Stereotaxis Inc

Previous wording

This report includes various forward-looking statements that are subject to risks and uncertainties, many of which are beyond our control. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Part II - Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31,2023, as well as various impacts related toour recently announced proposed acquisition of Access Point Technologies, Inc. (“APT”). Forward-looking statements discuss matters that are not historical facts. Forward-looking statements include, but are not limited to, discussions regarding our operating strategy, sales and marketing strategy, regulatory strategy, industry, economic conditions, financial condition, liquidity, capital resources, results of operations, the on-going impact of the coronavirus (“COVID-19”) pandemic and our response to it or any impact of a similar pandemic, andstatements relating to our ability to consummate the APT acquisition within the expected timing, or at all.* 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.*

Current wording

This report includes various forward-looking statements that are subject to risks and uncertainties, many of which are beyond our control. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Part II - Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the year ended December 31,2023, as well as various impacts related to our previously announced acquisition of Access Point Technologies, Inc. (“APT”). Forward-looking statements discuss matters that are not historical facts. Forward-looking statements include, but are not limited to, discussions regarding our operating strategy, sales and marketing strategy, regulatory strategy, industry, economic conditions, financial condition, liquidity, capital resources, results of operations, the on-going impact of the coronavirus (“COVID -19”) pandemic and our response to it or any impact of a similar pandemic, and statements relating to our recent acquisition of APT including any benefits expected from the acquisition, potential strategic implications as a result of the acquisition, and the potential for achievement of the regulatory and commercial milestones that would trigger contingent payments in the transaction. 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.

Previous wording

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

Current wording

There is substantial real-world evidence and clinical literature for Robotic Magnetic Navigation in electrophysiology. Hundreds of electrophysiologists at over one hundred hospitals globally have treated over 100,000 arrhythmia patients with our robotic technology. Clinical use of our technology has been documented in over 500 clinical publications. Robotic Magnetic Navigation is designed to enable physicians to complete more complex interventional procedures with greater success and safety by providing image-guided delivery of catheters through the blood vessels and chambers of the heart to treatment sites. This is achieved using externally applied computer-controlled magnetic fields that govern the motion of the working tip of the catheter, resulting in improved navigation. The more flexible atraumatic design of catheters driven using magnetic fields may reduce the risk of patient harm and other adverse events. Performing the procedure from a control cockpit enables physicians to complete procedures in a safe location protected from x-ray exposure, with greater ergonomics, and improved efficiency. We believe these benefits can be applicable in other endovascular indications where navigation through complex vasculature is often challenging or unsuccessful and generates significant x-ray exposure, and we are investing in research and development in these areas.

Previous wording

We have received regulatory clearances and approvals necessary for us to market theGenesis RMN System in the U.S. and Europe, and we are in the process of obtaining necessary registrations for extending our markets in other countries. TheNiobe System, our prior generation robotic magnetic navigation system, theOdyssey Solution,Cardiodrive, e-Contact, and various disposable interventional devices have received regulatory clearances and approvals in the U.S., Europe, Canada, China, Japan and various other countries. We have received the regulatory clearances and approvals that allow us to market theVdrive andVdrive Duo Systems with theV-CASdevice in the U.S. and Canada. We are pursuing regulatory approvals for the Stereotaxis MAGiC catheter, a robotically-navigated magnetic ablation catheter designed to perform minimally invasive cardiac ablation procedures, in various global geographies. Approval processes can be lengthy and uncertain, submissions may require revised or additional non-clinical and clinical data, and regulatory applications could be denied.

Current wording

We have received regulatory clearances and approvals necessary for us to market theGenesis RMN System in the U.S. and Europe, and we are in the process of obtaining necessary registrations for extending our markets in other countries. TheNiobe System, our prior generation robotic magnetic navigation system, theOdyssey Solution,Cardiodrive, e-Contact, and various disposable interventional devices have received regulatory clearances and approvals in the U.S., Europe, Canada, China, Japan and various other countries. We have regulatory clearances and approvals that allow us to market theVdrive andVdrive Duo Systems with the V-CAS device in the U.S., Canada and Europe. We are pursuing regulatory approvals for the Stereotaxis MAGiC catheter, a robotically-navigated magnetic ablation catheter designed to perform minimally invasive cardiac ablation procedures, in various global geographies. Approval processes can be lengthy and uncertain, submissions may require revised or additional non-clinical and clinical data, and regulatory applications could be denied.

Previous wording

Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation, service-type warranty, and an implied obligation to provide software enhancements if and when available for one year following installation. Revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Revenue from service-type warranties and the implied obligation to deliver software enhancements if and when available is included in Other Recurring Revenue and is recognized ratably typically over the first year following installation of the system as the customer receives the service-type warranty and right to software updates throughout the period. The Company’s system contracts generally do not provide a right of return. Systems are generally covered by a one-year service-type warranty or a one-year assurance-type warranty. Assurance-type warranty costs were less than $0.1 million for the three months ended March 31, 2024, and 2023.

Current wording

Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation, service-type warranty, and an implied obligation to provide software enhancements if and when available for one year following installation. Revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Revenue from service-type warranties and the implied obligation to deliver software enhancements if and when available is included in Other Recurring Revenue and is recognized ratably typically over the first year following installation of the system as the customer receives the service-type warranty and right to software updates throughout the period. The Company’s system contracts generally do not provide a right of return. Systems may be covered by aone-year assurance-type warranty in lieu of a service-type warranty. Assurance-type warranty costs were less than $0.1 million for the six months ended June 30, 2024, and 2023.

Previous wording

Revenue from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by an assurance type warranty that provides for the return of defective products. Warranty costs were not material for the three months ended March 31, 2024, and 2023.

Current wording

Revenue from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by an assurance type warranty that provides for the return of defective products. Warranty costs were not material for the six months ended June 30, 2024, and 2023.

Previous wording

Revenue. Revenue increased from $6.5 million for the three months ended March 31, 2023, to $6.9 million for the three months ended March 31, 2024, an increase of 5%. Revenue from the sales of systems increased to $2.6 million for the three months ended March 31, 2024, from $1.8 million for the three months ended March 31, 2023, driven by increased system sales volumes and changes in product mix in the current year period. Revenue from sales of disposable interventional devices, service, and accessories decreased to approximately $4.3 million for the three months ended March 31, 2024, from $4.7 million for the three months ended March 31, 2023, a decrease of approximately 10%. The decrease was primarily driven by lower service revenue from time and material contracts in addition to lower current period disposable sales volumes related to Biosense Webster catheter shortages.

Current wording

Revenue. Revenue decreased from $7.9 million for the three months ended June 30, 2023, to $4.5 million for the three months ended June 30, 2024, a decrease of 43%. Revenue from the sales of systems decreased to $0.2 million for the three months ended June 30, 2024, from $3.3 million for the three months ended June 30, 2023, driven by decreased system sales volumes in the current year period. Revenue from sales of disposable interventional devices, service, and accessories decreased to approximately $4.3 million for the three months ended June 30, 2024, from $4.6 million for the three months ended June 30, 2023, a decrease of approximately 6%. The decrease was primarily driven by decreased service revenue in the current year period.

Previous wording

Cost of Revenue. Cost of revenue increased from $2.7 million for the three months ended March 31, 2023, to $2.9 million for the three months ended March 31, 2024, an increase of approximately 9%. As a percentage of our total revenue, overall gross margin remained fairly consistent at 58% for the three months ended March 31, 2024, compared to 59% for the three months ended March 31, 2023. Cost of revenue for systems sold increased to $1.9 million for the three months ended March 31, 2024, from $1.7 million for the three months ended March 31, 2023, driven by increased system sales volumes and changes in product mix in the current year period. Gross margin for systems was $0.7 million for the three months ended March 31, 2024, compared to $0.1 million for the three months ended March 31, 2023. Cost of revenue for disposables, service, and accessories remained consistent at $1.0 million for the three months ended March 31, 2023, and 2024. Gross margin for disposables, service, and accessories was 76% for the three months ended March 31, 2024, compared to 79% for the three months ended March 31, 2023.

Current wording

Cost of Revenue. Cost of revenue decreased from $3.7 million for the three months ended June 30, 2023, to $1.2 million for the three months ended June 30, 2024, a decrease of approximately 68%. As a percentage of our total revenue, overall gross margin increased to 74% for the three months ended June 30, 2024, from 53% for the three months ended June 30, 2023, primarily due to changes in product mix. Cost of revenue for systems sold decreased from $2.7 million for the three months ended June 30, 2023, to $0.2 million for the three months ended June 30, 2024, driven by decreased system sales volumes in the current year period. Gross margin for systems was $0.6 million for the three months ended June 30, 2023, compared to less than $0.1 million for the three months ended June 30, 2024. Cost of revenue for disposables, service, and accessories remained consistent at $1.0 million for the three months ended June 30, 2023, and 2024. Gross margin for disposables, service, and accessories was 76% for the three months ended June 30, 2024, compared to 79% for the three months ended June 30, 2023. The decrease was driven primarily by decreased service revenue in the current year period.

Previous wording

Research and Development Expenses. Research and development expenses decreased from $2.7 million for the three months ended March 31, 2023, to $2.2 million for the three months ended March 31, 2024, a decrease of approximately 18%. This decrease was primarily driven by project timing and decreased headcount-related costs in the current year period, partially offset by higher clinical trial costs.

Current wording

Research and Development Expenses. Research and development expenses decreased from $2.6 million for the three months ended June 30, 2023, to $2.3 million for the three months ended June 30, 2024, a decrease of approximately 14%. This decrease was primarily driven by the reversal of an accrued regulatory license fee of approximately $0.5 million and decreased headcount costs offset slightly by project timing, including regulatory fees, in the current year period.

Previous wording

General and Administrative Expenses. General and administrative expenses include finance, information systems, legal, and general management. General and administrative expenses decreased from $3.6 million for the three months ended March 31, 2023, to $3.5 million for the three months ended March 31, 2024, a decrease of approximately 4%. This decrease was driven by lower administrative and headcount-related costs in the current period.

Current wording

General and Administrative Expenses. General and administrative expenses include finance, information systems, legal, and general management. General and administrative expenses increased from $3.5 million for the three months ended June 30, 2023, to $3.8 million for the three months ended June 30, 2024, an increase of approximately 8%. This increase was primarily driven by higher administrative expenses and professional service fees in the current period.

Previous wording

Interest Income (Expense). Net interest income was approximately $0.2 million for the three months ended March 31, 2024, compared to approximately $0.3 million for the three months ended March 31, 2023. The decrease was driven by lower invested balances in the current year period.

Current wording

Interest Income (Expense). Net interest income was approximately $0.3 million for the three months ended June 30, 2023, compared to $0.2 million for the three months ended June 30, 2024. The decrease was driven by lower invested balances in the current year period.

Previous wording

Sales and Marketing Expenses. Sales and marketing expenses decreased from $3.1 million for the three months ended March 31, 2023, to $3.0 million for the three months ended March 31, 2024, a decrease of approximately 5% primarily due to decreased headcount-related costs in the current year period.

Current wording

Sales and Marketing Expenses. Sales and marketing expenses decreased from $6.5 million for the six months ended June 30, 2023, to $6.3 million for the six months ended June 30, 2024, a decrease of approximately 3%. This decrease was primarily due to lower headcount expenses in the current year period.

Previous wording

As of March 31, 2024, we had $18.2 million of cash and cash equivalents, inclusive of restricted cash. We had working capital of $18.4 million as of March 31, 2024, compared to $20.0 million as of December 31, 2023.

Current wording

As of June 30, 2024, we had $15.2 million of cash and cash equivalents, inclusive of restricted cash. We had working capital of $15.8 million as of June 30, 2024, compared to $20.0 million as of December 31, 2023.

Previous wording

The following table summarizes our cash flow by operating, investing and financing activities for the three months ended March 31, 2024, and 2023 (in thousands):

Current wording

The following table summarizes our cash flow by operating, investing and financing activities for the six months ended June 30, 2024, and 2023 (in thousands):

Previous wording

Net cash used in operating activities. We used approximately $2.3 million and $2.8 million of cash for operating activities during the three months ended March 31, 2024, and 2023, respectively. The decrease in cash used in operating activities was driven by the decrease in operating loss in the current year period partially offset by changes in working capital.

Current wording

Net cash used in operating activities. We used approximately $5.4 million and $5.7 million of cash for operating activities during the six months ended June 30, 2024, and 2023, respectively. The decrease in cash used in operating activities was driven by changes in working capital.

Previous wording

Net cash provided by financing activities. We generated less than $0.1 million of cash from financing activities during the three months ended March 31, 2024, and 2023. The cash generated in both periods was driven by the proceeds from issuance of stock from the exercise of options, net of issuance costs, and from our employee stock purchase program.

Current wording

Net cash provided by financing activities. We generated less than $0.1 million of cash from financing activities during the six months ended June 30, 2024, and 2023. The cash generated in both periods was driven by the proceeds from issuance of stock from the exercise of options, net of issuance costs, and from our employee stock purchase program.