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			&lt;font style="display: inline;font-weight:bold;font-style:italic;"&gt;1. Description of Business&lt;/font&gt;
		&lt;/p&gt;
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			&lt;font style="display: inline;"&gt;Stereotaxis designs, manufactures and markets the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Epoch&lt;/font&gt;&lt;font style="display: inline;"&gt; Solution, which is an advanced remote robotic navigation system for use in a hospital&amp;#x2019;s interventional surgical suite, or &amp;#x201C;interventional lab&amp;#x201D;, 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.&amp;nbsp;&amp;nbsp;The &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Epoch&lt;/font&gt;&lt;font style="display: inline;"&gt; Solution is comprised of the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;"&gt; ES Robotic Magnetic Navigation System (&amp;#x201C;&lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe &lt;/font&gt;&lt;font style="display: inline;"&gt;ES system&amp;#x201D;), &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Odyssey&lt;/font&gt;&lt;font style="display: inline;"&gt; Information Management Solution (&amp;#x201C;&lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Odyssey &lt;/font&gt;&lt;font style="display: inline;"&gt;Solution&amp;#x201D;), and the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Vdrive&lt;/font&gt;&lt;font style="display: inline;"&gt; Robotic Navigation System (&amp;#x201C;&lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Vdrive &lt;/font&gt;&lt;font style="display: inline;"&gt;system&lt;/font&gt;&lt;font style="display: inline;"&gt;&amp;#x201D;). &lt;/font&gt;
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		&lt;p style="margin:4.5pt 0pt 0pt;line-height:100%;text-indent:23pt;font-family:Times New Roman;font-size: 10pt"&gt;
			&lt;font style="display: inline;"&gt;The &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;"&gt; 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.&lt;/font&gt;
		&lt;/p&gt;
		&lt;p style="margin:9pt 0pt 0pt;line-height:100%;text-indent:23pt;font-family:Times New Roman;font-size: 10pt"&gt;
			&lt;font style="display: inline;"&gt;In addition to the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;"&gt; system and its components, Stereotaxis also has developed the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Odyssey&lt;/font&gt;&lt;font style="display: inline;"&gt; 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&lt;/font&gt;&lt;font style="display: inline;"&gt; the&lt;/font&gt;&lt;font style="display: inline;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Odyssey&lt;/font&gt;&lt;font style="display: inline;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Cinema&lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;"&gt;solution&lt;/font&gt;&lt;font style="display: inline;"&gt;, which is 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 local area network and over the global &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Odyssey&lt;/font&gt;&lt;font style="display: inline;"&gt; Network providing physicians with a tool for clinical collaboration, remote consultation and training.&lt;/font&gt;
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		&lt;p style="margin:4.5pt 0pt 0pt;text-indent:24.5pt;text-align:justify;text-justify:inter-ideograph;border-bottom:1pt none #D9D9D9 ;line-height:100%;font-family:Times New Roman;font-size: 10pt"&gt;
			&lt;font style="display: inline;font-size:10pt;"&gt;Our &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Vdrive &lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt;system&lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt;provides navigation and stability for diagnostic and therapeutic devices designed to improve&lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt;interventional procedures. The &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Vdrive &lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt;system complements the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; ES system control of therapeutic catheters for fully remote procedures and enables single-operator workflow and is sold as two options, the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Vdrive&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; system and the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Vdrive Duo&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; system. In addition to the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Vdrive&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; system and the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Vdrive Duo&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; system, we also manufacture and market various disposable components which can be manipulated by these systems.&lt;/font&gt;
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		&lt;p style="margin:9pt 0pt 0pt;text-indent:24.5pt;text-align:justify;text-justify:inter-ideograph;border-top:1pt none #D9D9D9 ;line-height:100%;font-family:Times New Roman;font-size: 10pt"&gt;
			&lt;font style="display: inline;font-size:10pt;"&gt;We promote the full &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Epoch&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; Solution in a typical hospital implementation, subject to regulatory approvals or clearances. The full &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Epoch&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; 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 warranty period, and software licenses. In hospitals where the full &lt;/font&gt;&lt;font style="display: inline;font-style:italic;font-size:10pt;"&gt;Epoch&lt;/font&gt;&lt;font style="display: inline;font-size:10pt;"&gt; Solution has not been implemented, equipment upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.&lt;/font&gt;
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		&lt;p style="margin:9pt 0pt 0pt;line-height:100%;text-indent:23pt;font-family:Times New Roman;font-size: 10pt"&gt;
			&lt;font style="display: inline;"&gt;The core components of Stereotaxis systems have &lt;/font&gt;&lt;font style="display: inline;"&gt;received regulatory clearance in the U.S., Europe, Canada and elsewhere.&amp;nbsp; &lt;/font&gt;&lt;font style="display: inline;"&gt;The &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;V-Sono&lt;/font&gt;&lt;font style="display: inline;"&gt; ICE catheter manipulator has received U.S. clearance, and the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;V-Loop&lt;/font&gt;&lt;font style="display: inline;"&gt; circular catheter manipulator is currently in clinical trials in order to obtain clearance by the U.S. Food and Drug Administration.&lt;/font&gt;
		&lt;/p&gt;
		&lt;p style="margin:9pt 0pt 0pt;line-height:100%;text-indent:23pt;font-family:Times New Roman;font-size: 10pt"&gt;
			&lt;font style="display: inline;"&gt;Since our inception, we have generated significant losses. As of &lt;/font&gt;&lt;font style="display: inline;"&gt;June 30&lt;/font&gt;&lt;font style="display: inline;"&gt;, 2013&lt;/font&gt;&lt;font style="display: inline;"&gt; we had incurred cumulative net losses of approximately $&lt;/font&gt;&lt;font style="display: inline;"&gt;39&lt;/font&gt;&lt;font style="display: inline;"&gt;3&lt;/font&gt;&lt;font style="display: inline;"&gt; million. In May 2011, the Company introduced the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;"&gt; ES &lt;/font&gt;&lt;font style="display: inline;"&gt;system&lt;/font&gt;&lt;font style="display: inline;"&gt;, which is the latest generation of the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;"&gt; Robotic Magnetic Navigation System and will replace the &lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;"&gt; II system going forward. As of &lt;/font&gt;&lt;font style="display: inline;"&gt;June 30&lt;/font&gt;&lt;font style="display: inline;"&gt;, 2013, the Company had an installed base &lt;/font&gt;&lt;font style="display: inline;"&gt;of &lt;/font&gt;&lt;font style="display: inline;"&gt;88&lt;/font&gt;&lt;font style="display: inline;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;font-style:italic;"&gt;Niobe&lt;/font&gt;&lt;font style="display: inline;"&gt; ES systems and has received positive feedback from the physicians at these sites.&amp;nbsp;&amp;nbsp;During the third quarter of 2011, the Company implemented a wide ranging plan to rebalance and reduce opera&lt;/font&gt;&lt;font style="display: inline;"&gt;ting expenses&lt;/font&gt;&lt;font style="display: inline;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;"&gt;by&lt;/font&gt;&lt;font style="display: inline;"&gt;&amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;"&gt;15&lt;/font&gt;&lt;font style="display: inline;"&gt;% &amp;nbsp;&lt;/font&gt;&lt;font style="display: inline;"&gt;to &lt;/font&gt;&lt;font style="display: inline;"&gt;20&lt;/font&gt;&lt;font style="display: inline;"&gt;% on an annual run rate basis&lt;/font&gt;&lt;font style="display: inline;"&gt;.&amp;nbsp;&amp;nbsp;During the year ended December 31, 2012, the Company reduced operating expenses by approximately $&lt;/font&gt;&lt;font style="display: inline;"&gt;19&lt;/font&gt;&lt;font style="display: inline;"&gt; million or &lt;/font&gt;&lt;font style="display: inline;"&gt;31&lt;/font&gt;&lt;font style="display: inline;"&gt;% over the prior year.&amp;nbsp;&amp;nbsp;We expect to incur additional losses throughout the remainder of 2013 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.&lt;/font&gt;
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			&lt;font style="display: inline;"&gt;&amp;nbsp;&lt;/font&gt;
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		&lt;p&gt;&lt;font size="1"&gt; &lt;/font&gt;&lt;/p&gt;
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 -Publisher FASB

 -Name Accounting Standards Codification

 -Topic 275

 -SubTopic 10

 -Section 50

 -Paragraph 2

 -URI http://asc.fasb.org/extlink&amp;oid=6927468&amp;loc=d3e6003-108592



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