~~March 31, 2023, the Company had ~~3,385,126~~3,813,206 shares of common stock issuable upon the exercise of outstanding options and stock appreciation rights at a weighted average exercise price of $~~4.26~~3.95 per share, ~~46,328,875~~47,873,675 shares of our common stock issuable upon conversion of our Series A Convertible Preferred Stock, 5,610,121 shares of our common stock issuable upon conversion of our Series B Convertible Preferred Stock and ~~1,215,604~~1,389,009 shares of unvested restricted share units. The Company had no unearned restricted shares outstanding as of ~~June 30, 2022.~~March 31, 2023.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05. The standard modifies the measurement approach for credit losses on financial instruments, including trade receivables, from an incurred loss method to a current expected credit loss method, otherwise known as “CECL.” The standard requires the measurement of expected credit losses to be based on relevant information, including historical experience, current conditions and a forecast that is supportable. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years; early adoption is permitted. The standard must be adopted by applying a cumulative adjustment to retained earnings. The Company ~~anticipates adopting~~adopted the standard in the first quarter of ~~2023, although it does not expect a significant~~2023. The impact to the Company’s financial ~~results.~~results was immaterial.
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3. Financial Instruments
The following table summarizes the Company’s cash and held to maturity securities’ amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category reported as cash and cash equivalents, restricted cash and investments as of March 31, 2023, and December 31, 2022:
Schedule of Cash and Held to Maturity Securities
March 31, 2023
Valuation Balance Sheet Classification
(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Restricted Cash- current Short-term Investments Restricted Cash
Cash $ 1,256 $ - $ - $ 1,256 $ 1,256 $ - $ - $ -
Level 2
Money market funds 5,504 - (1 ) 5,503 4,367 525 - 612
US treasury securities 9,959 1 - 9,960 - - 9,959 -
Corporate debt securities 10,082 2 (4 ) 10,080 - - 10,082 -
Subtotal 25,545 3 (5 ) 25,543 4,367 525 20,041 612
Total assets measured at fair value $ 26,801 $ 3 $ (5 ) $ 26,799 $ 5,623 $ 525 $ 20,041 $ 612
December 31, 2022
Valuation Balance Sheet Classification
(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Restricted Cash- current Short-term Investments Restricted Cash
Cash $ 3,258 $ - $ - $ 3,258 $ 3,258 $ - $ - $ -
Level 2
Money market funds 1,615 - - 1,615 346 525 - 744
US treasury securities 14,833 2 (2 ) 14,833 4,982 - 9,851 -
Corporate debt securities 9,993 - (6 ) 9,987 - - 9,993 -
Subtotal 26,441 2 (8 ) 26,435 5,328 525 19,844 744
Total assets measured at fair value $ 29,699 $ 2 $ (8 ) $ 29,693 $ 8,586 $ 525 $ 19,844 $ 744
Interest income recorded for these investments was approximately $0.3 million and $0.5 million during the three months ended March 31, 2023 and the year ended December 31, 2022, respectively.
As of March 31, 2023 and December 31, 2022, the Company did not have any financial assets classified as Level 1 or Level 3 nor did the Company have financial liabilities valued at fair value on a recurring basis.

3.4. Inventories

Inventories consist of the following (in thousands):
Schedule of Inventories
June 30, 2022 December 31, 2021 March 31, 2023 December 31, 2022
Raw materials $ 5,554 $ 3,642 $ 7,760 $ 6,556
Work in process 1,405 133 425 530
Finished goods 2,981 2,823 2,270 2,697
Reserve for excess and obsolescence (2,154 ) (2,165 ) (1,945 ) (1,907 )
Total inventory $ 7,786 $ 4,433 $ 8,510 $ 7,876

The reserve for excess and obsolescence primarily includes Niobe Systems and related raw materials and spare parts.

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4.5. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following (in thousands):
Schedule of Prepaid Expenses and Other Assets
June 30, 2022 December 31, 2021 March 31, 2023 December 31, 2022
Prepaid expenses $ 338 $ 1,012 $ 730 $ 605
Prepaid commissions 204 229 167 187
Deposits 584 1,276 528 669
Other assets 83 117 91 72
Total prepaid expenses and other assets 1,209 2,634 1,516 1,533
Less: Noncurrent prepaid expenses and other assets (218 ) (278 ) (184 ) (208 )
Total current prepaid expenses and other assets $ 991 $ 2,356 $ 1,332 $ 1,325

5.6. Property and Equipment

Property and Equipment consist of the following (in thousands):
Schedule of Property and Equipment
June 30, 2022 December 31, 2021
Equipment $ 3,684 $ 3,670
Leasehold improvements 2,521 17
Construction in process 349 2,156
Property, Plant and Equipment, Gross 6,554 5,843
Less: Accumulated depreciation (3,294 ) (3,211 )
Net property and equipment $ 3,260 $ 2,632

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March 31, 2023 December 31, 2022
Equipment $ 4,440 $ 4,393
Leasehold improvements 2,900 2,692
Construction in process - 204
Gross property and equipment 7,340 7,289
Less: Accumulated depreciation (3,618 ) (3,458 )
Net property and equipment $ 3,722 $ 3,831

The Company had ~~approximately~~less than $~~0.8~~0.1 million and $1.2 million of property and equipment additions during the ~~six~~three months ended ~~June 30,~~March 31, 2023, and the year ended December 31, 2022, respectively, associated with the buildout of the new leased space in St. Louis, Missouri.

6.7. Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company accounts for leases in accordance with Accounting Standards Update No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842 (“ASC 842”). The Company determines if an arrangement contains a lease at inception.
The Company leases its facilities under operating leases. In accordance with ASC 842, operating lease agreements are recognized on the balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability. These leases generally do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions. Many of our leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. A portion of our former principal executive office was subleased to a third party through 2021. The sublease did not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. In addition, the sublease did not contain contingent rent provisions nor were there options to extend or terminate the sublease. The sublease ended December 31, 2021.
The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. The Company elected not to include short-term leases (i.e. leases with initial terms of twelve months or less) on the balance sheet.

On March 1, 2021, the Company entered into an office lease agreement (the “Lease”) with Globe Building Company (the “Landlord”), under which the Company leases executive office space and manufacturing facilities of approximately 43,100 square feet of rentable space located at 710 N. Tucker Boulevard, St. Louis, Missouri (the “Premises”) that serves as the Company’s ~~new~~ principal executive and administrative offices and manufacturing facility. Lease payments commenced on January 1, 2022, and the lease has a term of ten years, withtwo renewal options of five years each. The minimum annual rent under the terms of the Lease ranges from approximately $0.8 million in 2022 to $1.0 million in 2031. The Company gained access to the Premises in the third quarter 2021 to begin constructing leasehold improvements. In accordance with ASC 842, the Company recorded a ROU asset and lease liability. The initial recognition of the ROU asset and lease liability was $5.9 million. In the fourth quarter of 2021, the Company received an occupancy permit and relocated its operations to the new leased space.

The calculated amounts of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum lease payments. ASC 842 requires the use of the discount rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception. As of ~~June 30, 2022,~~March 31, 2023, the weighted average discount rate for operating leases was 99%% and the weighted average remaining lease term for operating lease term is ~~9.5~~8.74 years.

The following table represents lease costs and other lease information (in thousands):
Schedule of Lease Costs and Other Lease Information
2022 2021 2022 2021 2023 2022
Three Months Ended June 30 Six Months Ended June 30 Three Months Ended March 31,
2022 2021 2022 2021 2023 2022
Operating lease cost $ 226 $ 583 $ 451 $ 1,165 $ 227 $ 226
Short-term lease cost 10 14 20 31 4 10
Sublease income - (247 ) - (493 )
Total net lease cost $ 236 $ 350 $ 471 $ 703 $ 231 $ 236

Cash paid within operating cash flows $ 220 $ 539 $ 654 $ 1,170 $ 242 $ 434

Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our leased facilities and equipment which are paid based on actual costs incurred.

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Future minimum payments for operating leases with initial or remaining terms of one year or more as of ~~June 30, 2022~~March 31, 2023, were as follows (in thousands):
Schedule of Future Minimum Operating Lease Payments
June 30, 2022 March 31, 2023
2022 $ 413
2023 871 $ 659
2024 891 898
2025 912 919
2026 933 935
2027 and thereafter 4,986
2027 956
2028 and thereafter 4,030
Total lease payments $ 9,006 $ 8,397
Less: Interest (3,015 ) (2,625 )
Present value of lease liabilities $ 5,991 $ 5,772
7.8. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):
Schedule of Accrued Liabilities
June 30, 2022 December 31, 2021
Accrued salaries, bonus, and benefits $ 1,213 $ 1,516
Accrued licenses and maintenance fees 484 484
Accrued warranties 209 242
Accrued taxes 165 177
Accrued investigational sites 102 123
Accrued lease deposit payable 5 124
Other 150 81
Total accrued liabilities 2,328 2,747
Less: Long term accrued liabilities (202 ) (219 )
Total current accrued liabilities $ 2,126 $ 2,528

~~Certain prior year amounts have been reclassified to conform to the 2022 presentation.~~
March 31, 2023 December 31, 2022
Accrued salaries, bonus, and benefits $ 899 $ 1,381
Accrued licenses and maintenance fees 484 484
Accrued warranties 155 163
Accrued taxes 75 47
Accrued investigational sites 85 101
Deferred contract obligations 1,045 1,045
Other 112 136
Total accrued liabilities 2,855 3,357
Less: Long term accrued liabilities (51 ) (51 )
Total current accrued liabilities $ 2,804 $ 3,306
8. ~~Debt and Credit Facilities~~
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. Among the provisions contained in the CARES Act was the creation of the Paycheck Protection Program that provides for Small Business Administration (“SBA”) Section 7(a) loans for qualified small businesses. In general, the loan could be forgiven as long as the funds were used for payroll related expenses as well as rent and utilities paid during the twenty-four-week period from the date of the loan and as long as certain headcount and salary/wage levels were maintained. On April 10, 2020, the Company was informed by its lender, Midwest BankCentre (the “Bank”), that the Bank received approval from the SBA to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP Loan”). Per the terms of the PPP Loan, the Company received total proceeds of approximately $~~2.2~~ million from the Bank on April 20, 2020. In accordance with the loan forgiveness requirements of the CARES Act, the Company used the full proceeds from the PPP Loan primarily for payroll costs, rent and utilities. In March 2021, the Company applied for loan forgiveness and in June 2021 full loan forgiveness was granted by the SBA. The Company recognized a net gain from debt extinguishment of approximately $~~2.2~~ ~~million.~~
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 when and as declared by the Board of Directors out of funds legally available for dividends, subject to the prior rights or preferences applicable to any preferred stock as may then be outstanding. The Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) is entitled to dividends equal to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. Until all shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) have been converted or redeemed, no dividends may be paid on the common stock or the Series B Preferred Stock without the express written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock. In the event that dividends or other distributions of assets are made or paid by the Company to the holders of the common stock or the holders of shares of the Series B Preferred Stock, the holders of shares of the Series A Preferred Stock are entitled to participate in such dividend or distribution on an as-converted basis. ~~NaN~~No dividends have been declared or paid as of ~~June 30, 2022,~~March 31, 2023, and the Company does not presently intend to pay any cash dividends in the foreseeable future.
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Series B Convertible Preferred Stock

On August 7, 2019, the Company entered into a Securities Purchase Agreement with certain institutional and other accredited investors, whereby it, as part of a private placement, agreed to issue and sell to the investors 5,610,121 shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), $0.001 par value per share which are convertible into shares of the Company’s common stock, at a price of $2.05 per share. The Series B Preferred Stock, which is a common stock equivalent but non-voting and with a blocker on conversion if the holder would exceed a specified threshold of voting security ownership, is convertible into common stock on a one-for-one basis, subject to adjustment for events such as stock splits, combinations and the like as provided in the Purchase Agreement. The Series B ~~Convertible~~ Preferred Stock is reported in the stockholders’ equity section of the Company’s balance sheet. In April 2023, all of the outstanding shares of Series B Convertible Preferred Stock were converted into shares of common stock on a one-for-one basis by the holder.

Series A Convertible Preferred Stock and Warrants

In September 2016, the Company issued (i) 24,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), par value $0.001 per share, with a stated value of $1,000 per share, ~~(the “Series A Preferred Stock”),~~ which are convertible into shares of the Company’s common stock at an initial conversion rate of $0.65 per share, subject to adjustment for events such as stock splits, combinations and the like as provided in the certificate of designations covering such Series A Preferred Stock, and (ii) (the SPA Warrants) to purchase an aggregate of 36,923,078 shares of common stock. The shares of Series A Preferred Stock are entitled to vote on an as-converted basis with the common stock, subject to specified beneficial ownership issuance limitations. The Series A Preferred Stock bear dividends at a rate of six percent (66%%) 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 Series A Preferred Stock. Each holder of convertible preferred shares has the right to require us to redeem such holder’s shares of Series A Preferred Stock 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 5050%% of the outstanding shares of the Company’s common stock. In addition, the Company has the right to redeem the Series A Preferred Stock in the event of a defined change of control. The Series A Preferred Stock ranks senior to our common stock as to distributions and payments upon the liquidation, dissolution, and winding up of the Company. Since the Series A Preferred Stock are subject to conditions for redemption that are outside the Company’s control, the Series A Preferred Stock are presently reported in the mezzanine section of the balance sheet.
~~The SPA 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 and to modify certain beneficial ownership limitations and to eliminate certain redemption rights, resulting in, among other things, the exercise of a substantial number of the SPA Warrants for cash. The remaining unexercised ~~15,385~~ ~~Warrants expired on September 29, 2021.~~

2021 CEO Performance Award Unit Grant

On February 23, 2021, the Company`s Board of Directors, upon recommendation of the Compensation Committee, approved the grant of the CEO Performance Award to the Company’s Chief Executive Officer. The CEO Performance award is a 10-year performance award of up to 13,000,000 shares, tied to the achievement of market capitalization milestones and subject to minimum service requirements.

As detailed in the table below, the CEO Performance Award consists of ten vesting tranches. The first market capitalization milestone is $1.0 billion, and each of the remaining nine market capitalization milestones are in additional $500 million increments, up to $5.5 billion.
Summary of Performance Award And Market Capitalization Milestones
Tranche #
No. of Shares
Subject to PSU
Market Capitalization
Milestones⁽¹⁾
1 1,000,000 $ 1,000,000,000
2 1,500,000 $ 1,500,000,000
3 1,500,000 $ 2,000,000,000
4 2,000,000 $ 2,500,000,000
5 1,000,000 $ 3,000,000,000
6 1,000,000 $ 3,500,000,000
7 1,000,000 $ 4,000,000,000
8 2,000,000 $ 4,500,000,000
9 1,000,000 $ 5,000,000,000
10 1,000,000 $ 5,500,000,000
Total: 13,000,000

Each tranche represents a portion of the PSUs covering the number of shares outlined in the table above. Each tranche vests upon (i) satisfaction of the market capitalization milestones and (ii) continued employment as CEO of the Company from the grant date through December 31, 2030. Absent an earlier termination, the PSUs will expire on December 31, 2030. If our CEO ceases employment as CEO of the Company for any reason including death, disability, termination for cause or without cause (as defined in the award agreement), or if he voluntary terminates after service as CEO for at least five years, the remaining service period will be waived and he will retain any PSUs that have vested through the date of ~~termination~~.termination.

The Company received Shareholder approval at its annual meeting on May 20, 2021 for shares to be issued under the award.

The market capitalization requirement is considered a market condition under FASB Accounting Standards Codification Topic 718 “Compensation – Stock Compensation” and is estimated on the grant date using Monte Carlo simulations. Recognition of stock-based compensation expense of all the tranches commenced on February 23, 2021, the date of grant, as the probability of meeting the ten market capitalization milestones is not considered in determining the timing of expense recognition. The expense will be recognized on an accelerated basis through 2030. Key assumptions for estimating the performance-based awards fair value at the date of grant included share price on grant date, volatility of the Company’s common stock price, risk free interest rate, and grant term.

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Total stock-based compensation recorded as operating expense for the CEO Performance Award was $~~3.5~~1.8 ~~million and $2.5~~ million for the ~~six-month period~~three-month periods ended ~~June 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022. As of ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company had approximately $~~47.7~~42.4 million and $~~54.9~~49.5 million, respectively, of total unrecognized stock-based compensation expense remaining under the CEO Performance Award assuming the grantee’s continued employment as CEO of the Company, or in a similar capacity, through 2030. As of ~~June 30, 2022,~~March 31, 2023, none of the performance milestones established by the 2021 CEO Incentive Program have been achieved, and no awards have been earned.

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 February 2022, the Compensation Committee of the Board of Directors adopted the 2022 Stock Incentive Plan (the “Plan”) which was subsequently approved by the Company’s shareholders. This plan replaced the 2012 Stock Incentive Plan which expired on May 19, 2022.

At ~~June 30, 2022,~~March 31, 2023, the Company had ~~4,107,114~~2,937,628 remaining shares of the Company’s common stock to provide for current and future grants under its various equity plans.

At ~~June 30, 2022,~~March 31, 2023, the total compensation cost related to options, stock appreciation rights, and non-vested stock granted to employees and non-employees under the Company’s stock award plans but not yet recognized was approximately $~~6.2~~5.5 million, excluding compensation not yet recognized related to the CEO Performance Award discussed above. 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 ~~six-month~~three-month period ended ~~June 30, 2022~~March 31, 2023 is as follows:
Summary of Option and Stock Appreciation Rights Activity
Number of Options/SARs Range of Exercise Price Weighted Average Exercise Price per Share Number of Options/SARs
Range of
Exercise Price
Weighted Average Exercise Price per Share
Outstanding, December 31, 2021 2,818,012 $0.74 - $9.87 $ 4.10
Outstanding, December 31, 2022 3,208,065 $ 0.74 - $9.87 $ 4.21
Granted 760,500 $2.66 - $5.21 $ 4.80 697,000 $ 2.57 $ 2.57
Exercised (40,523 ) $0.74 - $4.52 $ 1.11 (29,188 ) $ 0.74 - $2.03 $ 1.15
Forfeited (152,863 ) $0.74 - $7.70 $ 4.89 (62,671 ) $ 1.62 - $9.20 $ 3.62
Outstanding, June 30, 2022 3,385,126 $0.74 - $9.87 $ 4.26
Outstanding, March 31, 2023 3,813,206 $ 0.74 - $9.87 $ 3.95
A summary of the restricted stock unit activity for the ~~six-month~~three-month period ended ~~June 30, 2022~~March 31, 2023 is as follows:
Summary of Restricted Stock Unit Activity
Number of Restricted Stock Units Weighted Average Grant Date Fair Value per Unit
Number of Restricted
Stock Units
Weighted Average Grant Date Fair Value per Unit
Outstanding, December 31, 2021 1,164,723 $ 3.57
Outstanding, December 31, 2022 1,208,739 $ 4.21
Granted 61,580 $ 9.56 324,324 $ 1.85
Vested (10,699 ) $ 9.37 (144,054 ) $ 1.22
Outstanding, June 30, 2022 1,215,604 $ 3.82
Outstanding, March 31, 2023 1,389,009 $ 3.97
~~10.~~ ~~Fair Value Measurements~~
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including certain cash equivalents. Generally accepted 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.~~
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The following table sets forth the Company’s assets 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.
~~Schedule of Assets Measured at Fair Value on a Recurring Basis by Level Within Fair Value Hierarchy~~
Fair Value Measurement Using
(in thousands) Total Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets at June 30, 2022:
Cash invested in money market accounts $ 1,625 $ — $ 1,625 $ —
Total assets at fair value $ 1,625 $ — $ 1,625 $ —
Assets at December 31, 2021:
Cash invested in money market accounts $ 1,406 $ — $ 1,406 $ —
Total assets at fair value $ 1,406 $ — $ 1,406 $ —
~~The Company did not have any financial liabilities valued at fair value on a recurring basis as of June 30, 2022 or December 31, 2021.~~
~~Level 1~~
~~The Company does not have any financial assets or liabilities classified as Level 1.~~
~~Level 2~~
~~The Company’s financial assets consist of restricted cash and cash equivalents invested in money market funds in the amount of $1.6~~ ~~million and $1.4~~ ~~million at June 30, 2022 and December 31, 2021, respectively. These assets are classified as Level 2, as described above, and total interest income recorded for these investments was less than $0.1~~ ~~million during the six months ended June 30, 2022 and year ended December 31, 2021.~~
~~Level 3~~
~~The Company does not have any financial assets or liabilities classified as Level 3.~~
~~11.~~10. Product Warranty Provisions

The Company’s standard policy is to warrant all capital 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 (in thousands):
Schedule of Accrued Warranty
June 30, 2022 December 31, 2021 March 31, 2023 December 31, 2022
Warranty accrual, beginning of the fiscal period $ 242 $ 158 $ 163 $ 242
Accrual adjustment for product warranty 92 199 7 113
Payments made (125 ) (115 ) (15 ) (192 )
Warranty accrual, end of the fiscal period $ 209 $ 242 $ 155 $ 163
~~12.~~11. 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.

In April 2021, the Company entered into a letter of credit pursuant to the Lease agreement totaling approximately $1.8 million to be delivered in four equal installments of which the first was delivered in April 2021, the second was delivered in July 2021, the third was delivered in October 2021, and the fourth was delivered in January 2022. The amount available under this letter of credit ~~will~~ automatically ~~reduce~~reduces by one fortieth at the end of each month during the lease term.

~~13.~~12. Subsequent Events

None.
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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 Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. 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 “Part II - Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. 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, results of operations, and the impact of the recent coronavirus (“COVID-19”) pandemic and our response to it. 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 is a pioneer and global leader in surgical robotics for minimally invasive endovascular intervention. We design, manufacture and market robotic systems, instruments and information systems for the interventional laboratory. Our proprietary robotic technology, Robotic Magnetic Navigation, fundamentally transforms endovascular interventions using precise computer-controlled magnetic fields to directly control the tip of flexible interventional catheters or devices. Direct control of the tip of an interventional device, in contrast to all manual hand-held devices that are controlled from their handle, can improve the precision, stability, reach and safety of these devices during procedures.

Our primary clinical focus has been electrophysiology, specifically cardiac ablation procedures for the treatment of arrhythmias. Cardiac ablation has become a well-accepted therapy for arrhythmias and a multi-billion-dollar medical device market with expectations for substantial long-term growth. We have shared our aspiration and a product strategy to expand the clinical focus of our technology to several additional endovascular indications including coronary, neuro, and peripheral interventions.

There is substantial real-world evidence and clinical literature for Robotic Magnetic Navigation in electrophysiology. Hundreds of electrophysiologists at over one hundred hospitals globally have treated over 100,000 arrhythmia patients with our robotic technology. Clinical use of our technology has been documented in over 400 clinical publications. Robotic Magnetic Navigation is designed to enable physicians to complete more complex interventional procedures with greater success and safety by providing image-guided delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied computer-controlled magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation. The more flexible atraumatic design of catheters driven using magnetic fields may reduce the risk of patient harm and other adverse events. Performing the procedure from a control cockpit enables physicians to complete procedures in a safe location protected from x-ray exposure, with greater ergonomics, and improved efficiency. We believe these benefits can be applicable in other endovascular indications where navigation through complex vasculature is often challenging or unsuccessful and generates significant x-ray exposure.

Our primary products include the Genesis RMNSystem, the OdysseySolution, and other related devices. We also offer to our customers the Stereotaxis Imaging Model S x-ray System and other accessory devices.
The Genesis RMN System ~~System~~ is designed to enable physicians to complete more complex interventional procedures by providing image-guided delivery of catheters 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, resulting in improved navigation, efficient procedures, and reduced x-ray exposure.
The Odyssey Solution ~~Solution~~ consolidates lab information onto one large integrated display, enabling physicians to view and control all the key information in the operating room. This is designed to improve lab layout and procedure efficiency. The system also features a remote viewing and recording capability called Odyssey Cinema,, which is an innovative solution that delivers 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.
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The Stereotaxis Imaging Model S provides an integrated complete solution for a robotic interventional operating room. It is a single-plane, full-power x-ray system and includes the c-arm, powered table, motorized boom, and large high-definition monitors. Stereotaxis Imaging Model S incorporates modern fluoroscopy technology to support high quality imaging while minimizing radiation exposure for patients and physicians. The combination of RMN Systems with Stereotaxis Imaging Model S is designed to reduce the cost of acquisition, the ongoing cost of ownership, and the complexity of installation of a robotic electrophysiology practice.

We promote our full suite of products in a typical hospital implementation, subject to regulatory approvals or clearances. This 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 the warranty period, and ongoing software updates. In hospitals where our full suite of products has not been implemented, equipment upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.

We have received regulatory clearances and registration ~~approvals~~ necessary for us to market the Genesis RMN System in the U.S. and Europe, and we are in the process of obtaining necessary registrations for extending our markets in other countries. Our prior generation robotic magnetic navigation system, the Niobe System, ~~and~~ the 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 Europe. The Stereotaxis Imaging Model S x-ray System is CE marked and cleared by the FDA.

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We have strategic relationships with technology leaders and innovators in the global interventional market. Through these strategic relationships we provide compatibility between our robotic magnetic navigation system and digital imaging and 3D catheter location sensing technology, as well as disposable interventional devices. The maintenance of these strategic relationships, or the establishment of equivalent alternatives, is critical to our commercialization efforts. There are no guarantees that any existing strategic relationships will continue, and efforts are ongoing to ensure the availability of integrated systems and devices and/or equivalent alternatives. 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.

~~COVID-19 Pandemic~~Risks and Uncertainties

~~In January 2020, we began~~The global healthcare system is continuing to ~~see~~respond to the ~~impacts of~~unprecedented challenges posed by the COVID-19 pandemic ~~with a substantial reduction in robotic procedures in Asia Pacific, especially in China. As~~and other macroeconomic factors. While we cannot reliably estimate the ~~COVID-19 pandemic intensified and spread throughout the world, we experienced significant procedure disruption in all geographies. At the height~~ultimate duration of the ~~first wave~~impact or the severity of ~~the pandemic,~~ongoing periodic resurgences thereof, we continue to anticipate periodic disruptions to our manufacturing operations, supply chains, procedures ~~in the U.S~~volumes, service activities, and ~~Europe,~~capital system orders and placements, any of which ~~represent the majority~~could have a material adverse effect on our business, financial condition, results of ~~our procedures, declined to approximately 70% of the weekly procedure rate experienced in the fourth quarter of 2019.~~operations, or cash flows.The impact has varied widely over time by individual geography. In ~~the latter half of 2020, weekly procedures recovered and approached the levels seen before the pandemic.~~
During 2021, resurgences of COVID-19 as well as hospital staffing shortages, continued to impact procedure levels. During the first quarter of 2021, overall procedure volumes were approximately 5% higher than the first quarter of 2020. During the second quarter of 2021, as the rollout of vaccines continued in the US and were varied in other geographies, overall procedure volumes remained fairly consistent with the first quarter of 2021 and were nearly 40% higher than at the height of the pandemic in the second quarter of 2020. During the third and fourth quarters of 2021, a resurgence of COVID and hospital staffing shortages depressed procedure volumes with overall procedure volumes dropping by approximately 9% and 8% as compared to the respective prior year quarter.
~~In the first half of~~ 2022, procedure volumes ~~continue to be~~were challenged by periodic resurgences of COVID-19, ongoing hospital staffing issues and other factors. ~~Procedures in~~In the first ~~half~~quarter of ~~2022 declined by approximately 13% as compared to the prior year first half with~~2023, the most ~~noticeable declines occurring~~recent COVID-19 resurgences in China continued to negatively impact our procedure volumes in that region, but as infections and hospitalization decreased throughout the ~~Asia Pacific and North American geographies.~~quarter, we saw a recovery of procedure volumes.

We have experienced challenges and disruptions ~~due to the pandemic~~ such as worldwide supply chain disruptions, including shortages and inflationary pressures, and logistics delays which makes it difficult for us to source parts and ship our products. ~~Our customers have also experienced similar~~Hospitals are experiencing challenges with staffing and cost pressures as supply chain ~~issues as well as labor shortages, both~~constraints and inflation drive up operating costs. Many of our hospital customers, for whom the purchase of our system involves a significant capital purchase which ~~have contributed to delayed hospital~~may be part of a larger construction project ~~timelines.~~ at the customer site (typically the construction of a new building), may themselves be under economic pressures. This may cause delays or cancellations of current purchase orders and other commitments and may exacerbate the long and variable sales and installation cycles for our robotic magnetic navigation systems. Our hospital customers are also experiencing challenges in sourcing supplies, such as catheters, needed to perform procedures. Such shortages have, and may continue to, put pressure on procedures and our disposable revenue.
To-date, we have been generally able to conduct normal business activities albeit in a more deliberate manner than prior to the pandemic, including taking action to increase inventory levels, but we cannot guarantee that they will not be impacted more severely in the future.

~~Ongoing~~Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. Our investments may include, at any time, a diversified portfolio of cash equivalents and short- and long-term investments in a variety of high-quality securities, including money market funds, U.S. treasury and U.S. government agency securities, corporate notes and bonds, commercial paper, non-U.S. government agency securities, and municipal notes. The Company’s exposure to any individual corporate entity is limited by policy. Deposits may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC). The Company is closely monitoring ongoing ~~impact~~events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, including Silicon Valley Bank. On March 10, 2023, Silicon Valley Bank (“SVB”), where the Company maintained accounts with a cash balance of less than 6% of the Company’s total cash, cash equivalents and marketable securities, was closed by the California Department of Financial Protection and Innovation and the FDIC was appointed as receiver. On March 12, 2023, the U.S. Department of the Treasury, Federal Reserve Board, and FDIC released a joint statement announcing that the ~~pandemic will~~FDIC would complete its resolution of SVB in a manner that fully protected all depositors at SVB and that depositors would have access to all of their money starting March 13, 2023. On March 26, 2023, it was announced that First-Citizens Bank & Trust Company would assume all of SVB’s deposits and loans as of March 27, 2023. The Company does not believe that it has exposure to loss as a result of SVB’s receivership. During the periods presented, the Company has not experienced any losses on ~~our business will likely continue to vary by individual geography based on the extent~~its deposits of the outbreak in each area, the timing of vaccine distribution, specific governmental restrictions and the availability of testing capabilities, personal protective equipment, and hospital facilities, as well as decisions by our vendors, suppliers, customers and, ultimately, patients in response to the pandemic, none of which we are able to currently and accurately predict. While we cannot reliably estimate the depthcash, cash equivalents or length of the impact, we continue to anticipate significant, periodic disruptions to our procedures volumes, service activities and system placements in 2022. In addition, we would expect that capital system orders will continue to experience some delay.marketable securities.

Capital markets and worldwide economies continue to be significantly impacted by the COVID-19 pandemic, and the outlook for 2022 depends on future developments, including but not limited to: the length and severity of ongoing outbreaks (including further new variants beyond Delta and Omicron, which may be more contagious, more severe or less responsive to treatment or vaccines), the effectiveness of containment actions, and the timing of vaccinations and achievement of herd immunity. The impact on local and/or global economies is uncertain, including ongoing risk of recession. Such economic disruptions, including a recession, could have a material adverse effect on our long-term business as hospitals continue to monitor and adjust capital and overall spending or redirect such spending to treatments related directly to the pandemic. To date, our manufacturing operations and supply chains have been manageably impacted, but we cannot guarantee that such will not be impacted further in the future. If our manufacturing operations or supply chains are materially interrupted, it may not be possible for us to timely manufacture relevant products at required levels, or at all. A material reduction or interruption to any of our manufacturing processes could have a material adverse effect on our business, operating results, and financial condition. Further, the COVID-19 pandemic and local actions, such as “shelter-in-place” orders and restrictions on our ability to travel and access our customers or temporary closures of our facilities or the facilities of our suppliers and their contract manufacturers, could also significantly impact our sales and our ability to ship our products and supply our customers. Any of these events could negatively impact the number of procedures performed and the number of system placements and have a material adverse effect on our business, financial condition, results of operations, or cash flows.
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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, ~~2021.~~2022.
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Revenue Recognition

We generate revenue from the 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 of various devices as provided by ~~Biosense Webster of co-developed catheters,~~co-development and co-placement arrangements, and from other recurring revenue including ongoing software ~~enhancements~~updates and service contracts.

In accordance with Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers,” 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 arrangements with multiple performance obligations, 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.

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 enhancements throughout the period and is included in Other Recurring Revenue. The Company’s system contracts do not provide a right of return. Systems are generally covered by a one-year assurance type warranty; warranty costs were less than $0.1 million ~~and $0.1 million~~ for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022.

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 ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.
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Royalty:

The Company ~~is entitled to~~receives royalties on the sale of various devices as provided by co-development and co-placement arrangements with various manufacturers. The Company received royalty payments from Biosense Webster, payable quarterly based on net revenues from sales of the co-developed ~~catheters.~~catheters, during the term of the agreement.

Other Recurring Revenue:

Other recurring revenue includes revenue from product maintenance plans, other post warranty maintenance, and the implied obligation to provide software enhancements if and when available for a specified period, typically one year following installation of our systems. Revenue from services and software enhancements is deferred and amortized over the service or update period, which is typically one year. Revenue related to services performed on a time-and-materials basis is recognized when performed.
~~Sublease Revenue:~~
A portion of our former principal executive office was subleased to a third party through 2021. In accordance with Accounting Standards Update (ASU) 2016-02, “Leases” (Topic 842), the Company recorded sublease income as revenue.

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. Customer deposits primarily relate to future system sales but can also include deposits on disposable sales. 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~~credit losses on its contract assets for the periods ~~presented.~~presented therefore no allowance for credit losses was recorded as of March 31, 2023, or December 31, 2022.
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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 assets in the Company’s balance sheets were $0.2 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The Company did not incur any impairment losses during any of the periods presented.

Leases

The Company accounts for leases in accordance with ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company determines if a contract contains a lease at inception. For contracts where the Company is the lessee, operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liability on the Company’s balance sheet. The Company currently does not have any finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

The Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s operating leases. Additionally, the Company applies the short-term lease measurement and recognition exemption in which right of use assets and lease liabilities are not recognized for leases less than twelve months.

As disclosed in Note 6,7, on March 1, 2021, the Company entered into an office lease agreement (the “Lease”) with Globe Building Company (the “Landlord”), under which the Company is leasing executive office space and manufacturing facilities of approximately 43,100 square feet of rentable space located at 710 N. Tucker Boulevard, St. Louis, Missouri (the “Premises”) that serves as the Company’s ~~new~~ principal executive and administrative offices and manufacturing facility. Lease payments commenced on January 1, 2022 and the lease has a term of ten years, with two renewal options of five years each. The minimum annual rent under the terms of the Lease ranges from approximately $0.8 million in 2022 to $1.0 million in 2031.

The Company gained access to the Premises in the third quarter 2021 to begin constructing leasehold improvements. In accordance with ASC 842, the Company recorded a ROU asset and lease liability. The initial recognition of the ROU asset and lease liability was $5.9 million. In the fourth quarter of 2021, the Company received an occupancy permit and relocated its operations to the new leased space.

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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 recognized at the time of sale. Costs of disposable revenue include direct product costs and estimated warranty costs and are recognized at the time of sale. Cost of revenue from services and license fees are recognized when incurred. ~~Cost of sublease revenue was recognized on a straight-line basis.~~

~~Share-Based~~Stock-Based Compensation

~~Stock compensation expense, which is a non-cash charge, results from stock option, non-qualified~~The Company accounts for its grants of stock options, stock appreciation rights, restricted shares, restricted stock units and ~~restricted share grants made to employees, directors, and third-party consultants at~~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 ~~grants.~~ stock-based compensation at the grant date and the recognition of the related expense over the period in which the stock-based compensation vests.
For time-based awards, the Company utilizes the Black-Scholes valuation model to determine the fair value of stock options and stock appreciation rights ~~granted was determined using the Black-Scholes valuation method which gives consideration to the estimated value of the underlying stock~~ at the date of ~~grant,~~grant. The resulting compensation expense is recognized over the exercise price of the option, the expected dividend yield and volatility of the underlying stock, the expected life of the option and the corresponding risk-free interest rate. The fair value of the grants of restrictedrequisite service period, which is generally four years. Restricted shares and units ~~was determined based on~~granted to employees are valued at the ~~closing price of our stock on~~fair market value at the date of grant. ~~Stock~~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 ~~for options, stock appreciation rights and for time-based restricted share grants and units~~ is amortized on a straight-line basis over the vesting period of the underlying issue, generally over four years except for grants to directors which are generally earned over a period of six months. Stock compensation expense for performance-based restricted shares, if any, is amortized on a straight-line basis over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives. Compensation expenses related to grants to non-employees are re-measured quarterly through the vesting date. Compensation expense is recognized only for those options expected to vest, net of actual forfeitures. Estimates of the expected life of options have been based on the average of the vesting and expiration periods, which is the simplified method under general accounting principles for share-based payments. Estimates of volatility utilized in calculating stock-based compensation have been prepared based on historical data. Actual experience to date has been consistent with these estimates.

For market-based awards, stock-based compensation expense is recognized over the minimum service period regardless of whether or not the market target is probable of being achieved. The fair value of such awards is estimated on the grant date using Monte Carlo simulations.

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The amount of compensation expense to be recorded in future periods may increase if we make additional grants of options, stock appreciation rights or restricted shares. The amount of expense to be recorded in future periods may decrease if the requisite service periods are not completed.
Shares purchased by employees under the ~~2009~~2022 Employee Stock Purchase ~~Plan~~Plans are considered to be non-compensatory.

Results of Operations

Comparison of the Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~

Revenue. Revenue decreased from ~~$9.1~~$7.0 million for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$6.2~~$6.5 million for the three months ended ~~June 30, 2022,~~March 31, 2023, a decrease of ~~32%~~7%. Revenue from the sales of systems ~~decreased~~increased to ~~$0.6~~$1.8 million for the three months ended ~~June 30, 2022~~March 31, 2023, from ~~$2.7~~$1.6 million for the three months ended ~~June 30, 2021 due to decreased system shipments in the current year period.~~ March 31, 2022. Revenue from sales of disposable interventional devices, service, and accessories decreased to ~~$5.6~~$4.7 million for the three months ended ~~June 30, 2022,~~March 31, 2023, from ~~$6.1~~$5.4 million for the three months ended ~~June 30, 2021,~~March 31, 2022, a decrease of approximately ~~9%,~~13%. The decrease was primarily driven by ~~timing~~royalties paid to the Company by Biosense Webster on the sale of ~~service contract revenue and lower procedure volumes~~co-developed catheters during the ~~current year period. The Company recognized $0.2 million~~term of ~~sublease revenue for~~ the ~~three-month period ended June 30, 2021. The sublease ended December 31, 2021.~~agreement.

Cost of Revenue. Cost of revenue ~~decreased~~increased from ~~$2.5~~$2.1 million for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$1.5~~$2.7 million for the three months ended ~~June 30, 2022, a decrease~~March 31, 2023, an increase of approximately ~~41%~~26%. As a percentage of our total revenue, overall gross margin ~~increased~~decreased to ~~76%~~59% for the three months ended ~~June 30, 2022,~~March 31, 2023, from ~~72%~~ 70% for the three months ended ~~June 30, 2021.~~March 31, 2022. Cost of revenue for systems sold ~~decreased~~increased to ~~$0.5~~$1.7 million for the three months ended ~~June 30, 2022,~~March 31, 2023, from ~~$1.4~~$1.3 million for the three months ended ~~June 30, 2021,~~March 31, 2022, driven by ~~decreased system sales volumes and~~ changes in product mix in the current year period. Gross margin for systems was $0.1 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$1.3~~$0.3 million for the three months ended ~~June 30, 2021.~~March 31, 2022. Cost of revenue for disposables, service, and accessories increased to $1.0 million for the three months ended ~~June 30, 2022~~March 31, 2023, from ~~$0.9~~$0.8 million for the three months ended ~~June 30, 2021.~~March 31, 2022, driven by increased costs incurred under service contracts. Gross margin for disposables, service, and accessories was ~~83%~~79% for the three months ended ~~June 30,2022~~March 31, 2023 compared to ~~86%~~85% for the three months ended ~~June 30, 2021. Cost of sublease revenue was $0.2 million for the three months ended June 30, 2021. The sublease ended December~~March 31, ~~2021.~~2022.

Research and Development Expenses. Research and development expenses increased from $2.4 million for the three months ended March 31, 2022, to $2.7 million for the three months ended ~~June 30, 2021, to $2.9 million for the three months ended June 30, 2022,~~March 31, 2023, an increase of approximately 6%12%. This increase was primarily driven by project ~~timing.~~timing and regulatory expenses in the current year period.

Sales and Marketing Expenses. Sales and marketing expenses increased from ~~$3.0~~$2.9 million for the three months ended ~~June 30, 2021,~~March 31, 2022, to ~~$3.3~~$3.1 million for the three months ended ~~June 30, 2022,~~March 31, 2023, an increase of approximately ~~8% primarily due to higher trade show expense.~~
~~General and Administrative Expenses.~~ General and administrative expenses include finance, information systems, legal, and general management. General and administrative expenses decreased from $4.2 million for the three months ended June 30, 2021, to $3.7 million for the three months ended June 30, 2022, a decrease of approximately 12%. This decrease was primarily driven by lower stock-based compensation expense and reduced professional service fees in the current year period.
~~Interest Income (Expense)~~~~. Net interest income (expense) was less than $0.1 million for the three months ended June 30, 2022 and 2021.~~
~~Comparison of the Six Months Ended June 30, 2022 and 2021~~
~~Revenue~~. Revenue decreased from $17.7 million for the six months ended June 30, 2021 to $13.2 million for the six months ended June 30, 2022, a decrease of approximately 25%. Revenue from the sales of systems decreased to $2.2 million for the six months ended June 30, 2022 from $5.3 million for the six months ended June 30, 2021 driven by decreased system sales volumes and changes in product mix in the current year period. Revenue from sales of disposable interventional devices, service and accessories decreased to $11.0 million for the six months ended June 30, 2022 from $11.9 million for the six months ended June 30, 2021, a decrease of approximately 8%, driven by lower procedure volumes and service contracts. Sublease revenue was $0.5 million for the six-month period ended June 30, 2021. The sublease ended December 31, 2021.
~~Cost of Revenue.~~ Cost of revenue decreased from $5.1 million for the six months ended June 30, 2021 to $3.6 million for the six months ended June 30, 2022, a decrease of approximately 30%. As a percentage of our total revenue, overall gross margin increased to 73% for the six months ended June 30, 2022 from 71% for the six months ended June 30, 2021, primarily due to changes in product mix. Cost of revenue for systems sold decreased from $2.8 million for the six months ended June 30, 2021 to $1.8 million for the six months ended June 30, 2022, driven by decreased system sales volumes. Gross margin for systems decreased from $2.5 million for the six months ended June 30, 2021 to $0.4 million for the six months ended June 30, 2022. Cost of revenue for disposables, service, and accessories remained consistent at $1.8 million for the six months ended June 30, 2022 and 2021. Gross margin for disposables, service and accessories was 84% for the six months ended June 30, 2022 compared to 85% for the six months ended June 30, 2021. Cost of sublease revenue was $0.5 million for the six months ended June 30, 2021. The sublease ended December 31, 2021.
~~Research and Development Expenses~~. Research and development expenses increased from $5.1 million for the six months ended June 30, 2021 to $5.3 million for the six months ended June 30, 2022, an increase of approximately 5%. This increase was primarily due to higher project spending and hiring in the current year period.
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~~Sales and Marketing Expenses~~. Sales and marketing expenses increased from $6.0 million for the six months ended June 30, 2021 to $6.2 million for the six months ended June 30, 2022, an increase of approximately 4%. This increase was7% primarily due to higher travel and ~~trade show~~stock-based compensation expenses in the current year period.

General and Administrative Expenses. General and administrative expenses include finance, information systems, legal, and general management. General and administrative expenses ~~increased to $7.3~~remained consistent at $3.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022 from $6.4 million for the six months ended June 30, 2021, an increase of approximately 14%. This increase was primarily driven by higher stock-based compensation expense for the previously announced CEO Performance Award partially offset by lower professional service fees in the current year period.and 2023.

Interest Income (Expense). Net interest income ~~(expense)~~ was approximately $0.3 million for the three months ended March 31, 2023 compared to less than $0.1 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2022. The increase was driven by increased interest rates and ~~2021.~~higher invested balances in the current year period.
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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, cash equivalents, and cash equivalents. We are continuously and critically reviewing our liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 pandemic, the increasing recession risk, and macroeconomic headwinds.investments.

~~At June 30, 2022~~As of March 31, 2023 we had ~~$35.1~~$6.8 million of cash and cash equivalents, inclusive of restricted ~~cash.~~cash, and $20.0 million in short-term investments. We had working capital of ~~$33.0~~$26.6 million as of ~~June 30, 2022,~~March 31, 2023, compared to ~~$38.1~~$29.0 million as of December 31, ~~2021.~~2022.

The following table summarizes our cash flow by operating, investing and financing activities for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Six Months Ended June 30, Three Months Ended March 31,
2022 2021 2023 2022
Cash flow used in operating activities $ (3,330 ) $ (271 ) $ (2,802 ) $ (2,193 )
Cash flow used in investing activities (1,804 ) (150 ) (349 ) (1,154 )
Cash flow provided by financing activities 111 402 56 54
Net cash used in operating activities. We used approximately ~~$3.3~~$2.8 million and ~~$0.3~~$2.2 million of cash for operating activities during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The increase in cash used in operating activities was driven by the increase in operating ~~loss.~~loss in the current year period partially offset by changes in working capital.

Net cash used in investing activities. We used approximately ~~$1.8~~$0.3 million and $1.2 million of cash during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, respectively, for the purchase of equipment, construction and design costs associated with our new ~~facility. We used less than $0.2 million of cash during the six months ended June 30, 2021 for the purchase of equipment.~~facility.

Net cash provided by financing activities. We generated less than $0.1 ~~million and $0.4~~ million of cash from financing activities during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022. The cash generated in both periods was driven by the proceeds from issuance of stock, net of issuance costs.

Capital Resources

As of ~~June 30, 2022,~~March 31, 2023, the Company did not have any debt.
~~Paycheck Protection Program~~
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. Among the provisions contained in the CARES Act was the creation of the Paycheck Protection Program that provides for Small Business Administration (“SBA”) Section 7(a) loans for qualified small businesses. In general, the loan could be forgiven as long as the funds were used for payroll related expenses as well as rent and utilities paid during the twenty-four-week period from the date of the loan and as long as certain headcount and salary/wage levels were maintained. On April 10, 2020, the Company was informed by its lender, Midwest BankCentre (the “Bank”), that the Bank received approval from the SBA to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP Loan”). Per the terms of the PPP Loan, the Company received total proceeds of approximately $2.2 million from the Bank on April 20, 2020. In accordance with the loan forgiveness requirements of the CARES Act, the Company used the full proceeds from the PPP Loan primarily for payroll costs, rent and utilities. In March 2021, the Company applied for loan forgiveness and in June 2021, full loan forgiveness was granted by the SBA. The Company recognized a net gain from debt extinguishment of approximately $2.2 million upon forgiveness.

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.
25

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

~~None.~~We maintain our cash at financial institutions, often in balances that exceed federally insured limits:Adverse developments that affect financial institutions, transactional counterparties, or other third parties, or concerns or rumors about these events, have in the past and may in the future lead to market-wide liquidity problems. The majority of our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in depository accounts may exceed the $250,000 Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. On March 10, 2023, Silicon Valley Bank (“SVB”), where the Company maintained accounts with a cash balance of less than 6% of the Company’s total cash, cash equivalents and marketable securities, was closed by the California Department of Financial Protection and Innovation and the FDIC was appointed as receiver. On March 12, 2023, the U.S. Department of the Treasury, Federal Reserve Board, and FDIC released a joint statement announcing that the FDIC would complete its resolution of SVB in a manner that fully protected all depositors at SVB and that depositors would have access to all of their money starting March 13, 2023. On March 26, 2023, it was announced that First-Citizens Bank & Trust Company would assume all of SVB’s deposits and loans as of March 27, 2023. The Company does not believe that it has exposure to loss as a result of SVB’s receivership. During the periods presented, the Company has not experienced any losses on its deposits of cash, cash equivalents or marketable securities. However, in the future, our access to our cash in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we have arrangements directly facing liquidity constraints or failures. Any material loss that we may experience in the future could have a material adverse effect on our business and our financial condition.

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 Certificate of Designations, Preferences and Rights of Series B 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 August 8, 2019.

3.5 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.
25
~~10.1#~~
~~Stereotaxis, Inc. 2022 Stock Incentive Plan, filed herewith.~~
~~10.2#~~
~~Stereotaxis, Inc. 2022 Employee Stock Purchase Plan, filed herewith.~~

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 Inline XBRL Instance Document.

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

26

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: ~~August 11, 2022~~May 12, 2023 By: /s/ David L. Fischel

David L. Fischel
Chief Executive Officer

Date: ~~August 11, 2022~~May 12, 2023 By: /s/ Kimberly R. Peery

Kimberly R. Peery
Chief Financial Officer

27

	Shares			Amount		Shares		Amount		Shares		Amount		Amount		Amount			Amount			Amount
(in thousands, except share amounts)	Convertible Preferred Stock Series A (Mezzanine)					Convertible Preferred Stock Series B				Common Stock				Additional Paid-In		Treasury			Accumulated			Total Stockholders’ Equity
	Shares			Amount		Shares		Amount		Shares		Amount		Capital		Stock			Deficit			(Deficit)
Balance at December 31, 2021		22,387		$	5,584		5,610,121	$	6		74,618,240	$	75	$	532,641	$	(206	)	$	(498,676	)	$	33,840
Stock issued for the exercise of stock options and stock appreciation rights											10,294				18								18
Stock-based compensation											10,699				2,514								2,514
Components of net loss					-				-				-				-			(4,086	)		(4,086	)
Employee stock purchase plan											6,071				36								36
Preferred stock conversion		(1	)								2,025												0
Balance at March 31, 2022		22,386		$	5,584		5,610,121	$	6		74,647,329	$	75	$	535,209	$	(206	)	$	(502,762	)	$	32,322

Three Months Ended June 30, 2022

	Convertible Preferred Stock Series A (Mezzanine)				Convertible Preferred Stock Series B				Common Stock				Additional Paid-In Capital		Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
(in thousands, except share amounts)	Shares		Amount		Shares		Amount		Shares		Amount		Amount		Amount			Amount			Amount

Balance at March 31, 2022		22,386	$	5,584		5,610,121	$	6		74,647,329	$	75	$	535,209	$	(206	)	$	(502,762	)	$	32,322
Issuance of common stock		-		-		-		-		30,229				26		-						26
Share-based compensation		-				-								2,698								2,698
Components of net loss		-				-													(5,134	)		(5,134	)
Employee stock purchase plan		-				-				8,498				30								30
Preferred stock conversion		-				-																-
Balance at June 30, 2022		22,386	$	5,584		5,610,121	$	6		74,686,056	$	75	$	537,963	$	(206	)	$	(507,896	)	$	29,942

(in thousands, except share amounts)	Convertible Preferred Stock Series A (Mezzanine)				Convertible Preferred Stock Series B				Common Stock				Additional Paid-In		Treasury			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Stock			Deficit			(Deficit)

Balance at December 31, 2022		22,383	$	5,583		5,610,121	$	6		74,874,459	$	75	$	543,438	$	(206	)	$	(516,967	)	$	26,346
Stock issued for the exercise of stock options										29,188				33								33
Stock-based compensation										144,054				2,655								2,655
Components of net loss				-				-				-				-			(5,347	)		(5,347	)
Employee stock purchase plan										11,798				23								23
Balance at March 31, 2023		22,383	$	5,583		5,610,121	$	6		75,059,499	$	75	$	546,149	$	(206	)	$	(522,314	)	$	23,710

Six Months Ended June 30, 2021

(in thousands, except share amounts)	Convertible Preferred Stock Series A (Mezzanine)						Convertible Preferred Stock Series B				Common Stock				Additional Paid-In Capital		Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
	Shares			Amount			Shares		Amount		Shares		Amount		Amount		Amount			Amount			Amount
Balance at December 31, 2020		22,513		$	5,605			5,610,121	$	6		73,694,203	$	74	$	522,710	$	(206	)	$	(487,960	)	$	34,624
Issuance of common stock					-			-		-		244,584				340		-						340
Share-based compensation								-				272,500				4,156		-						4,156
Components of net loss								-										-			(2,743	)		(2,743	)
Employee stock purchase plan												11,207				61		-						61
Preferred stock conversion		(106	)		(27	)						206,371				27		-						27
Balance at June 30, 2021		22,407		$	5,578			5,610,121	$	6		74,428,865	$	74	$	527,294	$	(206	)	$	(490,703	)	$	36,465

Six Months Ended June 30, 2022

	Convertible Preferred Stock Series A (Mezzanine)					Convertible Preferred Stock Series B				Common Stock				Additional Paid-In Capital		Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
(in thousands, except share amounts)	Shares			Amount		Shares		Amount		Shares		Amount		Amount		Amount			Amount			Amount

Balance at December 31, 2021		22,387		$	5,584		5,610,121	$	6		74,618,240	$	75	$	532,641	$	(206	)	$	(498,676	)	$	33,840
Issuance of common stock					-		-		-		40,523				45		-						45
Share-based compensation							-				10,699				5,211		-						5,211
Components of net loss							-										-			(9,220	)		(9,220	)
Employee stock purchase plan							-				14,569				66		-						66
Preferred stock conversion		(1	)				-				2,025						-						-
Balance at June 30, 2022		22,386		$	5,584		5,610,121	$	6		74,686,056	$	75	$	537,963	$	(206	)	$	(507,896	)	$	29,942

(in thousands)	2022			2021

	Six Months Ended June 30,						Three Months Ended March 31,
(in thousands)	2022			2021			2023			2022
Cash flows from operating activities
Net loss	$	(9,220	)	$	(2,743	)	$	(5,347	)	$	(4,086	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		194			54			160			100
Non-cash lease (expense)		63			(26	)
Share-based compensation		5,211			4,156
Gain on debt extinguishment		-			(2,183	)
Non-cash interest		-			25
Non-cash lease expense								7			33
Stock-based compensation								2,655			2,514
Accretion and short-term investment discount								(197	)		-
Changes in operating assets and liabilities:
Accounts receivable		1,658			(1,137	)		216			713
Inventories		(3,353	)		(851	)		(97	)		(417	)
Prepaid expenses and other current assets		1,365			(931	)		(7	)		478
Compensating cash arrangement		-			(1	)
Other assets		60			25			24			25
Accounts payable		1,037			(484	)		563			(871	)
Accrued liabilities		(403	)		(352	)		(1,547	)		(561	)
Deferred revenue		75			4,102			768			(104	)
Other liabilities		(17	)		75			-			(17	)
Net cash used in operating activities		(3,330	)		(271	)		(2,802	)		(2,193	)
Cash flows from investing activities
Purchase of property and equipment		(1,804	)		(150	)		(349	)		(1,154	)
Net cash used in investing activities		(1,804	)		(150	)		(349	)		(1,154	)
Cash flows from financing activities
Proceeds from issuance of stock, net of issuance costs		111			402			56			54
Net cash provided by financing activities		111			402			56			54
Net decrease in cash, cash equivalents, and restricted cash		(5,023	)		(19	)		(3,095	)		(3,293	)
Cash, cash equivalents, and restricted cash at beginning of period		40,145			43,940			9,855			40,144
Cash, cash equivalents, and restricted cash at end of period	$	35,122		$	43,921		$	6,760		$	36,851

Supplemental disclosure of cash flow information:
Purchase of property and equipment included in accounts payable	$	116		$	-		$	15		$	699

Reconciliation of cash, cash equivalents, and restricted cash to balance sheet as of June 30th:
Reconciliation of cash, cash equivalents, and restricted cash to balance sheet as of March 31st:
Cash and cash equivalents	$	33,498		$	42,054		$	5,623		$	35,095
Restricted cash - current		618			1,484			525			618
Restricted cash		1,006			383			612			1,138
Total cash, cash equivalents, and restricted cash	$	35,122		$	43,921		$	6,760		$	36,851

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.

	March 31, 2023
	Valuation									Balance Sheet Classification
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cash and Cash Equivalents		Restricted Cash- current		Short-term Investments		Restricted Cash
Cash	$	1,256	$	-	$	-		$	1,256	$	1,256	$	-	$	-	$	-
Level 2
Money market funds		5,504		-		(1	)		5,503		4,367		525		-		612
US treasury securities		9,959		1		-			9,960		-		-		9,959		-
Corporate debt securities		10,082		2		(4	)		10,080		-		-		10,082		-
Subtotal		25,545		3		(5	)		25,543		4,367		525		20,041		612
Total assets measured at fair value	$	26,801	$	3	$	(5	)	$	26,799	$	5,623	$	525	$	20,041	$	612

	June 30, 2022			December 31, 2021
Equipment	$	3,684		$	3,670
Leasehold improvements		2,521			17
Construction in process		349			2,156
Property, Plant and Equipment, Gross		6,554			5,843
Less: Accumulated depreciation		(3,294	)		(3,211	)
Net property and equipment	$	3,260		$	2,632

	June 30, 2022			December 31, 2021
Accrued salaries, bonus, and benefits	$	1,213		$	1,516
Accrued licenses and maintenance fees		484			484
Accrued warranties		209			242
Accrued taxes		165			177
Accrued investigational sites		102			123
Accrued lease deposit payable		5			124
Other		150			81
Total accrued liabilities		2,328			2,747
Less: Long term accrued liabilities		(202	)		(219	)
Total current accrued liabilities	$	2,126		$	2,528

Tranche #	No. of Shares Subject to PSU		Market Capitalization Milestones⁽¹⁾
1		1,000,000	$	1,000,000,000
2		1,500,000	$	1,500,000,000
3		1,500,000	$	2,000,000,000
4		2,000,000	$	2,500,000,000
5		1,000,000	$	3,000,000,000
6		1,000,000	$	3,500,000,000
7		1,000,000	$	4,000,000,000
8		2,000,000	$	4,500,000,000
9		1,000,000	$	5,000,000,000
10		1,000,000	$	5,500,000,000
Total:		13,000,000

	Number of Options/SARs			Range of Exercise Price		Weighted Average Exercise Price per Share		Number of Options/SARs			Range of Exercise Price		Weighted Average Exercise Price per Share
Outstanding, December 31, 2021		2,818,012			$0.74 - $9.87	$	4.10
Outstanding, December 31, 2022									3,208,065		$	0.74 - $9.87	$	4.21
Granted		760,500			$2.66 - $5.21	$	4.80		697,000		$	2.57	$	2.57
Exercised		(40,523	)		$0.74 - $4.52	$	1.11		(29,188	)	$	0.74 - $2.03	$	1.15
Forfeited		(152,863	)		$0.74 - $7.70	$	4.89		(62,671	)	$	1.62 - $9.20	$	3.62
Outstanding, June 30, 2022		3,385,126			$0.74 - $9.87	$	4.26
Outstanding, March 31, 2023									3,813,206		$	0.74 - $9.87	$	3.95

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value per Unit		Number of Restricted Stock Units			Weighted Average Grant Date Fair Value per Unit
Outstanding, December 31, 2021		1,164,723		$	3.57
Outstanding, December 31, 2022							1,208,739		$	4.21
Granted		61,580		$	9.56		324,324		$	1.85
Vested		(10,699	)	$	9.37		(144,054	)	$	1.22
Outstanding, June 30, 2022		1,215,604		$	3.82
Outstanding, March 31, 2023							1,389,009		$	3.97

~~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.~~

	Fair Value Measurement Using
(in thousands)	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at June 30, 2022:
Cash invested in money market accounts	$	1,625	$	—	$	1,625	$	—
Total assets at fair value	$	1,625	$	—	$	1,625	$	—
Assets at December 31, 2021:
Cash invested in money market accounts	$	1,406	$	—	$	1,406	$	—
Total assets at fair value	$	1,406	$	—	$	1,406	$	—

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		Certificate of Designations, Preferences and Rights of Series B 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 August 8, 2019.

3.5		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.

~~10.1#~~		~~Stereotaxis, Inc. 2022 Stock Incentive Plan, filed herewith.~~

~~10.2#~~		~~Stereotaxis, Inc. 2022 Employee Stock Purchase Plan, filed herewith.~~

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		Inline XBRL Instance Document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	STEREOTAXIS, INC. (Registrant)

Date: ~~August 11, 2022~~May 12, 2023	By:	/s/ David L. Fischel
		David L. Fischel Chief Executive Officer

Date: ~~August 11, 2022~~May 12, 2023	By:	/s/ Kimberly R. Peery
		Kimberly R. Peery Chief Financial Officer