11. Stockholders’ Equity

The holders of common stock are entitled 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 Credit Agreement. No dividends have been declared or paid as of December 31, 2014.

Listing Transfer to NASDAQ Capital Market

On August 15, 2013, the NASDAQ Listing Qualifications Panel (the “Panel”) granted approval of the Company’s request to transfer its listing to The NASDAQ Capital Market from The NASDAQ Global Market. The Company’s securities began trading on the NASDAQ Capital Market effective August 19, 2013.

Reverse Stock Split

On July 10, 2012, the Company filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to implement a one-for-ten reverse split of our common stock (the “Reverse Stock Split”). The Reverse Stock Split was effective as of July 10, 2012, and the Company’s common stock began trading on a post-split basis on July 11, 2012.

As a result of the Reverse Stock Split, each ten shares of the Company’s issued and outstanding common stock were automatically combined and converted into one issued and outstanding share of common stock. The Reverse Stock Split affected all issued and outstanding shares of the Company’s common stock, as well as common stock underlying stock options, stock appreciation rights, restricted stock, restricted stock units, warrants and convertible debentures outstanding immediately prior to the effectiveness of the Reverse Stock Split. The Reverse Stock Split reduced the number of shares of the Company’s common stock outstanding from approximately 78 million to 7.8 million at the time of the Reverse Stock Split. In addition, the Amendment increased the number of authorized shares of the Company’s common stock from 100 million to 300 million. The Reverse Stock Split did not alter the par value of common stock, which remained $0.001 per share, or modify any voting rights or other terms of the Company’s common stock. Unless otherwise indicated, all information set forth herein gives effect to such Reverse Stock Split.

Issuances of Common Stock

In May 2012, the Company entered into a Stock and Warrant Purchase Agreement with certain institutional investors whereby it agreed to sell an aggregate of approximately 2.17 million shares of the Company's common stock (the “PIPE Common Stock”) at a price of $3.361 per share, together with six-year warrants at a price of $1.25 per share to purchase an aggregate of approximately 2.17 million shares of common stock having an exercise price of $3.361 per share (the “PIPE Warrants”). Each purchaser received a PIPE Warrant to purchase one share of common stock for every share of PIPE Common Stock purchased. Net proceeds from the sale of the securities were approximately $9.1 million, after placement agent fees and other offering expenses. The Company used the funds to repay $7 million of the revolving credit facility guaranteed by the Lenders and plans to use the balance for working capital and general corporate purposes.

Between March and July 2013, the Company amended its agreement with its primary lender and extended the $3 million guarantee of the revolving credit facility provided by affiliates of current and former members of the Board of Directors, “the Lenders”. As a result of these extensions, the Company issued the Lenders warrants to purchase common stock. The lenders received 113,636 warrants at $1.98 per share, 48,387 warrants at $1.55 per share, and 14,313 warrants at $5.24 per share.

On August 7, 2013, venture funds affiliated with Sanderling Ventures received an aggregate of 183,478 shares of common stock based upon the cashless exercise of warrants to purchase an aggregate of 262,450 shares of common stock. These warrants were comprised of 75,758 warrants with an exercise price of $1.98 per share, 156,204 warrants with an exercise price of $3.361 per share and 30,488 warrants with an exercise price of $4.10 per share. The warrants were issued by the Company in private placements in 2012 and 2013 in connection with the extension of previously disclosed guarantees.

On August 13, 2013, venture funds affiliated with Sanderling Ventures exercised PIPE Warrants to purchase an aggregate of 650,619 shares of common stock in a cashless net exercise as provided for in the PIPE Warrants, which resulted in the issuance to such funds of an aggregate of 308,194 shares of common stock. As a result, there were no net proceeds to the Company.

On August 16, 2013, certain affiliates of Franklin Templeton exercised PIPE Warrants to purchase an aggregate of 650,618 shares of common stock for cash. The Company received an aggregate of $2,186,727 gross proceeds from the sale.

On August 16, 2013, Alafi Capital Company exercised PIPE Warrants to purchase an aggregate of 261,241 shares of common stock for cash. The Company received an aggregate of $878,031 gross proceeds from the sale. Refer to Note 9 for the discussion of warrants issued in conjunction with debt offerings.

On November 27, 2013, the Company announced the results of its previously announced offering of subscription rights to purchase shares of its common stock, par value $0.001 per share. Pursuant to the rights offering, subscription rights to purchase approximately 3.4 million shares of common stock were exercised, resulting in gross proceeds to Stereotaxis of approximately $10.2 million.

The Company has reserved shares of common stock for the exercise of warrants, the issuance of options granted under the Company’s stock option plan and its stock purchase plan as follows:


	December 31,	December 31,
	2014	2013
Warrants	2,197,883	3,021,302
Stock award plans	1,297,389	1,032,462
Employee Stock Purchase Plan	250,000	-
	3,745,272	4,053,764

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 a stock incentive plan (the 2012 Stock Incentive Plan) which was subsequently approved by the Company’s stockholders. This plan replaces the 2002 Stock Incentive Plan which expired on March 25, 2012.

The 2012 Stock Incentive Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units to employees, directors, and consultants. Options granted under the 2012 Stock Incentive Plan expire no later than ten years from the date of grant. The exercise price of each incentive stock option shall not be less than 100% of the fair value of the stock subject to the option on the date the option is granted. The vesting provisions of individual options may vary, but incentive stock options generally vest 25% on the first anniversary of each grant and 1/48 per month over the next three years. Stock appreciation rights are rights to acquire a calculated number of shares of the Company’s common stock upon exercise of the rights. The number of shares to be issued is calculated as the difference between the exercise price of the right and the aggregate market value of the underlying shares on the exercise date divided by the market value as of the exercise date. Stock appreciation rights granted under the 2012 Stock Incentive Plan generally vest 25% on the first anniversary of such grant and 1/48 per month over the next three years and expire no later than ten years from the date of grant. The Company generally issues new shares upon the exercise of stock options and stock appreciation rights.

Restricted share grants are either time-based or performance-based. Time-based restricted shares generally cliff vest three years after grant. Performance-based restricted shares vest upon the achievement of performance objectives which are determined by the Company’s Board of Directors.

Restricted stock unit grants are time-based and generally vest over a period of four years. Options granted to non-employee directors expire no later than ten years from the date of grant. The exercise price of options to non-employee directors shall not be less than 100% of the fair value of the stock subject to the option on the date the option is granted. Initial grants of options to new directors generally vest over a two year period. Annual grants to directors generally vest upon the earlier of one year or the next stockholder meeting.

A summary of the option and stock appreciation rights activity for the year ended December 31, 2014 is as follows:


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

Outstanding, December 31, 2013	188,947	$1.69 - $116.40	$ 48.38
Granted	336,850	$4.04 - $5.19	$ 4.04
Exercised	-	-	-
Forfeited	(38,651)	$1.69 - $116.40	$ 54.80
Outstanding, December 31, 2014	487,146	$1.69 - $116.40	$ 17.21

As of December 31, 2014, the weighted average remaining contractual life of the options and stock appreciation rights outstanding was 7.50 years. Of the 487,146 options and stock appreciation rights that were outstanding as of December 31, 2014, 148,370 were vested and exercisable with a weighted average exercise price of $46.83 per share and a weighted average remaining term of 3.58 years.

A summary of the options and stock appreciation rights outstanding by range of exercise price is as follows:


	Year Ended December 31, 2014
							Number of		Weighted
			Weighted		Weighted		Options		Average Exercise
	Options		Average		Average		Currently		Price Per Vested
Range of Exercise Prices	Outstanding		Remaining Life		Exercise Price		Exercisable		Share
$0.00 - $10.00		338,031		9.23 years	$	4.06		1,389	$	6.49
$30.01 - $40.00		81,455		4.92 years	$	35.15		79,321	$	35.15
$40.01 - $50.00		36,660		1.76 years	$	44.13		36,660	$	44.13
$50.01 - $60.00		12,250		3.41 years	$	54.90		12,250	$	54.90
$70.01 - $80.00		4,500		0.46 years	$	78.00		4,500	$	78.00
$90.01+		14,250		1.76 years	$	105.94		14,250	$	105.94
		487,146		7.50 years	$	17.21		148,370	$	46.83

The intrinsic value of options and stock appreciation rights is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options and stock appreciation rights that were in-the-money at December 31, 2014. The intrinsic value of the options and stock appreciation rights outstanding at December 31, 2014 and the intrinsic value of fully vested options and stock appreciation rights outstanding at December 31, 2014 were zero based on a closing share price of $1.48 on December 31, 2014. No options or stock appreciation rights were exercised under the Company’s stock option plans during the year ended December 31, 2014. The weighted average grant date fair value of options and stock appreciation rights granted during the year ended December 31, 2014 was $4.04 per share.

During the year ended December 31, 2014, no options or stock appreciation rights were exercised. The Company realized less than $0.1 million and $0 from the exercise of stock options and stock appreciation rights during 2013 and 2012, respectively.

A summary of the restricted share grant activity for the year ended December 31, 2014 is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value per Share

Outstanding, December 31, 2013	6,600	$ 35.20
Granted	-	-
Vested	(6,600)	($35.20)
Forfeited	-	-
Outstanding, December 31, 2014	-	-

There were no restricted shares outstanding as of December 31, 2014. During the year ended December 31, 2013, the Company determined that it was not probable that the performance conditions related to certain of its outstanding restricted share awards would be achieved and accordingly reversed the related shares outstanding.

A summary of the restricted stock unit activity for the year ended December 31, 2014 is as follows:


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

Outstanding, December 31, 2013	588,759	$ 2.05
Granted	410,400	$ 3.91
Vested	(291,148)	$ 2.00
Forfeited	(10,260)	$ 3.65
Outstanding, December 31, 2014	697,751	$ 3.14

The intrinsic value of restricted shares and restricted stock units outstanding at December 31, 2014 was zero and $1.0 million, respectively, based on a closing share price of $1.48 as of December 31, 2014. During the year ended December 31, 2014, the aggregate intrinsic value of restricted shares and restricted stock units vested was less than $0.1 and $1.1 million, respectively, determined at the date of vesting.

During the fourth quarter of 2014, the Company made an adjustment to its forfeiture rate based on historical information, which resulted in an increase to share-based compensation of approximately $0.1 million for the year ended December 31, 2014.

As of December 31, 2014, 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 $1.6 million, net of estimated forfeitures of approximately $1.5 million. This cost will be amortized over a weighted average period of approximately two years on a straight-line basis over the underlying estimated service periods and will be adjusted for subsequent changes in estimated forfeitures.

2009 Employee Stock Purchase Plan

In 2009, the Company adopted its 2009 Employee Stock Purchase Plan (“ESPP”). In June 2014, our shareholders approved a proposal to amend the ESPP to increase the number of shares authorized for issuance under the ESPP by 250,000 shares. Eligible employees have the opportunity to participate in a new purchase period every 3 months. Under the terms of the plan, employees can purchase up to 15% of their compensation of the Company’s common stock, subject to an annual maximum of $25,000, at 95% of the fair market value of the stock at the end of the purchase period, subject to certain plan limitations. As of December 31, 2014, there were 250,000 remaining shares available for issuance under the Employee Stock Purchase Plan.