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Form 10-Q Stereotaxis, Inc. For: Mar 31

May 11, 2016 4:41 PM EDT
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended March 31, 2016

 

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

For the transition period from                      to                     

Commission File Number: 001-36159

 

 

STEREOTAXIS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   94-3120386

(State of

Incorporation)

 

(I.R.S. employer

identification no.)

4320 Forest Park Avenue Suite 100

St. Louis, Missouri

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

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

 

 

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

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

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

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   x

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

The number of outstanding shares of the registrant’s common stock on April 29, 2016 was 21,758,330.

 

 

 


Table of Contents

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 Cash Flows      5   
  Notes to Financial Statements      6-15   
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations      16-20   
Item 3.   [Reserved]      20   
Item 4.   Controls and Procedures      20-21   
Part II Other Information   
Item 1.   Legal Proceedings      21   
Item 1A.   Risk Factors      21   
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      21   
Item 3.   Defaults upon Senior Securities      21   
Item 4.   [Reserved]      21   
Item 5.   Other Information      21   
Item 6.   Exhibits      21   
Signatures      22   
Exhibit Index      23   

 

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ITEM 1. FINANCIAL STATEMENTS

STEREOTAXIS, INC.

BALANCE SHEETS

 

     March 31,     December 31,  
     2016     2015  
     (Unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 1,602,951      $ 5,593,582   

Accounts receivable, net of allowance of $155,964 and $93,478 in 2016 and 2015, respectively

     6,397,660        6,376,470   

Inventories

     4,446,363        4,504,282   

Prepaid expenses and other current assets

     1,150,631        668,659   
  

 

 

   

 

 

 

Total current assets

     13,597,605        17,142,993   

Property and equipment, net

     969,927        1,067,321   

Intangible assets, net

     586,059        635,889   

Other assets

     32,341        31,693   
  

 

 

   

 

 

 

Total assets

   $ 15,185,932      $ 18,877,896   
  

 

 

   

 

 

 

Liabilities and stockholders’ deficit

    

Current liabilities:

    

Accounts payable

   $ 2,042,246      $ 1,840,135   

Accrued liabilities

     5,245,395        6,058,390   

Deferred revenue

     6,627,020        7,445,935   

Warrants and debt conversion features

     762,836        794,130   
  

 

 

   

 

 

 

Total current liabilities

     14,677,497        16,138,590   

Long-term debt

     18,078,308        18,080,159   

Long-term deferred revenue

     1,782,155        2,009,198   

Other liabilities

     270,433        275,603   
  

 

 

   

 

 

 

Total liabilities

     34,808,393        36,503,550   

Stockholders’ deficit:

    

Preferred stock, par value $0.001; 10,000,000 shares authorized, none outstanding at 2016 and 2015

     —          —     

Common stock, par value $0.001; 300,000,000 shares authorized, 21,738,923 and 21,551,173, shares issued at 2016 and 2015, respectively

     21,739        21,551   

Additional paid in capital

     448,794,778        448,517,472   

Treasury stock, 4,015 shares at 2016 and 2015

     (205,999     (205,999

Accumulated deficit

     (468,232,979     (465,958,678
  

 

 

   

 

 

 

Total stockholders’ deficit

     (19,622,461     (17,625,654
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 15,185,932      $ 18,877,896   
  

 

 

   

 

 

 

See accompanying notes.

 

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STEREOTAXIS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three Months Ended March 31,  
     2016     2015  

Revenue:

    

Systems

   $ 2,075,019      $ 2,831,178   

Disposables, service and accessories

     6,572,987        6,699,848   
  

 

 

   

 

 

 

Total revenue

     8,648,006        9,531,026   

Cost of revenue:

    

Systems

     1,083,099        1,400,267   

Disposables, service and accessories

     1,097,715        1,230,370   
  

 

 

   

 

 

 

Total cost of revenue

     2,180,814        2,630,637   

Gross margin

     6,467,192        6,900,389   

Operating expenses:

    

Research and development

     1,473,086        1,485,706   

Sales and marketing

     3,894,113        4,034,371   

General and administrative

     2,586,791        2,794,590   
  

 

 

   

 

 

 

Total operating expenses

     7,953,990        8,314,667   
  

 

 

   

 

 

 

Operating loss

     (1,486,798     (1,414,278

Other income (expense)

     31,294        (892,377

Interest income

     222        862   

Interest expense

     (819,019     (829,788
  

 

 

   

 

 

 

Net loss

   $ (2,274,301   $ (3,135,581
  

 

 

   

 

 

 

Net loss per common share:

    

Basic

   $ (0.11   $ (0.15

Diluted

   $ (0.11   $ (0.15
  

 

 

   

 

 

 

Weighted average shares used in computing net loss per common share:

    

Basic

     21,611,612        20,742,932   

Diluted

     21,611,612        20,742,932   
  

 

 

   

 

 

 

See accompanying notes.

 

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STEREOTAXIS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Three Months Ended March 31,  
     2016     2015  

Cash flows from operating activities

    

Net loss

   $ (2,274,301   $ (3,135,581

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

    

Depreciation

     97,394        70,256   

Amortization of intangibles

     49,830        74,959   

Amortization of deferred finance costs

     54,937        55,793   

Share-based compensation

     270,102        326,444   

Adjustment of warrants

     (31,294     892,377   

Changes in operating assets and liabilities:

    

Accounts receivable

     (21,190     (1,256,119

Inventories

     57,919        (4,179

Prepaid expenses and other current assets

     (407,930     92,225   

Other assets

     (648     35,983   

Accounts payable

     202,111        250,495   

Accrued liabilities

     (812,995     (263,221

Deferred revenue

     (1,045,958     (352,450

Other liabilities

     (5,170     (75,682
  

 

 

   

 

 

 

Net cash used in operating activities

     (3,867,193     (3,288,700

Cash flows from investing activities

    

Purchase of equipment

     —          (52,410
  

 

 

   

 

 

 

Net cash used in investing activities

     —          (52,410

Cash flows from financing activities

    

Payments of deferred financing costs

     (100,000     —     

Proceeds from (payments to) Healthcare Royalty Partners debt

     (30,830     (68,869

Proceeds from issuance of stock, net of issuance costs

     7,392        578,211   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (123,438     509,342   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (3,990,631     (2,831,768
  

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

     5,593,582        7,270,301   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,602,951      $ 4,438,533   
  

 

 

   

 

 

 

See accompanying notes.

 

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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Notes to Financial Statements

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

1. Description of Business

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

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

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

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

We promote the full Epoch Solution in a typical hospital implementation, subject to regulatory approvals or clearances. The full Epoch Solution implementation requires a hospital to agree to an upfront capital payment and recurring payments. The upfront capital payment typically includes equipment and installation charges. The recurring payments typically include disposable costs for each procedure, equipment service costs beyond the warranty period, and software licenses. In hospitals where the full Epoch Solution has not been implemented, equipment upgrade or expansion may be implemented upon purchase of the necessary components. As of March 31, 2016, the Company has an installed base of 126 Niobe ES systems.

The core components of Stereotaxis’ systems have received regulatory clearance in the United States, European Union, Canada, China, Japan and various other countries. We have received regulatory clearance, licensing and/or CE Mark approvals necessary for us to market the Vdrive and Vdrive Duo systems with the V-CAS, V-Loop and V-Sono devices in the U.S., Canada and European Union. We have received Food and Drug Administration (“FDA”) clearance and the CE Mark necessary for us to market our suite of Pegasus™ coronary peripheral guidewires in the United States and Europe.

Since our inception, we have generated significant losses. As of March 31, 2016, we incurred cumulative net losses of approximately $468.2 million. In 2016, the Company plans to continue developing the Niobe ES system with the goal of furthering clinical adoption and new system placements. We expect to incur additional losses into 2016 as we continue the development and commercialization of our products, conduct our research and development activities and advance new products into clinical development from our existing research programs and fund additional sales and marketing initiatives. During 2016, we will continue to monitor operating expenses and make additional investment in certain targeted areas.

 

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        We may be required to raise capital or pursue other financing strategies to continue our operations. Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past and future public offerings, private sales of our equity securities, and loans collateralized by working capital and equipment. We continue to explore financing alternatives, which may include the sale of equity securities or non-core assets, strategic collaboration agreements, debt financings, or distribution rights. We cannot accurately predict the timing and amount of our utilization of capital, which will depend on a number of factors outside of our control.

Our existing cash, cash equivalents, and borrowing facilities may not be sufficient to fund our operating expenses and capital equipment requirements through the next 12 months, which would require us to obtain additional financing. We may be required to raise capital or pursue other financing strategies to continue our operations. Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past and future public offerings, private sales of our equity securities, and loans collateralized by working capital and equipment. We continue to explore financing alternatives, which may include the sale of equity securities or non-core assets, strategic collaboration agreements, debt financings, or distribution rights. We cannot accurately predict the timing and amount of our utilization of capital, which will depend on a number of factors outside of our control.

We cannot assure that additional financing will be available on acceptable terms or that such financing will not be dilutive to our stockholders. If adequate funds are not available to us, we could be required to delay development or commercialization of new products, to license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize ourselves, or to reduce the sales, marketing, customer support or other resources devoted to our products, any of which could have a material adverse effect on our business, financial condition, and operational results. In addition, we could be required to cease operations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements of Stereotaxis, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all the disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, they include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Operating results for the three month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016 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, 2015 as filed with the Securities and Exchange Commission (SEC) on March 11, 2016.

Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying value of such amounts reported at the applicable balance sheet dates approximates fair value. See Note 9 for disclosure of the fair value of debt.

The Company measures certain financial assets and liabilities, including warrants, at fair value on a recurring basis. General accounting principles for fair value measurement established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (“Level 1”) and the lowest priority to unobservable inputs (“Level 3”). See Note 11 for additional details.

Revenue and Costs of Revenue

The Company accounts for revenue using Accounting Standards Codification Topic 605-25, Multiple-Element Arrangements (“ASC 605-25”).

ASC 605-25 permits management to estimate the selling price of undelivered components of a bundled sale for which it is unable to establish vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”). This requires management to record revenue for certain elements of a transaction even though it might not have delivered other elements of the transaction, for which it was unable to meet the requirements for establishing VSOE or TPE. The Company believes that the guidance significantly improves the reporting of these types of transactions to more closely reflect the underlying economic circumstances. This guidance also prohibits the use of the residual method for allocating revenue to the various elements of a transaction and requires that the revenue be allocated proportionally based on the relative estimated selling prices.

 

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        Under our revenue recognition policy, a portion of revenue for Niobe systems, Vdrive systems and certain Odyssey systems is recognized upon delivery, provided that title has passed, there are no uncertainties regarding acceptance, persuasive evidence of an arrangement exists, the sales price is fixed and determinable, and collection of the related receivable is reasonably assured. Revenue is recognized for other types of Odyssey systems upon completion of installation, since there are no qualified third party installers. When installation is the responsibility of the customer, revenue from system sales is recognized upon shipment since these arrangements do not include an installation element or right of return privileges. The Company does not recognize revenue in situations in which inventory remains at a Stereotaxis warehouse or in situations in which title and risk of loss have not transferred to the customer. Amounts collected prior to satisfying the above revenue recognition criteria are reflected as deferred revenue. Revenue from services and license fees, whether sold individually or as a separate unit of accounting in a multiple-deliverable arrangement, is deferred and amortized over the service or license fee period, which is typically one year. Revenue from services is derived primarily from the sale of annual product maintenance plans. We recognize revenue from disposable device sales or accessories upon shipment and establish an appropriate reserve for returns. The return reserve, which is applicable only to disposable devices, is estimated based on historical experience which is periodically reviewed and updated as necessary. In the past, changes in estimate have had only a de minimis effect on revenue recognized in the period. We believe that the estimate is not likely to change significantly in the future.

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

Share-Based Compensation

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

The Company utilizes the Black-Scholes valuation model to determine the fair value of stock options and stock appreciation rights at the date of grant. The resulting compensation expense is recognized over the requisite service period, which is generally four years. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated based on the Company’s historical experience and future expectations. Restricted shares granted to employees are valued at the fair market value at the date of grant. The Company amortizes the fair market value to expense over the service period. If the shares are subject to performance objectives, the resulting compensation expense is amortized over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives.

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

Basic and diluted net earnings (loss) per common share are computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period.

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

 

     Three months ended March 31,  
     2016      2015  

Numerator:

     

Numerator for basic EPS

   $ (2,274,301    $ (3,135,581
  

 

 

    

 

 

 

Numerator for diluted EPS

   $ (2,274,301    $ (3,135,581
  

 

 

    

 

 

 

Denominator:

     

Denominator for basic EPS—weighted average shares

     21,611,612         20,742,932   
  

 

 

    

 

 

 

Denominator for diluted EPS—weighted average shares

     21,611,612         20,742,932   
  

 

 

    

 

 

 

Basic EPS

   $ (0.11    $ (0.15

Diluted EPS

   $ (0.11    $ (0.15

In addition, the Company did not include any portion of unearned restricted shares, outstanding options, stock appreciation rights or warrants 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 the Company’s unearned restricted shares do not contractually participate in its losses.

 

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As of March 31, 2016, the Company had 695,117 shares of common stock issuable upon the exercise of outstanding options and stock appreciation rights at a weighted average exercise price of $9.32 per share, 2,040,365 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $3.44 per share, and 1,271,276 shares of unvested restricted share units.

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This amendment is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification on the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2016 (January 1, 2017 for the Company) and interim periods within those fiscal years, with earlier application permitted. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

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

        In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): To simplify the presentation of deferred income taxes”. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. This standard is effective for public companies for financial statements issued for annual periods beginning after December 15, 2016 (January 1, 2017 for the Company), and interim periods within those annual periods. We adopted this accounting standard update in 2015 and there was no impact to the results of operations or cash flows.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” regarding the subsequent measurement of inventory as part of its Simplification Initiative. This standard is effective for public companies for fiscal years beginning after December 15, 2016 (January 1, 2017 for the Company), including interim periods within those fiscal years. This Update should be applied prospectively, and early application is permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the impact of adopting this accounting standard update but do not expect this to significantly impact the results of operations, financial conditions, cash flows, or financial statement presentation.

In April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. To simplify the presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update), which adds the SEC staff’s guidance on the presentation of debt issuance costs associated with lines of credit to the Codification. The SEC staff stated it will not object to an entity presenting the costs of securing line-of-credit arrangements as an asset, regardless of whether there are any outstanding borrowings. The Standard is effective for financial statements issued for fiscal years beginning after December 15, 2015 (January 1, 2016 for the Company), and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted for financial statements that have not been previously issued. We have adopted this accounting standard update. The Company’s balance sheets as of March 31, 2016 and December 31, 2015 included $320,039 and $349,018, respectively, of deferred financing costs (excluding $100,000 and $25,960, respectively, related to line-of-credit arrangements) that were, under the new guidance, presented as a direct reduction to debt liabilities.

In August 2014, the FASB issued ASU No. 2014-15, to communicate amendments to FASB Account Standards Codification Subtopic 205-40, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The ASU requires

 

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management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists. Management will be required to make this evaluation for both annual and interim reporting periods. Management will have to make certain disclosures if it concludes that substantial doubt exists and when it plans to alleviate substantial doubt about the entity’s ability to continue as a going concern. The standard is effective for annual periods ending after December 15, 2016 and for interim reporting periods starting in the first quarter of 2017 (December 31, 2016 for the Company). Early adoption is permitted. We are currently evaluating the impact of adopting this accounting standard update on our financial statement disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which converges the FASB’s and the International Accounting Standards Board’s current standards on revenue recognition. The standard provides companies with a single model to use in accounting for revenue arising from contracts with customers and supersedes current revenue guidance. The standard is effective for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The standard permits companies to either apply the adoption to all periods presented, or apply the requirements in the year of adoption through a cumulative adjustment. In April 2015, the FASB issued an exposure draft related to the deferral of the effective date, which would delay our effective date one year. Therefore, the standard would be effective for annual and interim periods beginning after December 15, 2017 (January 1, 2018 for the Company). We are currently evaluating the impact of adopting this accounting standard update on our financial statements and disclosures and have not concluded on an adoption method.

3. Inventories

Inventories consist of the following:

 

     March 31, 2016      December 31, 2015  

Raw materials

   $ 2,354,810       $ 2,065,676   

Work in process

     427,952         24,758   

Finished goods

     1,702,100         2,433,819   

Reserve for obsolescence

     (38,499      (19,971
  

 

 

    

 

 

 

Total inventory

   $ 4,446,363       $ 4,504,282   
  

 

 

    

 

 

 

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

     March 31, 2016      December 31, 2015  

Prepaid expenses

   $ 675,820       $ 454,822   

Deferred financing costs

     100,000         25,960   

Deposits

     312,713         136,583   

Deferred cost of revenue

     94,439         82,987  
  

 

 

    

 

 

 

Total prepaid expenses and other assets

     1,182,972         700,352   

Less: Noncurrent prepaid expenses and other assets

     (32,341      (31,693
  

 

 

    

 

 

 

Total current prepaid expenses and other assets

   $ 1,150,631       $ 668,659   
  

 

 

    

 

 

 

Certain prior year amounts have been reclassified to conform to the 2016 presentation.

5. Property and Equipment

Property and equipment consist of the following:

 

     March 31, 2016      December 31, 2015  

Equipment

   $ 8,496,636       $ 8,496,636   

Equipment held for lease

     303,412         303,412   

Leasehold improvements

     2,320,368         2,320,368   
  

 

 

    

 

 

 
     11,120,416         11,120,416   

Less: Accumulated depreciation

     (10,150,489      (10,053,095
  

 

 

    

 

 

 

Net property and equipment

   $ 969,927       $ 1,067,321   
  

 

 

    

 

 

 

6. Intangible Assets

As of March 31, 2016, the Company had total intangible assets of $3,221,069. Accumulated amortization at March 31, 2016, was $2,635,010.

 

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7. Accrued Liabilities

Accrued liabilities consist of the following:

 

     March 31,      December 31,  
     2016      2015  

Accrued salaries, bonus, and benefits

   $ 2,266,158       $ 3,053,012   

Accrued rent

     1,263,383         1,361,379   

Accrued licenses and maintenance fees

     660,781         666,373   

Accrued interest

     493,876         494,703   

Accrued warranties

     302,362         316,835   

Accrued taxes

     335,102         324,226   

Other

     194,166         117,465   
  

 

 

    

 

 

 

Total accrued liabilities

     5,515,828         6,333,993   

Less: Long term accrued liabilities

     (270,433      (275,603
  

 

 

    

 

 

 

Total current accrued liabilities

   $ 5,245,395       $ 6,058,390   
  

 

 

    

 

 

 

Our primary company facilities are located in St. Louis, Missouri where we currently lease approximately 52,000 square feet of office and 12,000 square feet of demonstration and assembly space. In the third quarter of 2013, the Company modified the existing lease agreement to terminate approximately 13,000 square feet of unimproved space. The costs associated with the termination were $515,138 and were accrued as a rent liability as of September 30, 2013. As of March 31, 2016, the remaining accrued costs associated with the termination were $258,995.

In the fourth quarter of 2015, the Company entered a sublease agreement to sublease 3,152 square feet of the first floor office space through December 31, 2018.

8. Deferred Revenue

Deferred revenue consists of the following:

 

     March 31,      December 31,  
     2016      2015  

Product shipped, revenue deferred

   $ 455,314       $ 366,388   

Customer deposits

     1,050,000         2,505,000   

Deferred service and license fees

     6,903,861         6,583,745   
  

 

 

    

 

 

 

Total deferred revenue

     8,409,175         9,455,133   

Less: Long-term deferred revenue

     (1,782,155      (2,009,198
  

 

 

    

 

 

 

Total current deferred revenue

   $ 6,627,020       $ 7,445,935   
  

 

 

    

 

 

 

9. Long-Term Debt and Credit Facilities

Debt outstanding consists of the following:

 

     March 31, 2016      December 31, 2015  
     Carrying      Estimated      Carrying      Estimated  
     Amount      Fair Value      Amount      Fair Value  

Healthcare Royalty Partners debt

   $ 18,078,308       $ 18,398,347       $ 18,080,159       $ 18,429,177   

Less current maturities

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long term debt

   $ 18,078,308       $ 18,398,347       $ 18,080,159       $ 18,429,177   
  

 

 

    

 

 

    

 

 

    

 

 

 

In accordance with general accounting principles for fair value measurement, the Company’s debt and credit facilities were measured at fair value as of March 31, 2016 and December 31, 2015. Long-term debt fair value estimates are based on estimated borrowing rates to discount the cash flows to their present value (Level 3).

Certain prior year amounts have been reclassified to conform to the 2016 presentation.

 

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Revolving Line of Credit

The Company has had a working capital line of credit with its primary lender, Silicon Valley Bank, since 2004. The revolving line of credit is secured by substantially all of the Company’s assets. The maximum available under the line is $10 million subject to the value of collateralized assets. The Company is required under the revolving line of credit to maintain its primary operating account and the majority of its cash and investment balances in accounts with its primary lender. The facility was amended on March 27, 2015, extending the maturity date to March 31, 2018 and on May 10, 2016, the Company and the primary lender agreed to modify certain financial covenants. The amended agreement requires the Company to maintain a liquidity ratio greater than 1.50:1.00, excluding certain short term advances from the calculation, and a minimum tangible net worth of not less than (no worse than) negative $24.0 million for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24.5 million for the quarters ended December 31, 2017 and March 31, 2018.

As of March 31, 2016, the Company had no outstanding debt under the revolving line of credit. Draws on the line of credit are made based on the borrowing capacity one week in arrears. As of March 31, 2016, the Company had a borrowing capacity of $4.9 million based on the Company’s collateralized assets, and cash and cash equivalents of $1.6 million for a total liquidity of $6.5 million.

Healthcare Royalty Partners Debt

In November 2011, the Company entered into a loan agreement with Healthcare Royalty Partners. Under the agreement the Company borrowed from Healthcare Royalty Partners $15 million. The Company was permitted to borrow up to an additional $5 million in the aggregate based on the achievement by the Company of certain milestones related to Niobe ES system sales in 2012. On August 8, 2012, the Company borrowed an additional $2.5 million based upon achievement of a milestone related to Niobe ES system sales for the three months ended June 30, 2012. On January 31, 2013, the Company borrowed an additional $2.5 million based upon achievement of a milestone related to Niobe ES system sales for the twelve months ended December 31, 2012. The loan will be repaid through, and secured by, royalties payable to the Company under its Development, Alliance and Supply Agreement with Biosense Webster, Inc. (the “Biosense Agreement”). The Biosense Agreement relates to the development and distribution of magnetically enabled catheters used with Stereotaxis’ Niobe ES system in cardiac ablation procedures. Under the terms of the agreement, Healthcare Royalty Partners will be entitled to receive 100% of all royalties due to the Company under the Biosense Agreement until the loan is repaid. The loan is a full recourse loan, matures on December 31, 2018, and bears interest at an annual rate of 16% payable quarterly with royalties received under the Biosense Agreement. If the payments received by the Company under the Biosense Agreement are insufficient to pay all amounts of interest due on the loan, then such deficiency will increase the outstanding principal amount on the loan. After the loan obligation is repaid, the royalties under the Biosense Agreement will again be paid to the Company. The loan is also secured by certain assets and intellectual property of the Company. The agreement also contains customary affirmative and negative covenants. The use of payments due to the Company under the Biosense Agreement was approved by our primary lender.

10. Stockholders’ Equity

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

Controlled Equity Offering

The Company entered into a Controlled Equity OfferingSM sales agreement (the “Sales Agreement”) in May 2014, as amended on March 26, 2015, with Cantor Fitzgerald & Co. (“Cantor”), as agent and/or principal, pursuant to which the Company could issue and sell, from time to time, shares of its common stock having an aggregate gross sales price of up to $18.0 million. The Company will pay Cantor a commission of 3.0% of the gross proceeds from any common stock sold through the Sales Agreement.

There were no proceeds from the Controlled Equity Offering during the three months ended March 31, 2016. As of March 31, 2016, $13.8 million of common stock remained available to be sold under this facility, subject to certain conditions as specified in the Sales Agreement.

Offerings of Common Stock

On October 8, 2015 the Company announced the results of its previously announced offering of transferable subscription warrants (the “Warrants Offering) to holders of record of the Company’s common stock. Pursuant to the Warrants Offering, subscription warrants to purchase 267,256 shares of common stock were exercised, resulting in gross proceeds to the Company of $293,982.

 

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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 August 2012, the Board of Directors adopted the 2012 Stock Incentive Plan (the “Plan”) which was subsequently approved by the Company’s shareholders. This plan replaced the 2002 Stock Incentive Plan which expired on March 25, 2012.

On June 5, 2013 and on June 10, 2014, the shareholders approved amendments to the Plan, which were previously approved and adopted by the Compensation Committee of the Board of Directors of the Company. Each of these amendments increased the number of shares authorized for issuance under the Plan by one million shares. At March 31, 2016, the Company had 46,051 remaining shares of the Company’s common stock to provide for current and future grants under its various equity plans.

At March 31, 2016, the total compensation cost related to options, stock appreciation rights and non-vested stock granted to employees under the Company’s stock award plans but not yet recognized was approximately $2.3 million, net of estimated forfeitures of approximately $0.7 million. This cost will be amortized over a period of up to four years over the underlying estimated service periods and will be adjusted for subsequent changes in estimated forfeitures and anticipated vesting periods.

A summary of the option and stock appreciation rights activity for the three month period ended March 31, 2016 is as follows:

 

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

Outstanding, December 31, 2015

     706,494       $1.45 - $116.40    $ 9.34   

Granted

     —         —        —     

Exercised

     —         —        —     

Forfeited

     (11,377    $1.74 - $36.20    $ 9.98   
  

 

 

       

 

 

 

Outstanding, March 31, 2016

     695,117       $1.45 - $116.40    $ 9.32   
  

 

 

       

 

 

 

A summary of the restricted stock unit activity for the three month period ended March 31, 2016 is as follows:

 

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

Outstanding, December 31, 2015

     752,008       $ 2.63   

Granted

     700,600       $ 0.78   

Vested

     (175,100    $ 3.00   

Forfeited

     (6,232    $ 2.73   
  

 

 

    

 

 

 

Outstanding, March 31, 2016

     1,271,276       $ 1.56   
  

 

 

    

 

 

 

11. Fair Value Measurements

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

 

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

 

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

 

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

 

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

 

     Fair Value Measurement Using  
     Total      Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Assets at March 31, 2016:

           

Cash equivalents

   $ 347,821         347,821         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets at fair value

   $ 347,821         347,821         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities at March 31, 2016:

           

Warrants issued May 2012

   $ 237,650         —           —           237,650   

Warrants issued August 2013

   $ 525,186         —           —           525,186   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities at fair value:

   $ 762,836         —           —           762,836   
  

 

 

    

 

 

    

 

 

    

 

 

 

Assets at December 31, 2015:

           

Cash equivalents

   $ 524,083         524,083         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets at fair value

   $ 524,083         524,083         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities at December 31, 2015:

           

Warrants issued May 2012

   $ 143,681         —           —           143,681   

Warrants issued August 2013

   $ 650,449         —           —           650,449   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities at fair value:

   $ 794,130         —           —           794,130   
  

 

 

    

 

 

    

 

 

    

 

 

 

Level 1

The Company’s financial assets consist of cash equivalents invested in money market funds in the amount of $347,821 and $524,083 at March 31, 2016 and December 31, 2015, respectively. These assets are classified as Level 1 as described above and total interest income recorded for these investments was insignificant during both the three month periods ended March 31, 2016, and March 31, 2015. There were no transfers in or out of Level 1 during the period ended March 31, 2016.

Level 2

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

Level 3

In conjunction with the Company’s May 2012 and August 2013 financing transactions, the Company issued warrants to purchase shares of the Company’s common stock. Due to the provisions included in the warrant agreements, the warrants did not meet the exemptions for equity classification and as such, the Company accounts for these warrants as derivative instruments. The calculated fair value of the warrants is classified as a liability and is periodically re-measured with any changes in value recognized in “Other expense” in the Statements of Operations.

The remaining warrants from the May 2012 transaction expire in May 2018 and were revalued as of March 31, 2016 using the following assumptions: 1) volatility of 113.14%; 2) risk-free interest rate of 0.73%; and 3) a closing stock price of $1.10.

The remaining warrants from the August 2013 expire in November 2018 and were revalued as of March 31, 2016 using the following assumptions: 1) volatility of 110.74%; 2) risk-free interest rate of 0.87%; and 3) a closing stock price of $1.10.

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

 

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The following table sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the three month period ended March 31, 2016:

 

     Warrants issued May
2012
     Warrants issued August
2013
     Total Liabilities  

Balance at beginning of period

   $ 143,681       $ 650,449       $ 794,130   

Issues

     —           —           —     

Settlements

     —           —           —     

Revaluation

     93,969         (125,263      (31,294
  

 

 

    

 

 

    

 

 

 

Balance at end of period

   $ 237,650       $ 525,186       $ 762,836   
  

 

 

    

 

 

    

 

 

 

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

12. Product Warranty Provisions

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

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

 

     March 31, 2016      December 31, 2015  

Warranty accrual, beginning of the fiscal period

   $ 316,835       $ 364,548   

Accrual adjustment for product warranty

     55,262         171,384   

Payments made

     (69,735      (219,097
  

 

 

    

 

 

 

Warranty accrual, end of the fiscal period

   $ 302,362       $ 316,835   
  

 

 

    

 

 

 

13. 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.

14. Subsequent Events

On May 2, 2016, Stereotaxis, Inc. (the “Company”) received a determination letter from the Nasdaq Hearings Panel (the “Panel”) granting the Company’s request for the continued listing of its common stock on The Nasdaq Capital Market (“Nasdaq”). The Company’s continued listing on Nasdaq is subject to, among other things, the Company evidencing compliance with the minimum $35 million market value of listed securities requirement (the “Market Cap Requirement”) by August 1, 2016. To satisfy the Market Cap Requirement, the Company must evidence a market value of listed securities of at least $35 million for a minimum of ten consecutive business days on or before August 1, 2016. The Company is taking definitive steps to timely comply with the terms of the Panel’s decision; however, there can be no assurance that it will be able to do so.

On May 10, 2016, Stereotaxis, Inc. (the “Company”) entered into an Eleventh Loan Modification Agreement (Domestic) with Silicon Valley Bank (the “Bank”) (“Modification Agreement”), further amending the terms of that certain Second Amended and Restated Loan and Security Agreement (Domestic) dated November 30, 2011, as amended (the “Amended Loan Agreement”), to modify the financial covenants under the Amended Loan Agreement by revising the tangible net worth covenant to require the Company to maintain a minimum tangible net worth of not less than (no worse than) negative $24,000,000 for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24,500,000 for the quarters ended December 31, 2017 and March 31, 2018.

 

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

The following discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2015. Operating results are not necessarily indicative of results that may occur in future periods.

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

Overview

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

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

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

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

We generate revenue from both the initial capital sale of the Niobe, Odyssey, and Vdrive systems as well as recurring revenue from the sale of our proprietary disposable devices, from ongoing license and service contracts, and from royalties paid to the Company by Biosense Webster for the sale of co-developed catheters. We market our products to a broad base of hospitals in the United States and internationally. As of March 31, 2016, the Company has an installed base of 126 Niobe ES systems.

 

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The core components of Stereotaxis’ systems have received regulatory clearance in the United States, European Union, Canada, China, Japan, and elsewhere. We have received regulatory clearance, licensing and/or CE Mark approvals necessary for us to market the Vdrive and Vdrive Duo systems with the V-CAS, V-Loop and V-Sono devices in the U.S., Canada and European Union. We have received Food and Drug Administration (“FDA”) clearance and the CE Mark necessary for us to market our suite of Pegasus™ coronary peripheral guidewires in the United States and Europe.

Since our inception, we have generated significant losses. As of March 31, 2016, we incurred cumulative net losses of approximately $468.2 million. In 2016, the Company plans to continue developing the Niobe ES system with the goal of furthering clinical adoption and new system placements. We expect to incur additional losses into 2016 as we continue the development and commercialization of our products, conduct our research and development activities and advance new products into clinical development from our existing research programs and fund additional sales and marketing initiatives. During 2016, we will continue to monitor operating expenses and make additional investment in certain targeted areas.

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, 2015.

Revenue Recognition

The Company accounts for revenue using Accounting Standards Codification Topic 605-25, Multiple-Element Arrangements (“ASC 605-25”).

ASC 605-25 permits management to estimate the selling price of undelivered components of a bundled sale for which it is unable to establish vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”). This requires management to record revenue for certain elements of a transaction even though it might not have delivered other elements of the transaction, for which it was unable to meet the requirements for establishing VSOE or TPE. The Company believes that the guidance significantly improves the reporting of these types of transactions to more closely reflect the underlying economic circumstances. This guidance also prohibits the use of the residual method for allocating revenue to the various elements of a transaction and requires that the revenue be allocated proportionally based on the relative estimated selling prices.

Under our revenue recognition policy, a portion of revenue for Niobe systems, Vdrive systems and certain Odyssey systems is recognized upon delivery, provided that title has passed, there are no uncertainties regarding acceptance, persuasive evidence of an arrangement exists, the sales price is fixed and determinable, and collection of the related receivable is reasonably assured. Revenue is recognized for other types of Odyssey systems upon completion of installation, since there are no qualified third party installers. When installation is the responsibility of the customer, revenue from system sales is recognized upon shipment since these arrangements do not include an installation element or right of return privileges. The Company does not recognize revenue in situations in which inventory remains at a Stereotaxis warehouse or in situations in which title and risk of loss have not transferred to the customer. Amounts collected prior to satisfying the above revenue recognition criteria are reflected as deferred revenue. Revenue from services and license fees, whether sold individually or as a separate unit of accounting in a multiple-deliverable arrangement, is deferred and amortized over the service or license fee period, which is typically one year. Revenue from services is derived primarily from the sale of annual product maintenance plans. We recognize revenue from disposable device sales or accessories upon shipment and establish an appropriate reserve for returns. The return reserve, which is applicable only to disposable devices, is estimated based on historical experience which is periodically reviewed and updated as necessary. In the past, changes in estimate have had only a de minimis effect on revenue recognized in the period. We believe that the estimate is not likely to change significantly in the future.

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

 

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Results of Operations

Comparison of the Three Months Ended March 31, 2016 and 2015

Revenue. Revenue decreased from $9.5 million for the three months ended March 31, 2015 to $8.6 million for the three months ended March 31, 2016, a decrease of 9%. Revenue from the sale of systems decreased from $2.8 million to $2.1 million, a decrease of approximately 27%, primarily due to decreased Niobe and Vdrive system sales volumes. We recognized revenue on one Niobe system and a total of $0.9 million for Odyssey and Odyssey Cinema systems during the 2016 period. System revenue for the prior period included two Niobe systems, a total $0.5 million for Odyssey and Odyssey Cinema systems, and $0.3 million for Vdrive systems. Revenue from sales of disposable interventional devices, service and accessories decreased to $6.6 million for the three months ended March 31, 2016 from $6.7 million for the three months ended March 31, 2015, a decrease of approximately 2%.

Cost of Revenue. Cost of revenue decreased to $2.2 million for the three months ended March 31, 2016 from $2.6 million for the three months ended March 31, 2015. As a percentage of our total revenue, overall gross margin has increased to 75% for the three months ended March 31, 2016 from 72% for the three months ended March 31, 2015 due to a shift in mix from systems revenue to disposables, service and accessories revenue. Cost of revenue for systems sold decreased from $1.4 million for the three months ended March 31, 2015 to $1.1 million for the three months ended March 31, 2016. Gross margin for systems decreased to 48% for the three months ended March 31, 2016 from 51% for the three months ended March 31, 2015. This decrease was primarily due to a shift in product mix from Niobe systems to Odyssey systems. Cost of revenue for disposables, service and accessories decreased to $1.1 million for the three months ended March 31, 2016 from $1.2 million for the three months ended March 31, 2015. Gross margin for disposables, service and accessories was 83% for the current quarter compared to 82% for the three months ended March 31, 2015.

Research and Development Expenses. Research and development expenses have remained relatively consistent with the three months ended March 31, 2015 at $1.5 million.

Sales and Marketing Expenses. Sales and marketing expenses decreased slightly from $4.0 million for the three months ended March 31, 2015 to $3.9 million for the three months ended March 31, 2016.

General and Administrative Expenses. General and administrative expenses include regulatory, clinical, finance, information systems, legal, general management and routine training expenses. General and administrative expenses decreased from $2.8 million for the three months ended March 31, 2015 to $2.6 million for the three months ended March 31, 2016, a decrease of approximately 7%. This decrease was primarily driven by lower headcount costs and changes in foreign currency.

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

Interest Expense. Interest expense has remained relatively consistent with the three months ended March 31, 2015 at $0.8 million.

Liquidity and Capital Resources

Liquidity refers to the liquid financial assets available to fund our business operations and pay for near-term obligations. These liquid financial assets consist of cash and cash equivalents. At March 31, 2016 we had $1.6 million of cash and equivalents. We had a working capital deficit of $1.1 million and working capital of $1.0 million as of March 31, 2016 and December 31, 2015, respectively. The decrease in the working capital is due principally to the net losses incurred for the first three months of 2016.

The following table summarizes our cash flow by operating, investing and financing activities for the three months ended March 31, 2016 and 2015 (in thousands):

 

     Three Months Ended March 31,  
     2016      2015  

Cash flow used in operating activities

   $ (3,867    $ (3,289

Cash flow used in investing activities

     —           (52

Cash flow provided by financing activities

     (123      509   

Net cash used in operating activities. We used approximately $3.9 million and $3.3 million of cash for operating activities during the three months ended March 31, 2016 and 2015, respectively. The increase in cash used in operating activities was primarily driven by changes in working capital.

 

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Net cash used in investing activities. There were no purchases of equipment for the three month period ended March, 31, 2016 and we used less than $0.1 million during the three month period ended March 31, 2015 for the purchase of equipment.

Net cash provided by financing activities. We used approximately $0.1 million of cash for the three month period ended March 31, 2016 compared to the $0.5 million generated for the three month period ended March 31, 2015. The increase in cash used for the period ended March 31, 2016 was driven by payments of deferred financing costs. The cash generated for the period ended March 31, 2015 was driven by proceeds from stock issued through the Controlled Equity Offering.

We may be required to raise capital or pursue other financing strategies to continue our operations. Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past and future public offerings, private sales of our equity securities, and loans collateralized by working capital and equipment. We continue to explore financing alternatives, which may include the sale of equity securities or non-core assets, strategic collaboration agreements, debt financings or distribution rights. We cannot accurately predict the timing and amount of our utilization of capital, which will depend on a number of factors outside of our control.

Our existing cash, cash equivalents and borrowing facilities may not be sufficient to fund our operating expenses and capital equipment requirements through the next 12 months, which would require us to obtain additional financing before that time. We cannot assure that additional financing will be available on a timely basis on terms acceptable to us or at all, or that such financing will not be dilutive to our stockholders. If adequate funds are not available to us, we could be required to delay development or commercialization of new products, to license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize ourselves or to reduce the sales, marketing, customer support or other resources devoted to our products, any of which could have a material adverse effect on our business, financial condition and results of operations. In addition, we could be required to cease operations.

Capital Resources

As of March 31, 2016, our borrowing facilities were comprised of a revolving line of credit maintained with our primary lender, Silicon Valley Bank, as well as the Healthcare Royalty Partners debt discussed in the following sections.

Revolving Line of Credit

The Company has had a working capital line of credit with its primary lender, Silicon Valley Bank, since 2004. The revolving line of credit is secured by substantially all of the Company’s assets. The maximum available under the line is $10 million subject to the value of collateralized assets. The Company is required under the revolving line of credit to maintain its primary operating account and the majority of its cash and investment balances in accounts with its primary lender. The facility was amended on March 27, 2015, extending the maturity date to March 31, 2018 and on May 10, 2016, the Company and the primary lender agreed to modify certain financial covenants. The amended agreement requires the Company to maintain a liquidity ratio greater than 1.50:1.00, excluding certain short term advances from the calculation, and a minimum tangible net worth of not less than (no worse than) negative $24.0 million for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24.5 million for the quarters ended December 31, 2017 and March 31, 2018.

As of March 31, 2016, the Company had no outstanding debt under the revolving line of credit. Draws on the line of credit are made based on the borrowing capacity one week in arrears. As of March 31, 2016 the Company had a borrowing capacity of $4.9 million based on the Company’s collateralized assets, and cash and cash equivalents of $1.6 million for a total liquidity of $6.5 million.

 

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Healthcare Royalty Partners Debt

In November 2011, we entered into a loan agreement with Healthcare Royalty Partners. Under the agreement the Company borrowed from Healthcare Royalty Partners $15 million. The Company was permitted to borrow up to an additional $5 million in the aggregate based on the achievement by the Company of certain milestones related to Niobe ES system sales in 2012. On August 8, 2012, the Company borrowed an additional $2.5 million based upon achievement of a milestone related to Niobe ES system sales for the three months ended June 30, 2012. On January 31, 2013, the Company borrowed an additional $2.5 million based upon achievement of a milestone related to Niobe ES system sales for the twelve months ended December 31, 2012. The loan will be repaid through, and secured by, royalties payable to the Company under its Development, Alliance and Supply Agreement with Biosense Webster, Inc. (the “Biosense Agreement”). The Biosense Agreement relates to the development and distribution of magnetically enabled catheters used with Stereotaxis’ Niobe ES system in cardiac ablation procedures. Under the terms of the agreement, Healthcare Royalty Partners will be entitled to receive 100% of all royalties due to the Company under the Biosense Agreement until the loan is repaid. The loan is a full recourse loan, matures on December 31, 2018, and bears interest at an annual rate of 16% payable quarterly with royalties received under the Biosense Agreement. If the payments received by the Company under the Biosense Agreement are insufficient to pay all amounts of interest due on the loan, then such deficiency will increase the outstanding principal amount on the loan. After the loan obligation is repaid, royalties under the Biosense Agreement will again be paid to the Company. The loan is also secured by certain assets and intellectual property of the Company. The agreement also contains customary affirmative and negative covenants. The use of payments due to the Company under the Biosense Agreement was approved by our primary lender.

Common Stock

The holders of common stock are entitled to one vote for each share held and to receive dividends whenever funds are legally available and when declared by the Board of Directors subject to the prior rights of holders of all classes of stock having priority rights as dividends and the conditions of the revolving line of credit agreement. No dividends have been declared or paid as of March 31, 2016.

Controlled Equity Offering

The Company entered into a Controlled Equity OfferingSM sales agreement (the “Sales Agreement”) in May 2014, as amended on March 26, 2015, with Cantor Fitzgerald & Co. (“Cantor”), as agent and/or principal, pursuant to which the Company could issue and sell, from time to time, shares of its common stock having an aggregate gross sales price of up to $18.0 million. The Company will pay Cantor a commission of 3.0% of the gross proceeds from any common stock sold through the Sales Agreement.

There were no proceeds from the Controlled Equity Offering during the three months ended March 31, 2016. As of March 31, 2016, $13.8 million of common stock remained available to be sold under this facility, subject to certain conditions as specified in the Sales Agreement.

Offerings of Common Stock

On October 8, 2015 the Company announced the results of its previously announced offering of transferable subscription warrants (the “Warrants Offering) to holders of record of the Company’s common stock. Pursuant to the Warrants Offering, subscription warrants to purchase 267,256 shares of common stock were exercised, resulting in gross proceeds to the Company of $293,982.

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,

 

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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.

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

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

 

ITEM 1A. RISK FACTORS

Risk Factors are discussed in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

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

On May 2, 2016, Stereotaxis, Inc. (the “Company”) received a determination letter from the Nasdaq Hearings Panel (the “Panel”) granting the Company’s request for the continued listing of its common stock on The Nasdaq Capital Market (“Nasdaq”). The Company’s continued listing on Nasdaq is subject to, among other things, the Company evidencing compliance with the minimum $35 million market value of listed securities requirement (the “Market Cap Requirement”) by August 1, 2016. To satisfy the Market Cap Requirement, the Company must evidence a market value of listed securities of at least $35 million for a minimum of ten consecutive business days on or before August 1, 2016. The Company is taking definitive steps to timely comply with the terms of the Panel’s decision; however, there can be no assurance that it will be able to do so.

On May 10, 2016, Stereotaxis, Inc. (the “Company”) entered into an Eleventh Loan Modification Agreement (Domestic) with Silicon Valley Bank (the “Bank”) (“Modification Agreement”), further amending the terms of that certain Second Amended and Restated Loan and Security Agreement (Domestic) dated November 30, 2011, as amended (the “Amended Loan Agreement”), to modify the financial covenants under the Amended Loan Agreement by revising the tangible net worth covenant to require the Company to maintain a minimum tangible net worth of not less than (no worse than) negative $24,000,000 for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24,500,000 for the quarters ended December 31, 2017 and March 31, 2018.

 

ITEM 6. EXHIBITS

Exhibits: See Exhibit Index herein

 

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STEREOTAXIS, INC.

SIGNATURES

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

 

   

STEREOTAXIS, INC.

(Registrant)

Date: May 11, 2016     By:   /s/ William C. Mills III
     

William C. Mills III,

Chief Executive Officer

 

Date: May 11, 2016     By:   /s/ Martin C. Stammer
     

Martin C. Stammer,

Chief Financial Officer

 

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EXHIBIT INDEX

 

Number

  

Description

    3.1    Restated Certificate 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 Current Report on Form 8-K (File No. 000-50884) filed on July 10, 2012.
    3.3    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    Eleventh Loan Modification Agreement (Domestic), dated May 10, 2016, between the Company, Stereotaxis International, Inc., and Silicon Valley Bank, 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    XBRL Instance Document.
101.SCH    XBRL Taxonomy Extension Schema Document.
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB    XBRL Taxonomy Extension Label Linkbase Document.
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document.

 

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Exhibit 10.1

ELEVENTH LOAN MODIFICATION AGREEMENT (DOMESTIC)

This Eleventh Loan Modification Agreement (Domestic) (this “Loan Modification Agreement”) is entered into as of May 10, 2016 (the “Eleventh Loan Modification (Domestic) Effective Date”), by and between SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 380 Interlocken Crescent, Suite 600, Broomfield, Colorado 80021 (“Bank”), STEREOTAXIS, INC., a Delaware corporation (“Stereotaxis”), and STEREOTAXIS INTERNATIONAL, INC., a Delaware corporation, each with offices located at 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108 (“International”, and together with Stereotaxis, individually and collectively, jointly and severally, “Borrower”).

1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of November 30, 2011, evidenced by, among other documents, (i) a certain Second Amended and Restated Loan and Security Agreement (Domestic) dated as of November 30, 2011, as amended by a certain First Loan Modification Agreement (Domestic), dated as of March 30, 2012, as further amended by a certain Second Loan Modification and Waiver Agreement (Domestic), dated as of May 1, 2012, as further amended by a certain Third Loan Modification Agreement, dated as of May 7, 2012, as further amended by a certain Fourth Loan Modification Agreement (Domestic), dated as of December 28, 2012, as further amended by a certain Fifth Loan Modification Agreement (Domestic), dated as of March 29, 2013 as further amended by a certain Sixth Loan Modification and Waiver Agreement (Domestic), dated as of June 28, 2013, as further amended by a certain Seventh Loan Modification and Waiver Agreement (Domestic), dated as of July 31, 2013, as further amended by a certain Eighth Loan Modification Agreement (Domestic), dated as of August 30, 2013, as further amended by a certain Ninth Loan Modification Agreement, dated as of March 28, 2014 and as further amended by a certain Tenth Loan Modification Agreement (Domestic), dated as of March 27, 2015 (as may be amended from time to time, the “Loan Agreement”).

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement, and the “Intellectual Property Collateral” as described in those certain IP Security Agreements, entered into by each Borrower and Bank, dated as of November 30, 2011 (together with any other collateral security granted to Bank, the “Security Documents”).

Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

 

  A. Modifications to Loan Agreement.

 

  1 The Loan Agreement shall be amended by deleting the following text appearing as Sections 6.9(a) thereof:

“(a) Tangible Net Worth. Borrower shall maintain a minimum Tangible Net Worth, tested quarterly, as of the last day of each fiscal quarter, of not less than (no worse than) the following amounts for each quarterly period listed below:

 

Quarterly Period Ending   

Minimum Tangible Net Worth

(tangible net loss no worse than)

March 31, 2015, June 30, 2015 and September 30, 2015

   ($21,500,000)

December 31, 2015, March 31, 2016, June 30, 2016 and September 30, 2016

   ($22,500,000)

December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017

   ($23,500,000)

December 31, 2017 and March 31, 2018

   ($24,500,000)”

 

1


and inserting in lieu thereof the following:

“(a) Tangible Net Worth. Borrower shall maintain a minimum Tangible Net Worth, tested quarterly, as of the last day of each fiscal quarter, of not less than (no worse than) the following amounts for each quarterly period listed below:

 

Quarterly Period Ending   

Minimum Tangible Net Worth

(tangible net loss no worse than)

December 31, 2015 and March 31, 2016

   ($22,500,000)

June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017

   ($24,000,000)

December 31, 2017 and March 31, 2018

   ($24,500,000)”

 

  2 The Loan Agreement shall be amended by inserting the following new definition in Section 13.1 thereof, in its appropriate alphabetical order:

Eleventh Loan Modification (Domestic) Effective Date” is May     , 2016.

 

  3 The Loan Agreement shall be amended by deleting the Compliance Certificate attached as Exhibit B attached thereto and inserting in lieu thereof Exhibit B as attached hereto.

4. FEES. In addition to and supplemental of the anniversary fees described in the Tenth Loan Modification Agreement (Domestic) and all other fees and expenses under the Loan Documents, Borrower shall pay to Bank a fully-earned, non-refundable modification fee equal to Five Thousand Dollars ($5,000), payable on or before the Eleventh Loan Modification (Domestic) Effective Date. Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with the Existing Loan Documents and this Loan Modification Agreement.

5. CONDITIONS PRECEDENT. Borrower hereby agrees that the following documents shall be delivered to the Bank prior to or concurrently with this Loan Modification Agreement, each in form and substance satisfactory to the Bank (collectively, the “Conditions Precedent”):

 

  A.

copies, certified by a duly authorized officer of each Borrower, to be true and complete as of the date hereof, of each of (i) the governing documents of each Borrower as in effect on the date

 

2


  hereof (but only to the extent modified since last delivered to the Bank), (ii) the resolutions of each Borrower authorizing the execution and delivery of this Loan Modification Agreement, the other documents executed in connection herewith and each Borrower’s performance of all of the transactions contemplated hereby (but only to the extent required since last delivered to Bank), and (iii) an incumbency certificate giving the name and bearing a specimen signature of each individual who shall be so authorized on behalf of each Borrower (but only to the extent any signatories have changed since such incumbency certificate was last delivered to Bank);

 

  B. updated evidence of insurance; and

 

  C. such other documents as Bank may request, in its reasonable discretion.

6. ADDITIONAL COVENANTS; RATIFICATION OF PERFECTION CERTIFICATE. Borrower is not a party to, nor is bound by, any license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral. Borrower shall provide written notice to Bank within ten (10) days of entering or becoming bound by any such license or agreement (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (x) all such licenses or contract rights to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement (such consent or authorization may include a licensor’s agreement to a contingent assignment of the license to Bank if Bank determines that is necessary in its good faith judgment), whether now existing or entered into in the future, and (y) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under the Loan Agreement and the other Loan Documents. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a certain Perfection Certificate, dated as of November 30, 2011, as amended and supplemented through and as of the Eleventh Loan Modification (Domestic) Effective Date with the additional disclosures attached as Exhibit A hereto, if any, and acknowledges, confirms and agrees the disclosures and information above Borrower provided to Bank in the Perfection Certificate, as so updated, remain true and correct in all material respects as of the date hereof.

7. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file UCC financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to further perfect or protect Bank’s interest in the Collateral, including a notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code.

8. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

9. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of each of the Loan Documents and all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.

10. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.

11. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.

 

3


12. RIGHT OF SET-OFF. In consideration of Bank’s agreement to enter into this Loan Modification Agreement, Borrower hereby reaffirms and hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Silicon Valley Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

13. CONFIDENTIALITY. Bank may use confidential information for the development of databases, reporting purposes, and market analysis, so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly permitted by Borrower. The provisions of the immediately preceding sentence shall survive the termination of the Loan Agreement.

14. JURISDICTION/VENUE/TRIAL WAIVER. Borrower accepts for itself and in connection with its properties, unconditionally, the exclusive jurisdiction of any state or federal court of competent jurisdiction in the State of Illinois in any action, suit, or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS LOAN MODIFICATION AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS LOAN MODIFICATION AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

15. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower and Bank.

[The remainder of this page is intentionally left blank]

 

4


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument under the laws of the State of Illinois as of the Eleventh Loan Modification (Domestic) Effective Date.

 

BORROWER:
STEREOTAXIS, INC.
By:   /s/ Martin C. Stammer
Name:   Martin C. Stammer
Title:   Chief Financial Officer
STEREOTAXIS INTERNATIONAL, INC.
By:   /s/ Martin C. Stammer
Name:   Martin C. Stammer
Title:   President
BANK:
SILICON VALLEY BANK
By:   /s/ Tom Hertzberg
Name:   Tom Hertzberg
Title:   Director

[Signature page to Eleventh Loan Modification Agreement (Domestic)]


Exhibit A

Updates to Perfection Certificate, if any

(See attached.)


Exhibit B to Eleventh Loan Modification Agreement

EXHIBIT B

COMPLIANCE CERTIFICATE

 

TO:          SILICON VALLEY BANK

Date:                     

FROM:    STEREOTAXIS, INC. and STEREOTAXIS INTERNATIONAL, INC.

The undersigned authorized officer of STEREOTAXIS, INC., a Delaware corporation and STEREOTAXIS INTERNATIONAL, INC. (collectively, jointly and severally, the “Borrower”) certifies that under the terms and conditions of the Second Amended and Restated Loan and Security Agreement between Borrower and Bank (as amended, the “Agreement”), (1) Borrower is in complete compliance for the period ending                      with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with generally GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

Monthly financial statements with Compliance Certificate    Monthly within 30 days        Yes  No
Annual financial statement (CPA Audited) + CC    FYE within 120 days        Yes  No
10-Q, 10-K and 8-K    Within 5 days after filing with SEC        Yes  No

A/R & A/P Agings, Deferred Revenue and Inventory

Reports

   Monthly within 30 days        Yes  No
Transaction Reports    Weekly, within 5 days when there are outstanding Advances under the Revolving Line, and with each request for a Credit Extension        Yes  No
Projections    Annually within 30 days prior to FYE        Yes  No

The following Intellectual Property was registered after the Effective Date (if no registrations, state “None”)

                                                                                                                                                                

 

Financial Covenant

   Required    Actual    Complies

Maintain as indicated:

        

Minimum Tangible Net Worth * (tested quarterly)

      $                Yes  No

Minimum Liquidity Ratio (tested monthly)

   1.50:1.00            :1.00    Yes  No

 

* See Section 6.9(a) of the Loan Agreement


The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

 

 

 

 

 

 

 

STEREOTAXIS, INC.     BANK USE ONLY
STEREOTAXIS INTERNATIONAL, INC.        
      Received by:  

 

By:  

 

        AUTHORIZED SIGNER
Name:  

 

    Date:  

 

Title:  

 

       
      Verified:                                                                                                  
          AUTHORIZED SIGNER
      Date:  

 

      Compliance Status:    Yes  No


Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                     

 

I. Tangible Net Worth (Section 6.9(a))

Required: Tangible Net Worth, tested quarterly, as of the last day of each fiscal quarter, of not less than (no worse than) the following amounts for each quarterly period listed below:

 

Quarterly Period Ending   

Minimum Tangible Net Worth

(tangible net loss no worse than)

December 31, 2015 and March 31, 2016

   ($22,500,000)

June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017

   ($24,000,000)

December 31, 2017 and March 31, 2018

   ($24,500,000)

Actual:

 

A.

   Consolidated total assets of Borrower and its Subsidiaries    $                

B.

   Amounts attributable to Goodwill    $                

C.

   Intangible items including unamortized debt discount and expense, patents, trade and service marks and names, copyrights and capitalized research and development expenses (except prepaid expenses)    $                

D.

   Notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates    $                

E.

   Reserves not already deducted from assets    $                

F.

   Intangible assets [line B plus line C plus line D plus line E]    $                

G.

   Total Liabilities (including, without limitation, the Cowen Indebtedness)    $                

H.

   Mark-to-market liabilities established in accordance with GAAP as a result of non-cash, mark-to-market adjustments, of the value of warrants and other derivative liabilities of the Borrower    $                

I.

   TANGIBLE NET WORTH [line A minus line F minus line G plus line H]    $                

Is line I equal to or greater than (no worse than) [$        ]?

 

         No, not in compliance             Yes, in compliance


II. Liquidity Ratio (Section 6.9(b))

Required: A Liquidity Ratio of greater than 1.50:1.00, it being understood that Short Term Advances shall be excluded from the foregoing calculation.

Actual:

 

A.    Borrower’s unrestricted cash at Bank    $                
B.    Borrower’s Eligible Accounts (excluding the Biosense Accounts)    $                
C.    LIQUIDITY [line A plus line B]    $                
D.    Total outstanding Obligations of Borrower owed to Bank (other than Short Term Advances)    $                
E.    LIQUIDITY RATIO [line C divided by line D]    $                

Is line E greater than 1.50:1.00?

 

         No, not in compliance             Yes, in compliance

Exhibit 31.1

Certification of Principal Executive Officer

I, William C. Mills III, certify that:

 

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

 

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

 

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

 

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

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

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

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

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

 

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

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

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

 

Date: May 11, 2016      

/s/ William C. Mills III

      William C. Mills III
      Chief Executive Officer
      Stereotaxis, Inc.
      (Principal Executive Officer)

Exhibit 31.2

Certification of Principal Financial Officer

I, Martin C. Stammer, certify that:

 

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

 

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

 

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

 

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

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

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

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

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

 

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

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

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

 

Date: May 11, 2016      

/s/ Martin C. Stammer

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

Exhibit 32.1

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

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Stereotaxis, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William C. Mills III, Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

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

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

 

Date: May 11, 2016      

/s/ William C. Mills III

      William C. Mills III
      Chief Executive Officer
      Stereotaxis, Inc.

Exhibit 32.2

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

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Stereotaxis, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martin C. Stammer, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

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

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

 

Date: May 11, 2016      

/s/ Martin C. Stammer

      Martin C. Stammer
      Chief Financial Officer
      Stereotaxis, Inc.
v3.4.0.3
Document And Entity Information - shares
3 Months Ended
Mar. 31, 2016
Apr. 29, 2016
Document And Entity Information [Abstract]    
Entity Registrant Name Stereotaxis, Inc.  
Entity Filer Category Smaller Reporting Company  
Entity Central Index Key 0001289340  
Trading Symbol stxs  
Amendment Flag false  
Document Type 10-Q  
Document Fiscal Period Focus Q1  
Document Period End Date Mar. 31, 2016  
Document Fiscal Year Focus 2016  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding   21,758,330
v3.4.0.3
Balance Sheets - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Current assets:    
Cash and cash equivalents $ 1,602,951 $ 5,593,582
Accounts receivable, net of allowance of $155,964 and $93,478 in 2016 and 2015, respectively 6,397,660 6,376,470
Inventories 4,446,363 4,504,282
Prepaid expenses and other current assets 1,150,631 668,659
Total current assets 13,597,605 17,142,993
Property and equipment, net 969,927 1,067,321
Intangible assets, net 586,059 635,889
Other assets 32,341 31,693
Total assets 15,185,932 18,877,896
Current liabilities:    
Accounts payable 2,042,246 1,840,135
Accrued liabilities 5,245,395 6,058,390
Deferred revenue 6,627,020 7,445,935
Warrants and debt conversion features 762,836 794,130
Total current liabilities 14,677,497 16,138,590
Long-term debt 18,078,308 18,080,159
Long-term deferred revenue 1,782,155 2,009,198
Other liabilities 270,433 275,603
Total liabilities $ 34,808,393 $ 36,503,550
Stockholders' deficit:    
Preferred stock, par value $0.001; 10,000,000 shares authorized, none outstanding at 2016 and 2015
Common stock, par value $0.001; 300,000,000 shares authorized, 21,738,923 and 21,551,173 shares issued at 2016 and 2015, respectively $ 21,739 $ 21,551
Additional paid in capital 448,794,778 448,517,472
Treasury stock, 4,015 shares at 2016 and 2015 (205,999) (205,999)
Accumulated deficit (468,232,979) (465,958,678)
Total stockholders' deficit (19,622,461) (17,625,654)
Total liabilities and stockholders' deficit $ 15,185,932 $ 18,877,896
v3.4.0.3
Balance Sheets (Parenthetical) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Current assets:    
Accounts receivable, allowance $ 155,964 $ 93,478
Stockholders' deficit:    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 300,000,000 300,000,000
Common stock, shares issued 21,738,923 21,551,173
Treasury stock, shares 4,015 4,015
v3.4.0.3
Statements Of Operations - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Revenue:    
Systems $ 2,075,019 $ 2,831,178
Disposables, service and accessories 6,572,987 6,699,848
Total revenue 8,648,006 9,531,026
Cost of revenue:    
Systems 1,083,099 1,400,267
Disposables, service and accessories 1,097,715 1,230,370
Total cost of revenue 2,180,814 2,630,637
Gross margin 6,467,192 6,900,389
Operating expenses:    
Research and development 1,473,086 1,485,706
Sales and marketing 3,894,113 4,034,371
General and administrative 2,586,791 2,794,590
Total operating expenses 7,953,990 8,314,667
Operating loss (1,486,798) (1,414,278)
Other income (expense) 31,294 (892,377)
Interest income 222 862
Interest expense (819,019) (829,788)
Net loss $ (2,274,301) $ (3,135,581)
Net loss per common share:    
Basic $ (0.11) $ (0.15)
Diluted $ (0.11) $ (0.15)
Weighted average shares used in computing net loss per common share:    
Basic 21,611,612 20,742,932
Diluted 21,611,612 20,742,932
v3.4.0.3
Statements Of Cash Flows - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Cash flows from operating activities    
Net loss $ (2,274,301) $ (3,135,581)
Adjustments to reconcile net loss to cash used in operating activities:    
Depreciation 97,394 70,256
Amortization of intangibles 49,830 74,959
Amortization of deferred finance costs 54,937 55,793
Share-based compensation 270,102 326,444
Adjustment of warrants (31,294) 892,377
Changes in operating assets and liabilities:    
Accounts receivable (21,190) (1,256,119)
Inventories 57,919 (4,179)
Prepaid expenses and other current assets (407,930) 92,225
Other assets (648) 35,983
Accounts payable 202,111 250,495
Accrued liabilities (812,995) (263,221)
Deferred revenue (1,045,958) (352,450)
Other liabilities (5,170) (75,682)
Net cash used in operating activities $ (3,867,193) (3,288,700)
Cash flows from investing activities    
Purchase of equipment (52,410)
Net cash used in investing activities (52,410)
Cash flows from financing activities    
Payments of deferred financing costs $ (100,000)  
Proceeds from (payments to) Healthcare Royalty Partners debt (30,830) (68,869)
Proceeds from issuance of stock, net of issuance costs 7,392 578,211
Net cash provided by (used in) financing activities (123,438) 509,342
Net increase (decrease) in cash and cash equivalents (3,990,631) (2,831,768)
Cash and cash equivalents at beginning of period 5,593,582 7,270,301
Cash and cash equivalents at end of period $ 1,602,951 $ 4,438,533
v3.4.0.3
Description Of Business
3 Months Ended
Mar. 31, 2016
Description Of Business [Abstract]  
Description Of Business

1. Description of Business

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

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

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

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

We promote the full Epoch Solution in a typical hospital implementation, subject to regulatory approvals or clearances. The full Epoch Solution implementation requires a hospital to agree to an upfront capital payment and recurring payments. The upfront capital payment typically includes equipment and installation charges. The recurring payments typically include disposable costs for each procedure, equipment service costs beyond the warranty period, and software licenses. In hospitals where the full Epoch Solution has not been implemented, equipment upgrade or expansion may be implemented upon purchase of the necessary components. As of March 31, 2016, the Company has an installed base of 126 Niobe ES systems.

The core components of Stereotaxis’ systems have received regulatory clearance in the United States, European Union, Canada, China, Japan and various other countries.  We have received regulatory clearance, licensing and/or CE Mark approvals necessary for us to market the Vdrive and Vdrive Duo systems with the V-CAS, V-Loop and V-Sono devices in the U.S., Canada and European Union. We have received Food and Drug Administration (“FDA”) clearance and the CE Mark necessary for us to market our suite of Pegasus coronary peripheral guidewires in the United States and Europe.

Since our inception, we have generated significant losses. As of March 31, 2016, we incurred cumulative net losses of approximately $468.2 million. In 2016, the Company plans to continue developing the Niobe ES system with the goal of furthering clinical adoption and new system placements.  We expect to incur additional losses into 2016 as we continue the development and commercialization of our products, conduct our research and development activities and advance new products into clinical development from our existing research programs and fund additional sales and marketing initiatives. During 2016, we will continue to monitor operating expenses and make additional investment in certain targeted areas.  

We may be required to raise capital or pursue other financing strategies to continue our operations. Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past and future public offerings, private sales of our equity securities, and loans collateralized by working capital and equipment. We continue to explore financing alternatives, which may include the sale of equity securities or non-core assets, strategic collaboration agreements, debt financings, or distribution rights. We cannot accurately predict the timing and amount of our utilization of capital, which will depend on a number of factors outside of our control.

Our existing cash, cash equivalents, and borrowing facilities may not be sufficient to fund our operating expenses and capital equipment requirements through the next 12 months, which would require us to obtain additional financing. We may be required to raise capital or pursue other financing strategies to continue our operations. Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with cash resources primarily generated from the proceeds of our past and future public offerings, private sales of our equity securities, and loans collateralized by working capital and equipment. We continue to explore financing alternatives, which may include the sale of equity securities or non-core assets, strategic collaboration agreements, debt financings, or distribution rights. We cannot accurately predict the timing and amount of our utilization of capital, which will depend on a number of factors outside of our control. 

We cannot assure that additional financing will be available on acceptable terms or that such financing will not be dilutive to our stockholders. If adequate funds are not available to us, we could be required to delay development or commercialization of new products, to license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize ourselves, or to reduce the sales, marketing, customer support or other resources devoted to our products, any of which could have a material adverse effect on our business, financial condition, and operational results. In addition, we could be required to cease operations.

v3.4.0.3
Summary Of Significant Accounting Policies
3 Months Ended
Mar. 31, 2016
Summary Of Significant Accounting Policies [Abstract]  
Summary Of Significant Accounting Policies

2. Summary of Significant Accounting Policies 

Basis of Presentation

The accompanying unaudited financial statements of Stereotaxis, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all the disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, they include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Operating results for the three month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016 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, 2015 as filed with the Securities and Exchange Commission (SEC) on March 11, 2016.

Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying value of such amounts reported at the applicable balance sheet dates approximates fair value. See Note 9 for disclosure of the fair value of debt.

The Company measures certain financial assets and liabilities, including warrants, at fair value on a recurring basis. General accounting principles for fair value measurement established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (“Level 1”) and the lowest priority to unobservable inputs (“Level 3”). See Note 11 for additional details.

Revenue and Costs of Revenue

 The Company accounts for revenue using Accounting Standards Codification Topic 605-25, Multiple-Element Arrangements (“ASC 605-25”).

ASC 605-25 permits management to estimate the selling price of undelivered components of a bundled sale for which it is unable to establish vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”). This requires management to record revenue for certain elements of a transaction even though it might not have delivered other elements of the transaction, for which it was unable to meet the requirements for establishing VSOE or TPE. The Company believes that the guidance significantly improves the reporting of these types of transactions to more closely reflect the underlying economic circumstances. This guidance also prohibits the use of the residual method for allocating revenue to the various elements of a transaction and requires that the revenue be allocated proportionally based on the relative estimated selling prices.

Under our revenue recognition policy, a portion of revenue for Niobe systems, Vdrive systems and certain Odyssey systems is recognized upon delivery, provided that title has passed, there are no uncertainties regarding acceptance, persuasive evidence of an arrangement exists, the sales price is fixed and determinable, and collection of the related receivable is reasonably assured. Revenue is recognized for other types of Odyssey systems upon completion of installation, since there are no qualified third party installers. When installation is the responsibility of the customer, revenue from system sales is recognized upon shipment since these arrangements do not include an installation element or right of return privileges. The Company does not recognize revenue in situations in which inventory remains at a Stereotaxis warehouse or in situations in which title and risk of loss have not transferred to the customer. Amounts collected prior to satisfying the above revenue recognition criteria are reflected as deferred revenue. Revenue from services and license fees, whether sold individually or as a separate unit of accounting in a multiple-deliverable arrangement, is deferred and amortized over the service or license fee period, which is typically one year. Revenue from services is derived primarily from the sale of annual product maintenance plans. We recognize revenue from disposable device sales or accessories upon shipment and establish an appropriate reserve for returns. The return reserve, which is applicable only to disposable devices, is estimated based on historical experience which is periodically reviewed and updated as necessary. In the past, changes in estimate have had only a de minimis effect on revenue recognized in the period. We believe that the estimate is not likely to change significantly in the future.

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

Share-Based Compensation

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

The Company utilizes the Black-Scholes valuation model to determine the fair value of stock options and stock appreciation rights at the date of grant. The resulting compensation expense is recognized over the requisite service period, which is generally four years. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated based on the Company’s historical experience and future expectations. Restricted shares granted to employees are valued at the fair market value at the date of grant. The Company amortizes the fair market value to expense over the service period. If the shares are subject to performance objectives, the resulting compensation expense is amortized over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives.

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

Basic and diluted net earnings (loss) per common share are computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period.

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





 

 

 

 

 

 

 



 

 

Three months ended March 31,

Numerator:

 

 

2016

 

2015

Numerator for basic EPS

 

$

(2,274,301)

 

$

(3,135,581)

 

Numerator for diluted EPS

 

$

(2,274,301)

 

$

(3,135,581)

 

Denominator:

 

 

 

 

 

 

 

Denominator for basic EPS—weighted average shares

 

 

21,611,612 

 

 

20,742,932 

 

Denominator for diluted EPS—weighted average shares

 

 

21,611,612 

 

 

20,742,932 

 

Basic EPS

 

$

(0.11)

 

$

(0.15)

 

Diluted EPS

 

$

(0.11)

 

$

(0.15)

 



In addition, the Company did not include any portion of unearned restricted shares, outstanding options, stock appreciation rights or warrants 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 the Company’s unearned restricted shares do not contractually participate in its losses.



As of March 31, 2016, the Company had 695,117 shares of common stock issuable upon the exercise of outstanding options and stock appreciation rights at a weighted average exercise price of $9.32 per share, 2,040,365 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $3.44 per share, and 1,271,276 shares of unvested restricted share units.

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This amendment is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification on the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2016 (January 1, 2017 for the Company) and interim periods within those fiscal years, with earlier application permitted. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

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

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): To simplify the presentation of deferred income taxes”. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. This standard is effective for public companies for financial statements issued for annual periods beginning after December 15, 2016 (January 1, 2017 for the Company), and interim periods within those annual periods. We adopted this accounting standard update in 2015 and there was no impact to the results of operations or cash flows.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” regarding the subsequent measurement of inventory as part of its Simplification Initiative. This standard is effective for public companies for fiscal years beginning after December 15, 2016 (January 1, 2017 for the Company), including interim periods within those fiscal years. This Update should be applied prospectively, and early application is permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the impact of adopting this accounting standard update but do not expect this to significantly impact the results of operations, financial conditions, cash flows, or financial statement presentation.

In April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. To simplify the presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update), which adds the SEC staff’s guidance on the presentation of debt issuance costs associated with lines of credit to the Codification. The SEC staff stated it will not object to an entity presenting the costs of securing line-of-credit arrangements as an asset, regardless of whether there are any outstanding borrowings. The Standard is effective for financial statements issued for fiscal years beginning after December 15, 2015 (January 1, 2016 for the Company), and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted for financial statements that have not been previously issued. We have adopted this accounting standard update. The Company’s balance sheets as of March 31, 2016 and December 31, 2015 included $320,039 and $349,018, respectively, of deferred financing costs (excluding $100,000 and $25,960, respectively, related to line-of-credit arrangements) that were, under the new guidance, presented as a direct reduction to debt liabilities.

In August 2014, the FASB issued ASU No. 2014-15, to communicate amendments to FASB Account Standards Codification Subtopic 205-40, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The ASU requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists. Management will be required to make this evaluation for both annual and interim reporting periods. Management will have to make certain disclosures if it concludes that substantial doubt exists and when it plans to alleviate substantial doubt about the entity’s ability to continue as a going concern. The standard is effective for annual periods ending after December 15, 2016 and for interim reporting periods starting in the first quarter of 2017 (December 31, 2016 for the Company). Early adoption is permitted. We are currently evaluating the impact of adopting this accounting standard update on our financial statement disclosures.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" which converges the FASB's and the International Accounting Standards Board's current standards on revenue recognition. The standard provides companies with a single model to use in accounting for revenue arising from contracts with customers and supersedes current revenue guidance. The standard is effective for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The standard permits companies to either apply the adoption to all periods presented, or apply the requirements in the year of adoption through a cumulative adjustment. In April 2015, the FASB issued an exposure draft related to the deferral of the effective date, which would delay our effective date one year. Therefore, the standard would be effective for annual and interim periods beginning after December 15, 2017 (January 1, 2018 for the Company). We are currently evaluating the impact of adopting this accounting standard update on our financial statements and disclosures and have not concluded on an adoption method.

v3.4.0.3
Inventories
3 Months Ended
Mar. 31, 2016
Inventories [Abstract]  
Inventories

  3. Inventories 

Inventories consist of the following:





 

 

 



March 31, 2016

 

December 31, 2015



 

 

 

Raw materials

$          2,354,810

 

$         2,065,676

Work in process

427,952 

 

24,758 

Finished goods

1,702,100 

 

2,433,819 

Reserve for obsolescence

(38,499)

 

(19,971)

Total inventory

$          4,446,363

 

$         4,504,282



v3.4.0.3
Prepaid Expenses And Other Current Assets
3 Months Ended
Mar. 31, 2016
Prepaid Expenses And Other Current Assets [Abstract]  
Prepaid Expenses And Other Current Assets

4. Prepaid Expenses and Other Current Assets 

Prepaid expenses and other current assets consist of the following:



 

 

 







 

 

 



 

 

 



March 31, 2016

 

December 31, 2015



 

 

 

Prepaid expenses

$        675,820

 

$       454,822

Deferred financing costs

100,000 

 

25,960 

Deposits

312,713 

 

136,583 

Deferred cost of revenue

94,439 

 

82,987 

Total prepaid expenses and other assets

1,182,972 

 

700,352 

Less: Noncurrent prepaid expenses and other assets

(32,341)

 

(31,693)

Total current prepaid expenses and other assets

$     1,150,631

 

$       668,659































Certain prior year amounts have been reclassified to conform to the 2016 presentation.

v3.4.0.3
Property And Equipment
3 Months Ended
Mar. 31, 2016
Property And Equipment [Abstract]  
Property And Equipment

5. Property and Equipment 

Property and equipment consist of the following:

 





 

 

 



March 31,

 

December 31,



2016

 

2015



 

 

 

Equipment

$          8,496,636

 

$    8,496,636

Equipment held for lease

303,412 

 

303,412 

Leasehold improvements

2,320,368 

 

2,320,368 

 

11,120,416 

 

11,120,416 

Less: Accumulated depreciation

(10,150,489)

 

(10,053,095)

Net property and equipment

$             969,927

 

$    1,067,321



v3.4.0.3
Intangible Assets
3 Months Ended
Mar. 31, 2016
Intangible Assets [Abstract]  
Intangible Assets

6. Intangible Assets 



As of March  31, 2016, the Company had total intangible assets of $3,221,069. Accumulated amortization at March  31, 2016, was $2,635,010. 







v3.4.0.3
Accrued Liabilities
3 Months Ended
Mar. 31, 2016
Accrued Liabilities [Abstract]  
Accrued Liabilities

7. Accrued Liabilities

Accrued liabilities consist of the following:





 

 

 



March 31,

 

December 31,



2016

 

2015



 

 

 

Accrued salaries, bonus, and benefits

$     2,266,158

 

$    3,053,012

Accrued rent

1,263,383 

 

1,361,379 

Accrued licenses and maintenance fees

660,781 

 

666,373 

Accrued interest

493,876 

 

494,703 

Accrued warranties

302,362 

 

316,835 

Accrued taxes

335,102 

 

324,226 

Other

194,166 

 

117,465 

Total accrued liabilities

5,515,828 

 

6,333,993 

Less: Long term accrued liabilities

(270,433)

 

(275,603)

Total current accrued liabilities

$     5,245,395

 

$    6,058,390





Our primary company facilities are located in St. Louis, Missouri where we currently lease approximately 52,000 square feet of office and 12,000 square feet of demonstration and assembly space. In the third quarter of 2013, the Company modified the existing lease agreement to terminate approximately 13,000 square feet of unimproved space. The costs associated with the termination were $515,138 and were accrued as a rent liability as of September 30, 2013. As of March  31, 2016, the remaining accrued costs associated with the termination were $258,995.

In the fourth quarter of 2015, the Company entered a sublease agreement to sublease 3,152 square feet of the first floor office space through December 31, 2018. 

v3.4.0.3
Deferred Revenue
3 Months Ended
Mar. 31, 2016
Deferred Revenue [Abstract]  
Deferred Revenue

8. Deferred Revenue

Deferred revenue consists of the following:





 

 

 



March 31,

 

December 31,



2016

 

2015



 

 

 

 Product shipped, revenue deferred

$        455,314

 

$        366,388

 Customer deposits

1,050,000 

 

2,505,000 

 Deferred service and license fees

6,903,861 

 

6,583,745 

 Total deferred revenue

8,409,175 

 

9,455,133 

 Less: Long-term deferred revenue

(1,782,155)

 

(2,009,198)

 Total current deferred revenue

$     6,627,020

 

$     7,445,935



v3.4.0.3
Long-Term Debt And Credit Facilities
3 Months Ended
Mar. 31, 2016
Long-Term Debt And Credit Facilities [Abstract]  
Long-Term Debt And Credit Facilities

9. Long-Term Debt and Credit Facilities 

Debt outstanding consists of the following:







 

 

 

 

 

 

 



March 31, 2016

 

December 31, 2015



Carrying

 

Estimated

 

Carrying

 

Estimated



Amount

 

Fair Value

 

Amount

 

Fair Value



 

 

 

 

 

 

 

Healthcare Royalty Partners debt

$       18,078,308

 

$    18,398,347

 

$       18,080,159

 

$       18,429,177

Less current maturities

 —

 

 —

 

 —

 

 —

Total long term debt

$       18,078,308

 

$    18,398,347

 

$       18,080,159

 

$       18,429,177



    In accordance with general accounting principles for fair value measurement, the Company’s debt and credit facilities were measured at fair value as of March  31, 2016 and December 31, 2015.  Long-term debt fair value estimates are based on estimated borrowing rates to discount the cash flows to their present value (Level 3). 

    Certain prior year amounts have been reclassified to conform to the 2016 presentation.



Revolving Line of Credit

The Company has had a working capital line of credit with its primary lender, Silicon Valley Bank, since 2004. The revolving line of credit is secured by substantially all of the Company’s assets. The maximum available under the line is $10 million subject to the value of collateralized assets. The Company is required under the revolving line of credit to maintain its primary operating account and the majority of its cash and investment balances in accounts with its primary lender. The facility was amended on March 27, 2015, extending the maturity date to March 31, 2018 and on May 10, 2016, the Company and the primary lender agreed to modify certain financial covenants.  The amended agreement requires the Company to maintain a liquidity ratio greater than 1.50:1.00, excluding certain short term advances from the calculation, and a minimum tangible net worth of not less than (no worse than)  negative $24.0 million for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24.5 million for the quarters ended December 31, 2017 and March 31, 2018.

As of March  31, 2016, the Company had no outstanding debt under the revolving line of credit. Draws on the line of credit are made based on the borrowing capacity one week in arrears. As of March  31, 2016, the Company had a borrowing capacity of $4.9 million based on the Company’s collateralized assets, and cash and cash equivalents of $1.6 million for a total liquidity of $6.5 million.

Healthcare Royalty Partners Debt

In November 2011, the Company entered into a loan agreement with Healthcare Royalty Partners. Under the agreement the Company borrowed from Healthcare Royalty Partners $15 million. The Company was permitted to borrow up to an additional $5 million in the aggregate based on the achievement by the Company of certain milestones related to Niobe ES system sales in 2012. On August 8, 2012, the Company borrowed an additional $2.5 million based upon achievement of a milestone related to Niobe ES system sales for the three months ended June 30, 2012. On January 31, 2013, the Company borrowed an additional $2.5 million based upon achievement of a milestone related to Niobe ES system sales for the twelve months ended December 31, 2012.  The loan will be repaid through, and secured by, royalties payable to the Company under its Development, Alliance and Supply Agreement with Biosense Webster, Inc. (the “Biosense Agreement”). The Biosense Agreement relates to the development and distribution of magnetically enabled catheters used with Stereotaxis' Niobe ES system in cardiac ablation procedures. Under the terms of the agreement, Healthcare Royalty Partners will be entitled to receive 100% of all royalties due to the Company under the Biosense Agreement until the loan is repaid.  The loan is a full recourse loan, matures on December 31, 2018, and bears interest at an annual rate of 16% payable quarterly with royalties received under the Biosense Agreement. If the payments received by the Company under the Biosense Agreement are insufficient to pay all amounts of interest due on the loan, then such deficiency will increase the outstanding principal amount on the loan. After the loan obligation is repaid, the royalties under the Biosense Agreement will again be paid to the Company. The loan is also secured by certain assets and intellectual property of the Company. The agreement also contains customary affirmative and negative covenants. The use of payments due to the Company under the Biosense Agreement was approved by our primary lender.  

v3.4.0.3
Stockholders' Equity
3 Months Ended
Mar. 31, 2016
Stockholders' Equity [Abstract]  
Stockholders' Equity

10. Stockholders’ Equity 

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

Controlled Equity Offering

The Company entered into a Controlled Equity OfferingSM sales agreement (the “Sales Agreement”) in May 2014, as amended on March 26, 2015, with Cantor Fitzgerald & Co. (“Cantor”), as agent and/or principal, pursuant to which the Company could issue and sell, from time to time, shares of its common stock having an aggregate gross sales price of up to $18.0 million. The Company will pay Cantor a commission of 3.0% of the gross proceeds from any common stock sold through the Sales Agreement.

There were no proceeds from the Controlled Equity Offering during the three months ended March 31, 2016.  As of March 31, 2016, $13.8 million of common stock remained available to be sold under this facility, subject to certain conditions as specified in the Sales Agreement.

Offerings of Common Stock 

On October 8, 2015 the Company announced the results of its previously announced offering of transferable subscription warrants (the “Warrants Offering) to holders of record of the Company’s common stock. Pursuant to the Warrants Offering, subscription warrants to purchase 267,256 shares of common stock were exercised, resulting in gross proceeds to the Company of $293,982.

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 August 2012, the Board of Directors adopted the 2012 Stock Incentive Plan (the “Plan”) which was subsequently approved by the Company’s shareholders. This plan replaced the 2002 Stock Incentive Plan which expired on March 25, 2012. 

On June 5, 2013 and on June 10, 2014, the shareholders approved amendments to the Plan, which were previously approved and adopted by the Compensation Committee of the Board of Directors of the Company. Each of these amendments increased the number of shares authorized for issuance under the Plan by one million shares. At March 31, 2016, the Company had 46,051 remaining shares of the Company’s common stock to provide for current and future grants under its various equity plans.

At March  31, 2016, the total compensation cost related to options, stock appreciation rights and non-vested stock granted to employees under the Company’s stock award plans but not yet recognized was approximately $2.3 million, net of estimated forfeitures of approximately $0.7 million. This cost will be amortized over a period of up to four years over the underlying estimated service periods and will be adjusted for subsequent changes in estimated forfeitures and anticipated vesting periods. 

A summary of the option and stock appreciation rights activity for the three month period ended March 31, 2016 is as follows:





 

 

 

 

 



Number of Options/SARs

 

Range of Exercise Price

 

Weighted Average Exercise Price per Share



 

 

 

 

 

Outstanding, December 31, 2015

706,494 

 

$1.45 - $116.40

 

$9.34 

Granted

 -

 

 -

 

 -

Exercised

 -

 

 -

 

 -

Forfeited

(11,377)

 

$1.74 - $36.20

 

$9.98 

Outstanding, March 31, 2016

695,117 

 

$1.45 - $116.40

 

$9.32 





 



 

 

 









A summary of the restricted stock unit activity for the three month period ended March  31, 2016 is as follows:





 

 

 



Number of Restricted Stock Units

 

Weighted Average Grant Date Fair Value per Unit



 

 

 

Outstanding, December 31, 2015

752,008 

 

$2.63 

Granted

700,600 

 

$0.78 

Vested

(175,100)

 

$3.00 

Forfeited

(6,232)

 

$2.73 

Outstanding, March 31, 2016

1,271,276 

 

$1.56 



v3.4.0.3
Fair Value Measurements
3 Months Ended
Mar. 31, 2016
Fair Value Measurements [Abstract]  
Fair Value Measurements

11. Fair Value Measurements 



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

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



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



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



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







 

 

 

 

 

 

 

 

 

 

 

 





 

 

 

 

 

 

 

 



Fair Value Measurement Using



Total

 

Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

Assets at March 31, 2016:

 

 

 

 

 

 

 

 

          Cash equivalents

$

347,821 

 

347,821 

 

—  

 

—  

Total assets at fair value

$

347,821 

 

347,821 

 

—  

 

—  

Liabilities at March 31, 2016:

 

 

 

 

 

 

 

 

          Warrants issued May 2012

$

237,650 

 

—  

 

—  

 

237,650 

          Warrants issued August 2013

$

525,186 

 

—  

 

—  

 

525,186 

Total liabilities at fair value:

$

762,836 

 

—  

 

—  

 

762,836 

Assets at December 31, 2015:

 

 

 

 

 

 

 

 

          Cash equivalents

$

524,083 

 

524,083 

 

—  

 

—  

Total assets at fair value

$

524,083 

 

524,083 

 

—  

 

—  

Liabilities at December 31, 2015:

 

 

 

 

 

 

 

 

          Warrants issued May 2012

$

143,681 

 

—  

 

—  

 

143,681 

          Warrants issued August 2013

$

650,449 

 

—  

 

—  

 

650,449 

Total liabilities at fair value:

$

794,130 

 

—  

 

—  

 

794,130 



Level 1

The Company’s financial assets consist of cash equivalents invested in money market funds in the amount of $347,821 and $524,083 at March 31, 2016 and December 31, 2015, respectively. These assets are classified as Level 1 as described above and total interest income recorded for these investments was insignificant during both the three month periods ended March  31, 2016, and March 31, 2015. There were no transfers in or out of Level 1 during the period ended March 31, 2016.

Level 2

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

Level 3 

In conjunction with the Company’s May 2012 and August 2013 financing transactions, the Company issued warrants to purchase shares of the Company’s common stock. Due to the provisions included in the warrant agreements, the warrants did not meet the exemptions for equity classification and as such, the Company accounts for these warrants as derivative instruments. The calculated fair value of the warrants is classified as a liability and is periodically re-measured with any changes in value recognized in “Other expense” in the Statements of Operations.

The remaining warrants from the May 2012 transaction expire in May 2018 and were revalued as of March 31, 2016 using the following assumptions: 1) volatility of 113.14%; 2) risk-free interest rate of 0.73%; and 3) a closing stock price of $1.10.

The remaining warrants from the August 2013 expire in November 2018 and were revalued as of March 31, 2016 using the following assumptions: 1) volatility of 110.74%; 2) risk-free interest rate of 0.87%; and 3) a closing stock price of $1.10.

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



The following table sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the three month period ended March  31, 2016:









 

 

 

 

 

 

 



 

 

Warrants issued May 2012

 

Warrants issued August 2013

 

Total Liabilities

Balance at beginning of period

 

 

$              143,681

 

$          650,449

 

$        794,130

     Issues

 

 

-

 

-

 

-

     Settlements

 

 

-

 

-

 

-

     Revaluation

 

 

93,969 

 

(125,263)

 

(31,294)

Balance at end of period

 

 

$              237,650

 

$          525,186

 

$        762,836



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

 

v3.4.0.3
Product Warranty Provisions
3 Months Ended
Mar. 31, 2016
Product Warranty Provisions [Abstract]  
Product Warranty Provisions

12. Product Warranty Provisions 



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



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







 

 

 

 

 

 



 

March 31, 2016

 

December 31, 2015

Warranty accrual, beginning of the fiscal period

 

$

316,835 

 

$

364,548 

Accrual adjustment for product warranty

 

 

55,262 

 

 

171,384 

Payments made

 

 

(69,735)

 

 

(219,097)

Warranty accrual, end of the fiscal period

 

$

302,362 

 

$

316,835 



v3.4.0.3
Commitments And Contingencies
3 Months Ended
Mar. 31, 2016
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

13. 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.

v3.4.0.3
Subsequent Events
3 Months Ended
Mar. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events

14. Subsequent Events 

On May 2, 2016, Stereotaxis, Inc. (the “Company”) received a determination letter from the Nasdaq Hearings Panel (the “Panel”) granting the Company’s request for the continued listing of its common stock on The Nasdaq Capital Market (“Nasdaq”). The Company’s continued listing on Nasdaq is subject to, among other things, the Company evidencing compliance with the minimum $35 million market value of listed securities requirement (the “Market Cap Requirement”) by August 1, 2016. To satisfy the Market Cap Requirement, the Company must evidence a market value of listed securities of at least $35 million for a minimum of ten consecutive business days on or before August 1, 2016. The Company is taking definitive steps to timely comply with the terms of the Panel’s decision; however, there can be no assurance that it will be able to do so.



On May 10, 2016, Stereotaxis, Inc. (the “Company”) entered into an Eleventh Loan Modification Agreement (Domestic) with Silicon Valley Bank (the “Bank”) (“Modification Agreement”), further amending the terms of that certain Second Amended and Restated Loan and Security Agreement (Domestic) dated November 30, 2011, as amended (the “Amended Loan Agreement”), to modify the financial covenants under the Amended Loan Agreement by revising the tangible net worth covenant to require the Company to maintain a minimum tangible net worth of not less than (no worse than) negative $24,000,000 for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017, and September 30, 2017; and not less than (no worse than) negative $24,500,000 for the quarters ended December 31, 2017 and March 31, 2018.





v3.4.0.3
Summary Of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2016
Summary Of Significant Accounting Policies [Abstract]  
Basis Of Presentation

Basis of Presentation

The accompanying unaudited financial statements of Stereotaxis, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all the disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, they include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Operating results for the three month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016 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, 2015 as filed with the Securities and Exchange Commission (SEC) on March 11, 2016.

Financial Instruments

Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying value of such amounts reported at the applicable balance sheet dates approximates fair value. See Note 9 for disclosure of the fair value of debt.

The Company measures certain financial assets and liabilities, including warrants, at fair value on a recurring basis. General accounting principles for fair value measurement established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (“Level 1”) and the lowest priority to unobservable inputs (“Level 3”). See Note 11 for additional details.

Revenue And Costs Of Revenue

Revenue and Costs of Revenue

 The Company accounts for revenue using Accounting Standards Codification Topic 605-25, Multiple-Element Arrangements (“ASC 605-25”).

ASC 605-25 permits management to estimate the selling price of undelivered components of a bundled sale for which it is unable to establish vendor-specific objective evidence (“VSOE”) or third-party evidence (“TPE”). This requires management to record revenue for certain elements of a transaction even though it might not have delivered other elements of the transaction, for which it was unable to meet the requirements for establishing VSOE or TPE. The Company believes that the guidance significantly improves the reporting of these types of transactions to more closely reflect the underlying economic circumstances. This guidance also prohibits the use of the residual method for allocating revenue to the various elements of a transaction and requires that the revenue be allocated proportionally based on the relative estimated selling prices.

Under our revenue recognition policy, a portion of revenue for Niobe systems, Vdrive systems and certain Odyssey systems is recognized upon delivery, provided that title has passed, there are no uncertainties regarding acceptance, persuasive evidence of an arrangement exists, the sales price is fixed and determinable, and collection of the related receivable is reasonably assured. Revenue is recognized for other types of Odyssey systems upon completion of installation, since there are no qualified third party installers. When installation is the responsibility of the customer, revenue from system sales is recognized upon shipment since these arrangements do not include an installation element or right of return privileges. The Company does not recognize revenue in situations in which inventory remains at a Stereotaxis warehouse or in situations in which title and risk of loss have not transferred to the customer. Amounts collected prior to satisfying the above revenue recognition criteria are reflected as deferred revenue. Revenue from services and license fees, whether sold individually or as a separate unit of accounting in a multiple-deliverable arrangement, is deferred and amortized over the service or license fee period, which is typically one year. Revenue from services is derived primarily from the sale of annual product maintenance plans. We recognize revenue from disposable device sales or accessories upon shipment and establish an appropriate reserve for returns. The return reserve, which is applicable only to disposable devices, is estimated based on historical experience which is periodically reviewed and updated as necessary. In the past, changes in estimate have had only a de minimis effect on revenue recognized in the period. We believe that the estimate is not likely to change significantly in the future.

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

Share-Based Compensation

Share-Based Compensation

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

The Company utilizes the Black-Scholes valuation model to determine the fair value of stock options and stock appreciation rights at the date of grant. The resulting compensation expense is recognized over the requisite service period, which is generally four years. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated based on the Company’s historical experience and future expectations. Restricted shares granted to employees are valued at the fair market value at the date of grant. The Company amortizes the fair market value to expense over the service period. If the shares are subject to performance objectives, the resulting compensation expense is amortized over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives.

Net Earnings (Loss) Per Common Share ("EPS")

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

Basic and diluted net earnings (loss) per common share are computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period.

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





 

 

 

 

 

 

 



 

 

Three months ended March 31,

Numerator:

 

 

2016

 

2015

Numerator for basic EPS

 

$

(2,274,301)

 

$

(3,135,581)

 

Numerator for diluted EPS

 

$

(2,274,301)

 

$

(3,135,581)

 

Denominator:

 

 

 

 

 

 

 

Denominator for basic EPS—weighted average shares

 

 

21,611,612 

 

 

20,742,932 

 

Denominator for diluted EPS—weighted average shares

 

 

21,611,612 

 

 

20,742,932 

 

Basic EPS

 

$

(0.11)

 

$

(0.15)

 

Diluted EPS

 

$

(0.11)

 

$

(0.15)

 



In addition, the Company did not include any portion of unearned restricted shares, outstanding options, stock appreciation rights or warrants 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 the Company’s unearned restricted shares do not contractually participate in its losses.



As of March 31, 2016, the Company had 695,117 shares of common stock issuable upon the exercise of outstanding options and stock appreciation rights at a weighted average exercise price of $9.32 per share, 2,040,365 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $3.44 per share, and 1,271,276 shares of unvested restricted share units.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This amendment is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification on the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2016 (January 1, 2017 for the Company) and interim periods within those fiscal years, with earlier application permitted. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

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

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): To simplify the presentation of deferred income taxes”. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. This standard is effective for public companies for financial statements issued for annual periods beginning after December 15, 2016 (January 1, 2017 for the Company), and interim periods within those annual periods. We adopted this accounting standard update in 2015 and there was no impact to the results of operations or cash flows.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” regarding the subsequent measurement of inventory as part of its Simplification Initiative. This standard is effective for public companies for fiscal years beginning after December 15, 2016 (January 1, 2017 for the Company), including interim periods within those fiscal years. This Update should be applied prospectively, and early application is permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the impact of adopting this accounting standard update but do not expect this to significantly impact the results of operations, financial conditions, cash flows, or financial statement presentation.

In April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. To simplify the presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update), which adds the SEC staff’s guidance on the presentation of debt issuance costs associated with lines of credit to the Codification. The SEC staff stated it will not object to an entity presenting the costs of securing line-of-credit arrangements as an asset, regardless of whether there are any outstanding borrowings. The Standard is effective for financial statements issued for fiscal years beginning after December 15, 2015 (January 1, 2016 for the Company), and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted for financial statements that have not been previously issued. We have adopted this accounting standard update. The Company’s balance sheets as of March 31, 2016 and December 31, 2015 included $320,039 and $349,018, respectively, of deferred financing costs (excluding $100,000 and $25,960, respectively, related to line-of-credit arrangements) that were, under the new guidance, presented as a direct reduction to debt liabilities.

In August 2014, the FASB issued ASU No. 2014-15, to communicate amendments to FASB Account Standards Codification Subtopic 205-40, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The ASU requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists. Management will be required to make this evaluation for both annual and interim reporting periods. Management will have to make certain disclosures if it concludes that substantial doubt exists and when it plans to alleviate substantial doubt about the entity’s ability to continue as a going concern. The standard is effective for annual periods ending after December 15, 2016 and for interim reporting periods starting in the first quarter of 2017 (December 31, 2016 for the Company). Early adoption is permitted. We are currently evaluating the impact of adopting this accounting standard update on our financial statement disclosures.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" which converges the FASB's and the International Accounting Standards Board's current standards on revenue recognition. The standard provides companies with a single model to use in accounting for revenue arising from contracts with customers and supersedes current revenue guidance. The standard is effective for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The standard permits companies to either apply the adoption to all periods presented, or apply the requirements in the year of adoption through a cumulative adjustment. In April 2015, the FASB issued an exposure draft related to the deferral of the effective date, which would delay our effective date one year. Therefore, the standard would be effective for annual and interim periods beginning after December 15, 2017 (January 1, 2018 for the Company). We are currently evaluating the impact of adopting this accounting standard update on our financial statements and disclosures and have not concluded on an adoption method.

v3.4.0.3
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2016
Summary Of Significant Accounting Policies [Abstract]  
Computation Of Basic And Diluted EPS



 

 

 

 

 

 

 



 

 

Three months ended March 31,

Numerator:

 

 

2016

 

2015

Numerator for basic EPS

 

$

(2,274,301)

 

$

(3,135,581)

 

Numerator for diluted EPS

 

$

(2,274,301)

 

$

(3,135,581)

 

Denominator:

 

 

 

 

 

 

 

Denominator for basic EPS—weighted average shares

 

 

21,611,612 

 

 

20,742,932 

 

Denominator for diluted EPS—weighted average shares

 

 

21,611,612 

 

 

20,742,932 

 

Basic EPS

 

$

(0.11)

 

$

(0.15)

 

Diluted EPS

 

$

(0.11)

 

$

(0.15)

 



v3.4.0.3
Inventories (Tables)
3 Months Ended
Mar. 31, 2016
Inventories [Abstract]  
Schedule Of Inventories



 

 

 



March 31, 2016

 

December 31, 2015



 

 

 

Raw materials

$          2,354,810

 

$         2,065,676

Work in process

427,952 

 

24,758 

Finished goods

1,702,100 

 

2,433,819 

Reserve for obsolescence

(38,499)

 

(19,971)

Total inventory

$          4,446,363

 

$         4,504,282



v3.4.0.3
Prepaid Expenses And Other Current Assets (Tables)
3 Months Ended
Mar. 31, 2016
Prepaid Expenses And Other Current Assets [Abstract]  
Schedule Of Prepaid Expenses And Other Current Assets



 

 

 



 

 

 



March 31, 2016

 

December 31, 2015



 

 

 

Prepaid expenses

$        675,820

 

$       454,822

Deferred financing costs

100,000 

 

25,960 

Deposits

312,713 

 

136,583 

Deferred cost of revenue

94,439 

 

82,987 

Total prepaid expenses and other assets

1,182,972 

 

700,352 

Less: Noncurrent prepaid expenses and other assets

(32,341)

 

(31,693)

Total current prepaid expenses and other assets

$     1,150,631

 

$       668,659



v3.4.0.3
Property And Equipment (Tables)
3 Months Ended
Mar. 31, 2016
Property And Equipment [Abstract]  
Schedule Of Property And Equipment



 

 

 



March 31,

 

December 31,



2016

 

2015



 

 

 

Equipment

$          8,496,636

 

$    8,496,636

Equipment held for lease

303,412 

 

303,412 

Leasehold improvements

2,320,368 

 

2,320,368 

 

11,120,416 

 

11,120,416 

Less: Accumulated depreciation

(10,150,489)

 

(10,053,095)

Net property and equipment

$             969,927

 

$    1,067,321



v3.4.0.3
Accrued Liabilities (Tables)
3 Months Ended
Mar. 31, 2016
Accrued Liabilities [Abstract]  
Schedule Of Accrued Liabilities



 

 

 



March 31,

 

December 31,



2016

 

2015



 

 

 

Accrued salaries, bonus, and benefits

$     2,266,158

 

$    3,053,012

Accrued rent

1,263,383 

 

1,361,379 

Accrued licenses and maintenance fees

660,781 

 

666,373 

Accrued interest

493,876 

 

494,703 

Accrued warranties

302,362 

 

316,835 

Accrued taxes

335,102 

 

324,226 

Other

194,166 

 

117,465 

Total accrued liabilities

5,515,828 

 

6,333,993 

Less: Long term accrued liabilities

(270,433)

 

(275,603)

Total current accrued liabilities

$     5,245,395

 

$    6,058,390



v3.4.0.3
Deferred Revenue (Tables)
3 Months Ended
Mar. 31, 2016
Deferred Revenue [Abstract]  
Schedule Of Deferred Revenue



 

 

 



March 31,

 

December 31,



2016

 

2015



 

 

 

 Product shipped, revenue deferred

$        455,314

 

$        366,388

 Customer deposits

1,050,000 

 

2,505,000 

 Deferred service and license fees

6,903,861 

 

6,583,745 

 Total deferred revenue

8,409,175 

 

9,455,133 

 Less: Long-term deferred revenue

(1,782,155)

 

(2,009,198)

 Total current deferred revenue

$     6,627,020

 

$     7,445,935



v3.4.0.3
Long-Term Debt And Credit Facilities (Tables)
3 Months Ended
Mar. 31, 2016
Long-Term Debt And Credit Facilities [Abstract]  
Schedule Of Debt Outstanding



 

 

 

 

 

 

 



March 31, 2016

 

December 31, 2015



Carrying

 

Estimated

 

Carrying

 

Estimated



Amount

 

Fair Value

 

Amount

 

Fair Value



 

 

 

 

 

 

 

Healthcare Royalty Partners debt

$       18,078,308

 

$    18,398,347

 

$       18,080,159

 

$       18,429,177

Less current maturities

 —

 

 —

 

 —

 

 —

Total long term debt

$       18,078,308

 

$    18,398,347

 

$       18,080,159

 

$       18,429,177



v3.4.0.3
Stockholder's Equity (Tables)
3 Months Ended
Mar. 31, 2016
Stockholders' Equity [Abstract]  
Summary Of Option And Stock Appreciation Rights Activity



 

 

 

 

 



Number of Options/SARs

 

Range of Exercise Price

 

Weighted Average Exercise Price per Share



 

 

 

 

 

Outstanding, December 31, 2015

706,494 

 

$1.45 - $116.40

 

$9.34 

Granted

 -

 

 -

 

 -

Exercised

 -

 

 -

 

 -

Forfeited

(11,377)

 

$1.74 - $36.20

 

$9.98 

Outstanding, March 31, 2016

695,117 

 

$1.45 - $116.40

 

$9.32 



Summary Of Restricted Stock Unit Activity



 

 

 



Number of Restricted Stock Units

 

Weighted Average Grant Date Fair Value per Unit



 

 

 

Outstanding, December 31, 2015

752,008 

 

$2.63 

Granted

700,600 

 

$0.78 

Vested

(175,100)

 

$3.00 

Forfeited

(6,232)

 

$2.73 

Outstanding, March 31, 2016

1,271,276 

 

$1.56 



v3.4.0.3
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2016
Fair Value Measurements [Abstract]  
Assets And Liabilities Measured At Fair Value On Recurring Basis By Level



 

 

 

 

 

 

 

 



Fair Value Measurement Using



Total

 

Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

Assets at March 31, 2016:

 

 

 

 

 

 

 

 

          Cash equivalents

$

347,821 

 

347,821 

 

—  

 

—  

Total assets at fair value

$

347,821 

 

347,821 

 

—  

 

—  

Liabilities at March 31, 2016:

 

 

 

 

 

 

 

 

          Warrants issued May 2012

$

237,650 

 

—  

 

—  

 

237,650 

          Warrants issued August 2013

$

525,186 

 

—  

 

—  

 

525,186 

Total liabilities at fair value:

$

762,836 

 

—  

 

—  

 

762,836 

Assets at December 31, 2015:

 

 

 

 

 

 

 

 

          Cash equivalents

$

524,083 

 

524,083 

 

—  

 

—  

Total assets at fair value

$

524,083 

 

524,083 

 

—  

 

—  

Liabilities at December 31, 2015:

 

 

 

 

 

 

 

 

          Warrants issued May 2012

$

143,681 

 

—  

 

—  

 

143,681 

          Warrants issued August 2013

$

650,449 

 

—  

 

—  

 

650,449 

Total liabilities at fair value:

$

794,130 

 

—  

 

—  

 

794,130 



Summary Of Changes In Fair Value Of Level 3 Financial Liabilities



 

 

 

 

 

 

 



 

 

Warrants issued May 2012

 

Warrants issued August 2013

 

Total Liabilities

Balance at beginning of period

 

 

$              143,681

 

$          650,449

 

$        794,130

     Issues

 

 

-

 

-

 

-

     Settlements

 

 

-

 

-

 

-

     Revaluation

 

 

93,969 

 

(125,263)

 

(31,294)

Balance at end of period

 

 

$              237,650

 

$          525,186

 

$        762,836



v3.4.0.3
Product Warranty Provisions (Tables)
3 Months Ended
Mar. 31, 2016
Product Warranty Provisions [Abstract]  
Schedule Of Accrued Warranty



 

 

 

 

 

 



 

March 31, 2016

 

December 31, 2015

Warranty accrual, beginning of the fiscal period

 

$

316,835 

 

$

364,548 

Accrual adjustment for product warranty

 

 

55,262 

 

 

171,384 

Payments made

 

 

(69,735)

 

 

(219,097)

Warranty accrual, end of the fiscal period

 

$

302,362 

 

$

316,835 



v3.4.0.3
Description Of Business (Details)
Mar. 31, 2016
USD ($)
item
Dec. 31, 2015
USD ($)
Description Of Business [Abstract]    
Installed base | item 126  
Cumulative net losses | $ $ (468,232,979) $ (465,958,678)
v3.4.0.3
Summary Of Significant Accounting Policies (Narrative) (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Accounting Policies [Line Items]    
Share-based compensation, requisite service period 4 years  
Options and stock appreciation rights outstanding 695,117 706,494
Weighted average exercise price $ 9.32 $ 9.34
Deferred financing costs $ 320,039 $ 349,018
Deferred financing costs related to line-of-credit arrangements $ 100,000 $ 25,960
Warrants [Member]    
Accounting Policies [Line Items]    
Common stock issuable upon exercise of outstanding warrants 2,040,365  
Exercise price of warrants $ 3.44  
Restricted Stock Units [Member]    
Accounting Policies [Line Items]    
Unvested restricted shares 1,271,276 752,008
v3.4.0.3
Summary Of Significant Accounting Policies (Computation Of Basic And Diluted EPS) (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Summary Of Significant Accounting Policies [Abstract]    
Numerator for basic EPS $ (2,274,301) $ (3,135,581)
Numerator for diluted EPS $ (2,274,301) $ (3,135,581)
Denominator for basic EPS-weighted average shares 21,611,612 20,742,932
Denominator for diluted EPS-weighted average shares 21,611,612 20,742,932
Basic EPS $ (0.11) $ (0.15)
Diluted EPS $ (0.11) $ (0.15)
v3.4.0.3
Inventories (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Inventories [Abstract]    
Raw materials $ 2,354,810 $ 2,065,676
Work in process 427,952 24,758
Finished goods 1,702,100 2,433,819
Reserve for obsolescence (38,499) (19,971)
Total inventory $ 4,446,363 $ 4,504,282
v3.4.0.3
Prepaid Expenses And Other Current Assets (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Prepaid Expenses And Other Current Assets [Abstract]    
Prepaid expenses $ 675,820 $ 454,822
Deferred financing costs 100,000 25,960
Deposits 312,713 136,583
Deferred cost of revenue 94,439 82,987
Total prepaid expenses and other assets 1,182,972 700,352
Less: Noncurrent prepaid expenses and other assets (32,341) (31,693)
Total current prepaid expenses and other assets $ 1,150,631 $ 668,659
v3.4.0.3
Property And Equipment (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Property, Plant and Equipment [Line Items]    
Gross property and equipment $ 11,120,416 $ 11,120,416
Less: Accumulated depreciation (10,150,489) (10,053,095)
Net property and equipment 969,927 1,067,321
Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Gross property and equipment 8,496,636 8,496,636
Equipment Held For Lease [Member]    
Property, Plant and Equipment [Line Items]    
Gross property and equipment 303,412 303,412
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Gross property and equipment $ 2,320,368 $ 2,320,368
v3.4.0.3
Intangible Assets (Details)
Mar. 31, 2016
USD ($)
Intangible Assets [Abstract]  
Total intangible assets $ 3,221,069
Accumulated amortization $ 2,635,010
v3.4.0.3
Accrued Liabilities (Details)
3 Months Ended
Mar. 31, 2016
USD ($)
ft²
Dec. 31, 2015
USD ($)
ft²
Sep. 30, 2013
USD ($)
ft²
Dec. 31, 2014
USD ($)
Accrued Liabilities [Abstract]        
Accrued salaries, bonus, and benefits $ 2,266,158 $ 3,053,012    
Accrued rent 1,263,383 1,361,379    
Accrued licenses and maintenance fees 660,781 666,373    
Accrued interest 493,876 494,703    
Accrued warranties 302,362 316,835   $ 364,548
Accrued taxes 335,102 324,226    
Other 194,166 117,465    
Total accrued liabilities 5,515,828 6,333,993    
Less: Long term accrued liabilities (270,433) (275,603)    
Total current accrued liabilities $ 5,245,395 $ 6,058,390    
Square feet of office leased space | ft² 52,000 3,152    
Square feet of demonstration and assembly leased space | ft² 12,000      
Square feet of terminated unimproved leased space | ft²     13,000  
Accrued lease termination costs     $ 515,138  
Accrued lease termination costs remaining $ 258,995      
Sublease expiration date Dec. 31, 2018      
v3.4.0.3
Deferred Revenue (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Deferred Revenue Arrangement [Line Items]    
Total deferred revenue $ 8,409,175 $ 9,455,133
Less: Long-term deferred revenue (1,782,155) (2,009,198)
Total current deferred revenue 6,627,020 7,445,935
Product Shipped, Revenue Deferred [Member]    
Deferred Revenue Arrangement [Line Items]    
Total deferred revenue 455,314 366,388
Customer Deposits [Member]    
Deferred Revenue Arrangement [Line Items]    
Total deferred revenue 1,050,000 2,505,000
Deferred Service And License Fees [Member]    
Deferred Revenue Arrangement [Line Items]    
Total deferred revenue $ 6,903,861 $ 6,583,745
v3.4.0.3
Long-Term Debt And Credit Facilities (Revolving Line Of Credit) (Narrative) (Details)
3 Months Ended
Mar. 31, 2016
USD ($)
May. 10, 2016
USD ($)
Dec. 31, 2015
USD ($)
Mar. 31, 2015
USD ($)
Dec. 31, 2014
USD ($)
Line of Credit Facility [Line Items]          
Cash and cash equivalents $ 1,602,951   $ 5,593,582 $ 4,438,533 $ 7,270,301
Total liquidity 6,500,000        
Revolving Credit Facility [Member]          
Line of Credit Facility [Line Items]          
Line of credit facility, maximum borrowing capacity $ 10,000,000        
Line of credit maturity date Mar. 31, 2018        
Line of credit facility, amount outstanding $ 0        
Line of credit facility, current borrowing capacity $ 4,900,000        
Subsequent Event [Member] | Revolving Credit Facility [Member]          
Line of Credit Facility [Line Items]          
Minimum tangible net worth requirement, period one   $ (24,000,000)      
Minimum tangible net worth requirement, period two   $ (24,500,000)      
Subsequent Event [Member] | Revolving Credit Facility [Member] | Minimum [Member]          
Line of Credit Facility [Line Items]          
Liquidity ratio   1.50      
v3.4.0.3
Long-Term Debt And Credit Facilities (Healthcare Royalty Partners Debt) (Narrative) (Details) - Healthcare Royalty Partners Debt [Member] - USD ($)
$ in Millions
1 Months Ended 3 Months Ended
Jan. 31, 2013
Aug. 08, 2012
Nov. 30, 2011
Mar. 31, 2016
Debt Instrument [Line Items]        
Amount borrowed $ 2.5 $ 2.5 $ 15.0  
Additional amount which may be borrowed     $ 5.0  
Percentage of royalties entitled to receive     100.00%  
Maturity date       Dec. 31, 2018
Annual interest rate     16.00%  
v3.4.0.3
Long-Term Debt And Credit Facilities (Schedule Of Debt Outstanding) (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Debt Instrument [Line Items]    
Total long term debt $ 18,078,308 $ 18,080,159
Carrying Amount [Member]    
Debt Instrument [Line Items]    
Total debt $ 18,078,308 $ 18,080,159
Less current maturities
Total long term debt $ 18,078,308 $ 18,080,159
Estimated Fair Value [Member]    
Debt Instrument [Line Items]    
Total debt $ 18,398,347 $ 18,429,177
Less current maturities
Total long term debt $ 18,398,347 $ 18,429,177
v3.4.0.3
Stockholders' Equity (Narrative) (Details)
1 Months Ended 3 Months Ended
Jun. 10, 2014
shares
Jun. 05, 2013
shares
May. 31, 2014
USD ($)
Mar. 31, 2016
USD ($)
item
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Votes per share | item       1
Dividends declared       $ 0
Dividends paid       $ 0
2012 Stock Incentive Plan [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Increase in number of shares authorized for issuance under the Plan | shares 1,000,000 1,000,000    
Stock award plans | shares       46,051
Total compensation cost not yet recognized       $ 2,300,000
Estimated forfeitures       $ 700,000
Weighted average amortization period of total compensation cost not yet recognized       4 years
September 9, 2015 Warrants Offering [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Number of common shares exercised upon conversion of warrants | shares       267,256
Gross proceeds from stock warrants exercised       $ 293,982
Sales Agreement [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Aggregate gross sales price     $ 18,000,000  
Commission percentage of gross proceeds     3.00%  
Gross proceeds from common stock sold       0
Remaining common stock available       $ 13,800,000
v3.4.0.3
Stockholders' Equity (Summary Of Option And Stock Appreciation Rights Activity) (Details) - $ / shares
3 Months Ended 12 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]    
Number of Options/SARs, Outstanding, December 31, 2015 706,494  
Number of Options/SARs, Granted  
Number of Options/SARs, Exercised  
Number of Options/SARs, Forfeited (11,377)  
Number of Options/SARs, Outstanding, March 31, 2016 695,117 706,494
Weighted Average Exercise Price per Share, Outstanding, December 31, 2015 $ 9.34  
Weighted Average Exercise Price per Share, Granted  
Weighted Average Exercise Price per Share, Exercised  
Weighted Average Exercise Price per Share, Forfeited $ 9.98  
Weighted Average Exercise Price per Share, Outstanding, March 31, 2016 9.32 $ 9.34
$1.45 - $116.40 [Member]    
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]    
Range of Exercise Prices, Lower Limit   1.45
Range of Exercise Prices, Upper Limit   $ 116.40
$1.74 - $36.20 [Member]    
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]    
Range of Exercise Prices, Lower Limit 1.74  
Range of Exercise Prices, Upper Limit 36.20  
$1.45 - $116.40 [Member]    
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]    
Range of Exercise Prices, Lower Limit 1.45  
Range of Exercise Prices, Upper Limit $ 116.40  
v3.4.0.3
Stockholders' Equity (Summary Of Restricted Stock Unit Activity) (Details) - Restricted Stock Units [Member]
3 Months Ended
Mar. 31, 2016
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Number of Restricted Stock Units, Outstanding, December 31, 2015 | shares 752,008
Number of Restricted Stock Units, Granted | shares 700,600
Number of Restricted Stock Units, Vested | shares (175,100)
Number of Restricted Stock Units, Forfeited | shares (6,232)
Number of Restricted Stock Units, Outstanding, March 31, 2016 | shares 1,271,276
Weighted Average Grant Date Fair Value per Unit, Outstanding, December 31, 2015 | $ / shares $ 2.63
Weighted Average Grant Date Fair Value per Unit, Granted | $ / shares 0.78
Weighted Average Grant Date Fair Value per Unit, Vested | $ / shares 3.00
Weighted Average Grant Date Fair Value per Unit, Forfeited | $ / shares 2.73
Weighted Average Grant Date Fair Value per Unit, Outstanding, March 31, 2016 | $ / shares $ 1.56
v3.4.0.3
Fair Value Measurements (Narrative) (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Cash equivalents invested in money market funds $ 347,821 $ 524,083
Quoted Prices In Active Markets For Identical Instruments (Level 1) [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Cash equivalents invested in money market funds $ 347,821 $ 524,083
Significant Unobservable Inputs (Level 3) [Member] | Warrants Issued May 10, 2012 [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Warrant expiration date May 01, 2018  
Volatility rate 113.14%  
Risk-free interest rate 0.73%  
Closing stock price $ 1.10  
Significant Unobservable Inputs (Level 3) [Member] | Warrants Issued August 2013 [Member]    
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]    
Warrant expiration date Nov. 01, 2018  
Volatility rate 110.74%  
Risk-free interest rate 0.87%  
Closing stock price $ 1.10  
v3.4.0.3
Fair Value Measurements (Assets And Liabilities Measured At Fair Value On Recurring Basis By Level) (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents $ 347,821 $ 524,083
Total assets at fair value 347,821 524,083
Warrants issued 762,836 794,130
Total liabilities at fair value 762,836 794,130
Warrants Issued May 10, 2012 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Warrants issued 237,650 143,681
Warrants Issued August 2013 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Warrants issued 525,186 650,449
Quoted Prices In Active Markets For Identical Instruments (Level 1) [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 347,821 524,083
Total assets at fair value $ 347,821 $ 524,083
Significant Other Observable Inputs (Level 2) [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents
Total assets at fair value
Total liabilities at fair value
Significant Other Observable Inputs (Level 2) [Member] | Warrants Issued May 10, 2012 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Warrants issued
Significant Other Observable Inputs (Level 2) [Member] | Warrants Issued August 2013 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Warrants issued
Significant Unobservable Inputs (Level 3) [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total liabilities at fair value $ 762,836 $ 794,130
Significant Unobservable Inputs (Level 3) [Member] | Warrants Issued May 10, 2012 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Warrants issued 237,650 143,681
Significant Unobservable Inputs (Level 3) [Member] | Warrants Issued August 2013 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Warrants issued $ 525,186 $ 650,449
v3.4.0.3
Fair Value Measurements (Summary Of Changes In Fair Value Of Level 3 Financial Liabilities) (Details)
3 Months Ended
Mar. 31, 2016
USD ($)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]  
Liabilities, Balance at beginning of period $ 794,130
Liabilities, Issues
Liabilities, Settlements
Liabilities, Revaluation $ (31,294)
Liabilities, Balance at end of period 762,836
Warrants Issued May 10, 2012 [Member]  
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]  
Liabilities, Balance at beginning of period $ 143,681
Liabilities, Issues
Liabilities, Settlements
Liabilities, Revaluation $ 93,969
Liabilities, Balance at end of period 237,650
Warrants Issued August 2013 [Member]  
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]  
Liabilities, Balance at beginning of period $ 650,449
Liabilities, Issues
Liabilities, Settlements
Liabilities, Revaluation $ (125,263)
Liabilities, Balance at end of period $ 525,186
v3.4.0.3
Product Warranty Provisions (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Product Warranty Provisions [Abstract]    
Standard product warranty, coverage term 1 year  
Warranty accrual, beginning of the fiscal period $ 316,835 $ 364,548
Accrual adjustment for product warranty 55,262 171,384
Payments made (69,735) (219,097)
Warranty accrual, end of the fiscal period $ 302,362 $ 316,835
v3.4.0.3
Subsequent Events (Details) - Subsequent Event [Member] - Revolving Credit Facility [Member]
$ in Millions
May. 10, 2016
USD ($)
Subsequent Event [Line Items]  
Minimum tangible net worth requirement, period one $ (24.0)
Minimum tangible net worth requirement, period two $ (24.5)
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