##### 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 June 30, 2010.



| ̈ | 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:
000-50884





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).      ̈  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         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

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 August 2, 2010 was 50,372,024.









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##### Table of Contents

STEREOTAXIS, INC.

INDEX TO FORM 10-Q



|                             |  |               |  |                                                                                       |  |      
|---------------------------- |  | ------------- |  | ------------------------------------------------------------------------------------- |  | -----
|                             |  |               |  |                                                                                       |  | Page 
|Part I Financial Information |  |              
|                             |  |               | 
|                             |  | Item 1.       |  | Financial Statements (unaudited)                                                      |  |      
|                             |  |               |  | Balance Sheets                                                                        |  | 3    
|                             |  |               |  | Statements of Operations                                                              |  | 4    
|                             |  |               |  | Statements of Cash Flows                                                              |  | 5    
|                             |  |               |  | Notes to Financial Statements                                                         |  | 6-12 
|                             |  |               | 
|                             |  | Item 2.       |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 13-18
|                             |  |               | 
|                             |  | Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 18   
|                             |  |               | 
|                             |  | Item 4.       |  | Controls and Procedures                                                               |  | 19   
|                             | 
|Part II Other Information    |  |              
|                             |  |               | 
|                             |  | Item 1.       |  | Legal Proceedings                                                                     |  | 20   
|                             |  |               | 
|                             |  | Item 1A.      |  | Risk Factors                                                                          |  | 20   
|                             |  |               | 
|                             |  | Item 2.       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 20   
|                             |  |               | 
|                             |  | Item 3.       |  | Defaults upon Senior Securities                                                       |  | 20   
|                             |  |               | 
|                             |  | Item 4.       |  | [Reserved]                                                                            |  | 20   
|                             |  |               | 
|                             |  | Item 5.       |  | Other Information                                                                     |  | 20   
|                             |  |               | 
|                             |  | Item 6.       |  | Exhibits                                                                              |  | 20   
|                             |  |              
|                             |  | Signatures    |  | 21                                                                                   
|                             |  |              
|                             |  | Exhibit Index |  | 22                                                                                   



2



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##### Table of Contents

|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

STEREOTAXIS, INC.

BALANCE SHEETS



|                                                                                                                                                       |  |             |              |   |              |   |              |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ------------ | - | ------------ | - | ------------ | -
|                                                                                                                                                       |  | June 30,    |              |   | December 31, |  
|                                                                                                                                                       |  | 2010        |              |   | 2009         |  
|                                                                                                                                                       |  | (unaudited) |              |   |              |  
|Assets                                                                                                                                                 |  |             |              |   |              |   |              |  
|Current assets:                                                                                                                                        |  |             |              |   |              |   |              |  
|Cash and cash equivalents                                                                                                                              |  | $           | 22,014,249   |   |              | $ | 30,546,550   |  
|Accounts receivable, net of allowance of $294,368 and $322,463 in 2010 and 2009, respectively                                                          |  |             | 14,147,775   |   |              |   | 11,152,648   |  
|Current portion of long-term receivables                                                                                                               |  |             | 63,800       |   |              |   | 66,800       |  
|Inventories                                                                                                                                            |  |             | 4,272,702    |   |              |   | 4,403,675    |  
|Prepaid expenses and other current assets                                                                                                              |  |             | 3,024,675    |   |              |   | 3,872,535    |  
|                                                                                                                                                       |  |             |              |   |              |   |              |  
|Total current assets                                                                                                                                   |  |             | 43,523,201   |   |              |   | 50,042,208   |  
|Property and equipment, net                                                                                                                            |  |             | 4,445,477    |   |              |   | 4,790,310    |  
|Intangible assets, net                                                                                                                                 |  |             | 2,742,778    |   |              |   | 1,144,445    |  
|Long-term receivables                                                                                                                                  |  |             | 146,425      |   |              |   | 138,441      |  
|Other assets                                                                                                                                           |  |             | 5,112        |   |              |   | 5,112        |  
|                                                                                                                                                       |  |             |              |   |              |   |              |  
|Total assets                                                                                                                                           |  | $           | 50,862,993   |   |              | $ | 56,120,516   |  
|                                                                                                                                                       |  |             |              |   |              |   |              |  
|                                                                                                                                                       |  |            
|Liabilities and stockholders equity                                                                                                                   |  |             |              |   |              |   |              |  
|Current liabilities:                                                                                                                                   |  |             |              |   |              |   |              |  
|Short-term debt and current maturities of long-term debt                                                                                               |  | $           | 19,499,999   |   |              | $ | 3,333,333    |  
|Accounts payable                                                                                                                                       |  |             | 5,766,991    |   |              |   | 3,881,205    |  
|Accrued liabilities                                                                                                                                    |  |             | 7,698,627    |   |              |   | 8,615,287    |  
|Deferred revenue                                                                                                                                       |  |             | 7,606,228    |   |              |   | 7,191,492    |  
|Warrants                                                                                                                                               |  |             | 3,172,562    |   |              |   | 4,142,614    |  
|                                                                                                                                                       |  |             |              |   |              |   |              |  
|Total current liabilities                                                                                                                              |  |             | 43,744,407   |   |              |   | 27,163,931   |  
|                                                                                                                                                       |  |            
|Long-term debt, less current maturities                                                                                                                |  |             | 7,154,045    |   |              |   | 20,346,655   |  
|Long-term deferred revenue                                                                                                                             |  |             | 789,381      |   |              |   | 948,574      |  
|Other liabilities                                                                                                                                      |  |             | 14,134       |   |              |   | 20,013       |  
|                                                                                                                                                       |  |            
|Stockholders equity:                                                                                                                                  |  |             |              |   |              |   |              |  
|Preferred stock, par value $0.001; 10,000,000 shares authorized at 2010 and 2009, none outstanding at 2010 and
2009                                    |  |             |             |   |              |   |             |  
|Common stock, par value $0.001; 100,000,000 shares authorized at 2010 and 2009, 50,356,233 and 50,208,171 shares issued at 2010
and 2009, respectively |  |             | 50,356       |   |              |   | 50,208       |  
|Additional paid in capital                                                                                                                             |  |             | 335,058,197  |   |              |   | 331,249,918  |  
|Treasury stock, 40,151 shares at 2010 and 2009                                                                                                         |  |             | (205,999     | ) |              |   | (205,999     | )
|Accumulated deficit                                                                                                                                    |  |             | (335,741,528 | ) |              |   | (323,452,784 | )
|                                                                                                                                                       |  |             |              |   |              |   |              |  
|Total stockholders equity (deficit)                                                                                                                   |  |             | (838,974     | ) |              |   | 7,641,343    |  
|                                                                                                                                                       |  |             |              |   |              |   |              |  
|Total liabilities and stockholders equity                                                                                                             |  | $           | 50,862,993   |   |              | $ | 56,120,516   |  
|                                                                                                                                                       |  |             |              |   |              |   |              |  

See accompanying notes.



3



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##### Table of Contents

STEREOTAXIS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|-------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                                                     |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|                                                                     |  | 2010                        |            |   | 2009                      |   |            | 2010 |  |   | 2009        |  
|Revenue:                                                             |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Systems                                                              |  | $                           | 9,439,857  |   |                           | $ | 8,162,504  |      |  | $ | 14,673,611  |   |  | $ | 15,023,312  |  
|Disposables, service and accessories                                 |  |                             | 5,578,221  |   |                           |   | 4,481,833  |      |  |   | 10,961,076  |   |  |   | 8,754,162   |  
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Total revenue                                                        |  |                             | 15,018,078 |   |                           |   | 12,644,337 |      |  |   | 25,634,687  |   |  |   | 23,777,474  |  
|                                                                     |  |                             |            |  
|Cost of revenue:                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Systems                                                              |  |                             | 4,313,774  |   |                           |   | 3,212,031  |      |  |   | 6,390,490   |   |  |   | 5,775,513   |  
|Disposables, service and accessories                                 |  |                             | 612,379    |   |                           |   | 1,453,854  |      |  |   | 1,456,332   |   |  |   | 2,351,052   |  
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Total cost of revenue                                                |  |                             | 4,926,153  |   |                           |   | 4,665,885  |      |  |   | 7,846,822   |   |  |   | 8,126,565   |  
|                                                                     |  |                             |            |  
|Gross margin                                                         |  |                             | 10,091,925 |   |                           |   | 7,978,452  |      |  |   | 17,787,865  |   |  |   | 15,650,909  |  
|                                                                     |  |                             |            |  
|Operating expenses:                                                  |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Research and development                                             |  |                             | 3,358,008  |   |                           |   | 3,636,007  |      |  |   | 6,727,546   |   |  |   | 6,945,870   |  
|Sales and marketing                                                  |  |                             | 8,446,612  |   |                           |   | 7,680,549  |      |  |   | 15,141,730  |   |  |   | 15,133,984  |  
|General and administrative                                           |  |                             | 3,976,057  |   |                           |   | 3,314,678  |      |  |   | 7,866,394   |   |  |   | 7,352,843   |  
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Total operating expenses                                             |  |                             | 15,780,677 |   |                           |   | 14,631,234 |      |  |   | 29,735,670  |   |  |   | 29,432,697  |  
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Operating loss                                                       |  |                             | (5,688,752 | ) |                           |   | (6,652,782 | )    |  |   | (11,947,805 | ) |  |   | (13,781,788 | )
|                                                                     |  |                             |            |  
|Other income                                                         |  |                             | 2,507,221  |   |                           |   | 304,709    |      |  |   | 970,052     |   |  |   | 555,646     |  
|Interest income                                                      |  |                             | 2,148      |   |                           |   | 4,376      |      |  |   | 4,930       |   |  |   | 31,349      |  
|Interest expense                                                     |  |                             | (682,804   | ) |                           |   | (1,096,080 | )    |  |   | (1,315,921  | ) |  |   | (1,775,071  | )
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Net loss                                                             |  | $                           | (3,862,187 | ) |                           | $ | (7,439,777 | )    |  | $ | (12,288,744 | ) |  | $ | (14,969,864 | )
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|                                                                     |  |                             |            |  
|Net loss per common share:                                           |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Basic and diluted                                                    |  | $                           | (0.08      | ) |                           | $ | (0.18      | )    |  | $ | (0.25       | ) |  | $ | (0.36       | )
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|                                                                     |  |                             |            |  
|Weighted average shares used in computing net loss per common share: |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  
|Basic and diluted                                                    |  |                             | 49,885,589 |   |                           |   | 41,670,130 |      |  |   | 49,753,046  |   |  |   | 41,476,704  |  
|                                                                     |  |                             |            |   |                           |   |            |      |  |   |             |   |  |   |             |  

See accompanying notes.



4



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STEREOTAXIS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                        |  |                           |             |   |      |   |             |  
|----------------------------------------------------------------------- |  | ------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                        |  | Six Months Ended June 30, |            
|                                                                        |  | 2010                      |             |   | 2009 |  
|Cash flows from operating activities                                    |  |                           |             |   |      |   |             |  
|Net loss                                                                |  | $                         | (12,288,744 | ) |      | $ | (14,969,864 | )
|Adjustments to reconcile net loss to cash used in operating activities: |  |                           |             |   |      |   |             |  
|Depreciation                                                            |  |                           | 926,511     |   |      |   | 1,128,860   |  
|Amortization                                                            |  |                           | 66,667      |   |      |   | 66,667      |  
|Amortization of warrants                                                |  |                           | 621,348     |   |      |   | 674,575     |  
|Share-based compensation                                                |  |                           | 751,876     |   |      |   | 2,608,500   |  
|Loss on asset disposal                                                  |  |                           | 4,556       |   |      |   | 551,559     |  
|Non-cash royalty (income), net                                          |  |                           | (1,628,842  | ) |      |   | (833,582    | )
|Warrant adjustment                                                      |  |                           | (970,052    | ) |      |   | (555,646    | )
|Changes in operating assets and liabilities:                            |  |                           |             |   |      |   |             |  
|Accounts receivable                                                     |  |                           | (2,995,127  | ) |      |   | (2,212,230  | )
|Other receivables                                                       |  |                           | (4,984      | ) |      |   | 13,443      |  
|Inventories                                                             |  |                           | 93,698      |   |      |   | 796,181     |  
|Prepaid expenses and other current assets                               |  |                           | 643,079     |   |      |   | 180,572     |  
|Other assets                                                            |  |                           |            |   |      |   | 73,750      |  
|Accounts payable                                                        |  |                           | 1,885,786   |   |      |   | (282,417    | )
|Accrued liabilities                                                     |  |                           | (489,064    | ) |      |   | (1,324,548  | )
|Deferred revenue                                                        |  |                           | 255,543     |   |      |   | (1,970,205  | )
|Other liabilities                                                       |  |                           | (5,879      | ) |      |   | (11,588     | )
|                                                                        |  |                           |             |   |      |   |             |  
|Net cash used in operating activities                                   |  |                           | (13,133,628 | ) |      |   | (16,065,973 | )
|                                                                        |  |                          
|Cash flows from investing activities                                    |  |                           |             |   |      |   |             |  
|Purchase of equipment                                                   |  |                           | (548,959    | ) |      |   | (1,246,403  | )
|                                                                        |  |                           |             |   |      |   |             |  
|Net cash used in investing activities                                   |  |                           | (548,959    | ) |      |   | (1,246,403  | )
|                                                                        |  |                          
|Cash flows from financing activities                                    |  |                           |             |   |      |   |             |  
|Proceeds from revolving line of credit                                  |  |                           | 25,500,000  |   |      |   |            |  
|Payments of revolving line of credit                                    |  |                           | (20,333,334 | ) |      |   | (333,331    | )
|Payments of long-term debt                                              |  |                           | (563,768    | ) |      |   |            |  
|Proceeds from issuance of stock and warrants, net of issuance costs     |  |                           | 547,388     |   |      |   | 69,631      |  
|                                                                        |  |                           |             |   |      |   |             |  
|Net cash provided by (used in) financing activities                     |  |                           | 5,150,286   |   |      |   | (263,700    | )
|                                                                        |  |                           |             |   |      |   |             |  
|                                                                        |  |                          
|Net decrease in cash and cash equivalents                               |  |                           | (8,532,301  | ) |      |   | (17,576,076 | )
|Cash and cash equivalents at beginning of period                        |  |                           | 30,546,550  |   |      |   | 30,355,657  |  
|                                                                        |  |                           |             |   |      |   |             |  
|Cash and cash equivalents at end of period                              |  | $                         | 22,014,249  |   |      | $ | 12,779,581  |  
|                                                                        |  |                           |             |   |      |   |             |  

See accompanying notes.



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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Notes to
Financial Statements

1. Basis of Presentation

The accompanying unaudited financial statements of Stereotaxis, Inc. (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information and with 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 and six
month periods ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ended December 31, 2010 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, 2009 as filed with the Securities and Exchange Commission (the SEC) on March 15, 2010.

2. Summary of Significant Accounting Policies

Revenue and Costs of Revenue

For arrangements with multiple deliverables, the Company allocates the total revenue to each deliverable based on the provisions of
general accounting principles for revenue recognition and multiple-deliverable revenue arrangements and recognizes revenue for each separate element as the criteria for revenue recognition are met. Each element is assigned an estimated selling price
using vendor-specific objective evidence, third party evidence, or managements estimate.

Under our
revenue recognition policy, a portion of revenue for NIOBE® 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. Beginning in
the quarter ended March 31, 2010, revenue for certain
ODYSSEYTMVISION systems was recognized upon delivery due to the fact that third parties became qualified to perform installations. However, this change did not have a material
impact on revenue recognition for the three months ended March 31, 2010. Beginning in the quarter ended June 30, 2010, revenue for the remaining types of ODYSSEY VISION systems was recognized upon delivery due
to the fact that third parties became qualified to perform installations. This change resulted in additional revenue of $1.2 million and additional gross margin of $0.6 million during the quarter ended June 30, 2010. Revenue is recognized for
other types of ODYSSEY systems upon completion of installation, since there are no qualified third party installers. We may deliver systems to a non-hospital site at the customers request. We evaluate whether delivery has
occurred considering general accounting principles for revenue recognition with respect to bill and hold transactions. 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 are recorded at the time of sale. Cost of revenue from services and license fees are recorded when incurred.

Net Loss per Common Share

Basic and diluted net loss per common share is computed by dividing the net loss for the period by the weighted average number of common
shares outstanding during the period. The largest adjustment between the shares outstanding at June 30, 2010 and the weighted average shares used for calculating basic earnings per share for the quarter ended June 30, 2010 is the deduction
of unearned restricted shares, which amounted to 296,012 at June 30, 2010. This amount is primarily comprised of 252,000 performance-based shares that are outstanding at June 30, 2010, but for which the performance conditions are not
expected to be met. 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 because the Companys unearned restricted shares
do not contractually participate in its losses.



6



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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



As of June 30, 2010, the Company had 5,152,718 shares of common stock issuable upon
the exercise of outstanding options and stock appreciation rights at a weighted average exercise price of $6.26 per share and 9,623,711 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of
$4.26 per share. The Company had a weighted average of 562,345 and 590,217 unearned restricted shares for the three and six months ended June 30, 2010.

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 Companys financial assets consist of cash equivalents invested in money market funds in the amount of $3,088,042 and
$27,239,083 at June 30, 2010 and December 31, 2009, respectively. These assets are classified as Level 1 as described above and total interest income recorded for these investments was approximately $2,100 and $4,900 during the three and
six month periods ended June 30, 2010. There were no transfers in or out of Level 1 during the three and six month periods ended June 30, 2010.

The Companys financial liabilities consist of warrants in the amount of $3,172,562 at June 30, 2010. These liabilities are
classified as Level 3 as described above and are measured using a Monte Carlo valuation model. The mark-to-market adjustment recorded in other income for these warrants was $2,507,221 and $970,052 during the three and six month periods ended
June 30, 2010. There were no purchases, sales, issuances, transfers, or settlements of Level 3 financial instruments during the three and six month periods ended June 30, 2010. These warrants were transferred into Level 3 on
January 1, 2009 based on the adoption of general accounting principles for determining whether an instrument (or embedded feature) is indexed to an entitys own stock. See Note 11 for additional details.

Fair Value  Other Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosures for other financial instruments as
of June 30, 2010 and December 31, 2009.

Cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses have carrying values which approximate fair value due to the short maturity or the financial nature of these instruments.

Long and short-term debt fair value estimates are based on estimated borrowing rates to discount the cash flows to their present value.
See Note 9 for disclosure of the fair value of debt.

Share-Based Compensation

The Company accounts for its grants of stock options, stock appreciation rights and restricted shares 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 requisite service period.

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 records
the amount to expense over the service period on a straight-line basis. 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.



7



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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Recently Issued Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update 2010-06 (ASU 2010-06), which is an amendment to the Fair
Value Measurements and Disclosures topic of the Accounting Standards Codification. This amendment requires disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements
relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This amendment is effective for periods beginning after
December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements, which will be effective for fiscal years beginning after December 15, 2010. See Fair Value
Measurements section of Note 2 for required disclosures.

3. Inventory

Inventory consists of the following:



|                         |  |          |           |   |              |   |           |  
|------------------------ |  | -------- | --------- | - | ------------ | - | --------- | -
|                         |  | June 30, |           |   | December 31, |  
|                         |  | 2010     |           |   | 2009         |  
|                         |  |         
|Raw materials            |  | $        | 2,211,730 |   |              | $ | 1,785,908 |  
|Work in process          |  |          | 421,070   |   |              |   | 312,797   |  
|Finished goods           |  |          | 2,254,832 |   |              |   | 3,117,438 |  
|Reserve for obsolescence |  |          | (614,930  | ) |              |   | (812,468  | )
|                         |  |          |           |   |              |   |           |  
|Total inventory          |  | $        | 4,272,702 |   |              | $ | 4,403,675 |  
|                         |  |          |           |   |              |   |           |  

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:



|                                                |  |          |           |              |   |          
|----------------------------------------------- |  | -------- | --------- | ------------ | - | ---------
|                                                |  | June 30, |           | December 31,
|                                                |  | 2010     |           | 2009        
|                                                |  |         
|Prepaid expenses                                |  | $        | 295,353   |              | $ | 733,966  
|Deferred cost of revenue                        |  |          | 1,053,271 |              |   | 960,145  
|Other assets                                    |  |          | 1,676,051 |              |   | 2,178,424
|                                                |  |          |           |              |   |          
|Total prepaid expenses and other current assets |  | $        | 3,024,675 |              | $ | 3,872,535
|                                                |  |          |           |              |   |          

Deferred cost of revenue represents the cost of
systems for which title has transferred from the Company but for which revenue has not been recognized.

5. Property and
Equipment

Property and equipment consist of the following:



|                               |  |          |            |   |              |   |            |  
|------------------------------ |  | -------- | ---------- | - | ------------ | - | ---------- | -
|                               |  | June 30, |            |   | December 31, |  
|                               |  | 2010     |            |   | 2009         |  
|                               |  |         
|Equipment                      |  | $        | 9,013,311  |   |              | $ | 8,541,355  |  
|Equipment held for lease       |  |          | 547,416    |   |              |   | 547,416    |  
|Leasehold improvements         |  |          | 2,400,789  |   |              |   | 2,317,753  |  
|                               |  |          |            |   |              |   |            |  
|                               |  |          | 11,961,516 |   |              |   | 11,406,524 |  
|Less: Accumulated depreciation |  |          | (7,516,039 | ) |              |   | (6,616,214 | )
|                               |  |          |            |   |              |   |            |  
|Net property and equipment     |  | $        | 4,445,477  |   |              | $ | 4,790,310  |  
|                               |  |          |            |   |              |   |            |  



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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



6. Intangible Assets

On June 4, 2010, the Company entered into an agreement to issue 450,000 shares of its common stock to a consultant (the
Purchaser) in exchange for intellectual property rights related to the Companys products. The Company issued 200,000 shares upon execution of the agreement and will issue an aggregate of 250,000 shares in annual installments on the
first three anniversaries of the agreement. The unissued shares meet the criteria for equity classification under Accounting Standards Codification 480 Distinguishing Liabilities from Equity and therefore, are recorded in additional paid-in capital.
There was no cash consideration paid for the securities. The securities were issued in consideration of the assignment to the Company of the Purchasers rights in certain intellectual property, including patent applications, in all inventions
and discoveries in the Companys business field (as defined in the agreement) that had been developed under various other agreements, which were terminated. The securities were sold by the Company in a private placement exempt from registration
under Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder. There were no underwriters or placement agents involved in the transaction.

7. Accrued Liabilities

Accrued liabilities consist of the following:



|                                          |  |          |           |              |   |          
|----------------------------------------- |  | -------- | --------- | ------------ | - | ---------
|                                          |  | June 30, |           | December 31,
|                                          |  | 2010     |           | 2009        
|                                          |  |         
|Accrued salaries, bonus, and benefits     |  | $        | 4,774,355 |              | $ | 5,160,246
|Accrued research and development          |  |          | 42,217    |              |   | 140,284  
|Accrued legal and other professional fees |  |          | 184,317   |              |   | 539,651  
|Other                                     |  |          | 2,697,738 |              |   | 2,775,106
|                                          |  |          |           |              |   |          
|Total accrued liabilities                 |  | $        | 7,698,627 |              | $ | 8,615,287
|                                          |  |          |           |              |   |          

8. Deferred Revenue

Deferred revenue consists of the following:



|                                  |  |          |           |   |              |   |           |  
|--------------------------------- |  | -------- | --------- | - | ------------ | - | --------- | -
|                                  |  | June 30, |           |   | December 31, |  
|                                  |  | 2010     |           |   | 2009         |  
|                                  |  |         
|Product shipped, revenue deferred |  | $        | 526,995   |   |              | $ | 1,898,701 |  
|Customer deposits                 |  |          | 1,878,353 |   |              |   | 1,022,476 |  
|Deferred service and license fees |  |          | 5,990,261 |   |              |   | 5,218,889 |  
|                                  |  |          |           |   |              |   |           |  
|                                  |  |          | 8,395,609 |   |              |   | 8,140,066 |  
|Less: Long-term deferred revenue  |  |          | (789,381  | ) |              |   | (948,574  | )
|                                  |  |          |           |   |              |   |           |  
|Total current deferred revenue    |  | $        | 7,606,228 |   |              | $ | 7,191,492 |  
|                                  |  |          |           |   |              |   |           |  

9. Long-Term Debt and Credit Facilities

Debt outstanding consists of the following:



|                                           |  |               |             |   |                   |   |             |          |  |   |            |   |  |   |            |  
|------------------------------------------ |  | ------------- | ----------- | - | ----------------- | - | ----------- | -------- |  | - | ---------- | - |  | - | ---------- | -
|                                           |  | June 30, 2010 |             |   | December 31, 2009 |  
|                                           |  | Carrying      |             |   | Estimated         |   |             | Carrying |  |   | Estimated  |  
|                                           |  | Amount        |             |   | Fair Value        |   |             | Amount   |  |   | Fair Value |  
|                                           |  |               |             |  
|Revolving credit agreement, due March 2011 |  | $             | 15,499,999  |   |                   | $ | 15,738,504  |          |  | $ | 10,000,000 |   |  | $ | 10,261,547 |  
|June 2007 term note, matured June 2010     |  |               |            |   |                   |   |            |          |  |   | 333,334    |   |  |   | 334,243    |  
|Biosense Webster Advance                   |  |               | 11,154,045  |   |                   |   | 11,377,664  |          |  |   | 13,346,654 |   |  |   | 13,683,595 |  
|                                           |  |               |             |   |                   |   |             |          |  |   |            |   |  |   |            |  
|Total debt                                 |  |               | 26,654,044  |   |                   |   | 27,116,168  |          |  |   | 23,679,988 |   |  |   | 24,279,385 |  
|Less current maturities                    |  |               | (19,499,999 | ) |                   |   | (19,818,697 | )        |  |   | (3,333,333 | ) |  |   | (3,359,455 | )
|                                           |  |               |             |   |                   |   |             |          |  |   |            |   |  |   |            |  
|Total long term debt                       |  | $             | 7,154,045   |   |                   | $ | 7,297,471   |          |  | $ | 20,346,655 |   |  | $ | 20,919,930 |  
|                                           |  |               |             |   |                   |   |             |          |  |   |            |   |  |   |            |  



9



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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



Revolving line of credit

In December 2009, the Company amended its agreement with its primary lender to extend the maturity of the current working capital line of
credit from March 31, 2010 to March 31, 2011 and to increase the total availability under the line from $25 million to $30 million, retaining the $10 million sublimit for borrowings supported by guarantees from stockholders who are
affiliates of two members of its board of directors (Lenders) and considered to be related parties. Under the revised facility the Company is required to maintain a minimum tangible net worth as defined in the agreement.
Interest on the facility accrues at the rate of prime plus 0.5% subject to a floor of 6% for the amount under guarantee and prime plus 1.75% subject to a floor of 7% for the remaining amounts.

As of June 30, 2010, the Company had $15.5 million outstanding under the revolving line of credit and a current borrowing capacity
of $19.8 million based on the Companys collateralized assets, including amounts already drawn. As such, the Company had the ability to borrow an additional $4.3 million under the revolving line of credit at June 30, 2010. As of
June 30, 2010, the Company was in compliance with all covenants of the bank loan agreement and had no remaining availability on its Lender loan and guarantee.

The revolving line of credit is secured by substantially all of the Companys assets. The Company is also 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 the primary lender.

Term note

In June 2007, the Company entered into a term note due in June 2010 with its primary lender for $2,000,000. The Company was required to
make equal payments of principal and interest, at prime plus 1%, through June 2010, at which time the term note matured.

Biosense Webster Advance

In July 2008, the Company and Biosense Webster entered into an amendment to their existing agreements relating to the development and sale
of catheters. Pursuant to the amendment, Biosense Webster agreed to pay to the Company $10.0 million as an advance on royalty amounts that were owed at the time the amendment was executed or would be owed in the future by Biosense Webster to the
Company pursuant to the royalty provisions of one of the existing agreements. The Company and Biosense Webster also agreed that an aggregate of up to $8.0 million of certain agreed upon research and development expenses that were owed at the time
the amendment was executed or may be owed in the future by the Company to Biosense Webster pursuant to the existing agreement would be deferred and will be due, together with any unrecouped portion of the $10.0 million royalty advance, on the Final
Payment Date (as defined below). Interest on the outstanding and unrecouped amounts of the royalty advance and deferred research and development expenses will accrue at an interest rate of the prime rate plus 0.75%. Outstanding royalty advances and
deferred research and development expenses and accrued interest thereon will be recouped by Biosense Webster by deductions from royalty amounts otherwise owed to the Company from Biosense Webster pursuant to the existing agreement. The Company has
the right to prepay any amounts due pursuant to the Amendment at any time without penalty. As of June 30, 2010, approximately $18.0 million had been advanced by Biosense Webster to the Company pursuant to the amendment. As of June 30,
2010, $7.8 million of royalty payments owed by Biosense had been used to reduce the advances and the remaining approximately $11.2 million of amounts owed to Biosense Webster has been classified as debt in the accompanying balance sheet including
$4.0 million as short-term debt and $7.2 million as long-term debt. The Company recorded research and development expenses of $0.1 million and $0.3 million and royalties within disposables, service and accessories revenue of $0.9 million and $1.9
million for the three and six months ended June 30, 2010, related to this agreement.

All funds owed by the Company to
Biosense Webster must be repaid on the sooner of December 31, 2011 or the date of an Accelerating Recoupment Event as defined below (the Final Payment Date). Commencing on May 15, 2010 the Company was required to make quarterly
payments (the Supplemental Payments) to Biosense Webster equal to the difference between the aggregate royalty payments recouped by Biosense Webster from the Company (other than royalty amounts attributable to Biosense Websters
sales of irrigated catheters) in such quarter and $1 million, until the earlier of (1) the date all funds owed by the Company to Biosense Webster pursuant to the Amendment are fully repaid or (2) the Final Payment Date. An
Accelerating Recoupment Event means any of the following: (i) the closing of any equity-based registered public financing transaction or in the event of convertible debt, the conversion of such debt into equity which raises at least
$50 million for the Company; (ii) the failure of the Company to make any Supplemental Payment; or (iii) a change of control of the Company (as defined in the amendment).



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STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



10. Stockholders Equity

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 that are described in both the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and the Companys definitive Proxy Statement on Schedule 14A filed with the SEC on April 15,
2010. At June 30, 2010, the Board of Directors had reserved a total of 7,252,311 shares of the Companys common stock to provide for current and future grants under its various equity plans.

At June 30, 2010, 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 $4.3 million, net of estimated forfeitures of approximately $1.3 million. This cost will be amortized over a period of up to four years on a straight-line
basis over the underlying estimated service periods and will be adjusted for subsequent changes in estimated forfeitures and anticipated vesting periods. In March 2010, the Company made an adjustment to its forfeiture rate based on historical
information, which resulted in a reduction of share-based compensation of $0.8 million for the six months ended June 30, 2010.

A summary of the option and stock appreciation rights activity for the six months ended June 30, 2010 is as follows:



|                               |  |                       |   |  |                        |               |                                         |   |     
|------------------------------ |  | --------------------- | - |  | ---------------------- | ------------- | --------------------------------------- | - | ----
|                               |  | Number ofOptions/SARs |   |  | Range of ExercisePrice |               | WeightedAverageExercise 
Priceper Share
|                               |  |                       |  
|Outstanding, December 31, 2009 |  | 4,675,450             |   |  | $                      | 0.78 - $14.84 |                                         | $ | 6.63
|Granted                        |  | 965,000               |   |  | $                      | 3.62 - $4.86  |                                         | $ | 4.33
|Exercised                      |  | (130,555              | ) |  | $                      | 1.62 - $4.94  |                                         | $ | 3.53
|Forfeited                      |  | (357,177              | ) |  | $                      | 3.46 - $14.84 |                                         | $ | 6.92
|                               |  |                       |   |  |                        |               |                                         |   |     
|Outstanding, June 30, 2010     |  | 5,152,718             |   |  | $                      | 0.78 - $14.84 |                                         | $ | 6.26
|                               |  |                       |   |  |                        |               |                                         |   |     

A summary of the restricted share grant activity for the six months ended June 30, 2010 is as
follows:



|                               |  |                  |   |  |                                                |     
|------------------------------ |  | ---------------- | - |  | ---------------------------------------------- | ----
|                               |  | Number of Shares |   |  | Weighted AverageGrant Date FairValue per Share
|                               |  |                 
|Outstanding, December 31, 2009 |  | 858,938          |   |  | $                                              | 6.66
|Granted                        |  |                 |   |  |                                                |    
|Vested                         |  | (268,849         | ) |  | $                                              | 5.59
|Forfeited                      |  | (294,077         | ) |  | $                                              | 9.33
|                               |  |                  |   |  |                                                |     
|Outstanding, June 30, 2010     |  | 296,012          |   |  | $                                              | 4.97
|                               |  |                  |   |  |                                                |     

A summary of the restricted stock outstanding as of
June 30, 2010 is as follows:



|                                    |  |                
|----------------------------------- |  | ---------------
|                                    |  | Number ofShares
|                                    | 
|Time based restricted shares        |  | 44,012         
|Performance based restricted shares |  | 252,000        
|                                    |  |                
|Outstanding, June 30, 2010          |  | 296,012        
|                                    |  |                

11. Warrants Liability

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.



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##### Table of Contents

STEREOTAXIS, INC.

NOTES TO FINANCIAL STATEMENTS(Continued)

(Unaudited)



In conjunction with its December 29, 2008 registered direct offering, the Company
issued warrants to purchase 1,792,408 shares of the Companys common stock that contained a provision that required a reduction of the exercise price if certain equity events occurred. Under the provisions of general accounting principles for
derivatives and hedging activities and determining whether an instrument (or embedded feature) is indexed to an entitys own stock, such a reset provision does 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 remeasured with any changes in value recognized in Other income in the Statement of Operations.
General accounting principles for determining whether an instrument (or embedded feature) is indexed to an entitys own stock became effective for the Company as of January 1, 2009. Accordingly, the fair value of the warrants as of that
date was reclassified from stockholders equity into current liabilities.

In accordance with general accounting
principles for fair value measurement, the Companys warrants in the amount of $3,172,562 were measured at fair value on a recurring basis as of June 30, 2010 and were valued using Level 3 valuation inputs. A Monte Carlo model was used to
value the Companys warrants at June 30, 2010 using the following assumptions: 1) dividend yield of 0%; 2) volatility of 67%; 3) risk-free interest rate of 1.41%; and 4) expected life of 4 years. The fair value of the outstanding
derivative instrument and the effect on the Statement of Operations is as follows:



|                           |  |                       |           |  
|-------------------------- |  | --------------------- | --------- | -
|                           |  | Fair Value ofWarrants |          
|                           | 
|Balance, December 31, 2009 |  | $                     | 4,142,614 |  
|Change in fair value       |  |                       | (970,052  | )
|                           |  |                       |           |  
|Balance, June 30, 2010     |  | $                     | 3,172,562 |  
|                           |  |                       |           |  

12. Product Warranty Provisions

The Companys standard policy is to warrant all NIOBE and ODYSSEY 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 accrued liabilities - other, consists of the following:



|                                    |  |          |          |  
|----------------------------------- |  | -------- | -------- | -
|                                    |  | June 30, |         
|                                    |  | 2010     |         
|                                    | 
|Warranty accrual, December 31, 2009 |  | $        | 547,483  |  
|Warranty expense incurred           |  |          | 230,739  |  
|Payments made                       |  |          | (249,205 | )
|                                    |  |          |          |  
|Warranty accrual, June 30, 2010     |  | $        | 529,017  |  
|                                    |  |          |          |  

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

In July 2010, the Company entered into an amendment to its current agreement with Biosense Webster. This amendment extends Biosense
Websters exclusive distribution rights for the Companys non-irrigated catheters until December 31, 2010 in order to extend the time for negotiation of a possible expanded collaboration agreement including co-marketing of Odyssey
products. This agreement also updates the parties revenue sharing arrangement in accordance with such extension.



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##### Table of Contents

|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, 2009. 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 and in our Annual Report on Form 10-K
for the year ended December 31, 2009. Forward-looking statements discuss matters that are not historical facts and include, but are not limited to, discussions regarding our operating strategy, sales and marketing strategy, regulatory strategy,
industry, economic conditions, financial condition, liquidity and 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
believes, expects, anticipates, intends, estimates, projects, can, could, may, will, 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 were 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 an advanced cardiology instrument control system for use in a hospitals interventional
surgical suite to enhance the treatment of arrhythmias, coronary artery disease and peripheral vascular disease. The NIOBE 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 system and its components, Stereotaxis also has developed the ODYSSEY Enterprise Solution which provides an innovative information backbone for managing,
controlling, recording and sharing procedures performed in interventional labs. The ODYSSEY Vision standardizes data integration for magnetic and standard interventional labs by enhancing the physician workflow through a consolidated display of
multiple systems and eliminating the challenge of interacting simultaneously with many separate diagnostic systems. ODYSSEY Enterprise Cinema then captures a complete record of synchronized procedure data that can be viewed live or from a
comprehensive archive of cases performed. Hospitals can also share procedures with other institutions providing a forum for defining clinical best practices across a broad spectrum of medical procedures. The core components of the NIOBE and the
ODYSSEY systems have received regulatory clearance in the U.S., Canada, Europe and various other countries.

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, 2009.



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##### Table of Contents

Revenue Recognition

For arrangements with multiple deliverables, the Company allocates the total revenue to each deliverable based on the provisions of
general accounting principles for revenue recognition and multiple-deliverable revenue arrangements and recognizes revenue for each separate element as the criteria for revenue recognition are met. Each element is assigned an estimated selling price
using vendor-specific objective evidence, third party evidence, or managements estimate.

Under our revenue recognition
policy, a portion of revenue for NIOBE 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. Beginning in the quarter ended March 31, 2010, revenue for certain ODYSSEY VISION systems was recognized upon delivery due to the fact
that third parties became qualified to perform installations. However, this change did not have a material impact on revenue recognition for the three months ended March 31, 2010. Beginning in the quarter ended June 30, 2010, revenue for
the remaining types of ODYSSEY VISION systems was recognized upon delivery due to the fact that third parties became qualified to perform installations. This change resulted in additional revenue of $1.2 million and
additional gross margin of $0.6 million during the quarter ended June 30, 2010. Revenue is recognized for other types of ODYSSEY systems upon completion of installation, since there are no qualified third party installers. We may
deliver systems to a non-hospital site at the customers request. We evaluate whether delivery has occurred considering general accounting principles for revenue recognition with respect to bill and hold transactions. 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 are recorded at the time of sale. Cost of revenue
from services and license fees are recorded when incurred.

Results of Operations

Comparison of the Three Months Ended June 30, 2010 and 2009

Revenue. Revenue increased from $12.6 million for the three months ended June 30, 2009 to $15.0 million for the three months
ended June 30, 2010, an increase of approximately 19%. Revenue from the sale of systems increased from $8.2 million to $9.4 million, an increase of approximately 16%, primarily due to an increase in the number of ODYSSEY systems
sold. We recognized revenue on seven NIOBE systems and a total of $2.5 million for ODYSSEY systems during the 2010 period, versus eight NIOBE systems and a total of $0.4 million for ODYSSEY
systems during the 2009 period. Revenue from sales of disposable interventional devices, service and accessories increased to $5.6 million for the three months ended June 30, 2010 from $4.5 million for the three months ended June 30, 2009,
an increase of approximately 24%. The increase was attributable to the increased base of installed systems, the resulting increase in disposable sales and service contracts, as well as favorable volume and pricing on a next generation proprietary
disposable.

Cost of Revenue.Cost of revenue increased from $4.7 million for the three months ended June 30, 2009
to $4.9 million for the three months ended June 30, 2010, an increase of approximately 6%. As a percentage of our total revenue, overall gross margin improved to 67% for the three months ended June 30, 2010 compared to 63% during the same
three month period of the prior year. Cost of revenue for systems sold increased from $3.2 million for the three months ended June 30, 2009 to $4.3 million for the three months ended June 30, 2010, an increase of approximately 34%,
primarily due to the increase in the number of ODYSSEY systems sold in the most recent quarter. Cost of revenue for disposables, service and accessories decreased to $0.6 million during the 2010 period from $1.5 million during the
2009 period, resulting in an increase in gross margin to 89% from 68% between these periods. This decrease in cost of revenue was primarily due to higher than normal maintenance costs related to a first generation NIOBE system in 2009
as well as higher costs associated with software upgrades in 2009 compared to 2010.

Research and Development Expenses.
Research and development expenses decreased from $3.6 million for the three months ended June 30, 2009 to $3.4 million for the three months ended June 30, 2010, a decrease of approximately 8%. This decrease was primarily due to reduced
consulting costs associated with new product development and introductions.



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##### Table of Contents

Sales and Marketing Expenses. Sales and marketing expenses increased from $7.7
million for the three months ended June 30, 2009 to $8.4 million for the three months ended June 30, 2010, an increase of approximately 10%. The increase was primarily due to headcount additions supporting capital penetration and clinical
adoption efforts.

General and Administrative Expenses.General and administrative expenses include regulatory,
clinical, general management and training expenses. General and administrative expenses increased to $4.0 million from $3.3 million for the three months ended June 30, 2010 and 2009, respectively, an increase of approximately 20%. This increase
was primarily due to increased customer training costs and foreign currency fluctuation.

Other Income.
Other income represents the 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. The primary drivers of fluctuations in this balance are changes in the Companys stock price from one period to the next.

Interest Income. Interest income remained consistent at less than $0.1 million for the three months ended June 30, 2010 and
2009.

Interest Expense. Interest expense decreased to $0.7 million for the three months ended June 30, 2010 from
$1.1 million for the three months ended June 30, 2009, primarily due to lower average debt balances outstanding.

Comparison of the Six Months Ended June 30, 2010 and 2009

Revenue. Revenue increased from $23.8 million for the six months ended June 30, 2009 to $25.6 million for the six months ended
June 30, 2010, an increase of approximately 8%. Revenue from the sale of systems decreased from $15.0 million to $14.7 million, a decrease of approximately 2%, primarily due to a decrease in the number of NIOBE systems sold. We
recognized revenue on eleven NIOBE systems and a total of $3.3 million for ODYSSEY systems during the 2010 period, versus thirteen NIOBE systems and a total of $1.3 million for ODYSSEY
systems during the 2009 period. Revenue from sales of disposable interventional devices, service and accessories increased to $11.0 million for the six months ended June 30, 2010 from $8.8 million for the six months ended June 30, 2009, an
increase of approximately 25%. The increase was attributable to the increased base of installed systems, the resulting disposable sales and service contracts, as well as favorable pricing on a next generation proprietary disposable.

Cost of Revenue.Cost of revenue decreased from $8.1 million for the six months ended June 30, 2009 to $7.8 million for the
six months ended June 30, 2010, a decrease of approximately 3%. As a percentage of our total revenue, overall gross margin improved to 69% for the six months ended June 30, 2010 compared to 66% during the same six month period of the prior
year, due to a shift from system revenue to recurring revenue. Cost of revenue for systems sold increased from $5.8 million for the six months ended June 30, 2009 to $6.4 million for the six months ended June 30, 2010, an increase of
approximately 11%, primarily due to the increase in the number of ODYSSEY systems sold in the most recent quarter. Cost of revenue for disposables, service and accessories decreased to $1.5 million during the 2010 period from $2.4
million during the 2009 period, resulting in an increase in gross margin to 87% from 73% between these periods. This decrease in cost of revenue was primarily due to higher than normal maintenance costs related to a first generation
NIOBE system in 2009 as well as higher costs associated with software upgrades in 2009 compared to 2010.

Research and Development Expenses. Research and development expenses decreased from $6.9 million for the six months ended
June 30, 2009 to $6.7 million for the six months ended June 30, 2010, a decrease of approximately 3%. This decrease was primarily due to reduced consulting costs associated with new product development and introductions.

Sales and Marketing Expenses. Sales and marketing expenses remained unchanged at $15.1 million for the six months ended
June 30, 2010 and 2009. Current year expenses include $1.3 million related to additional headcount supporting capital penetration and clinical adoption efforts, which were offset by $0.8 million of reduced share-based compensation as a result
of increased forfeiture rates and $0.8 million of asset impairment charges in 2009.

General and Administrative Expenses.General and administrative expenses include regulatory, clinical, general management and training expenses. General and administrative expenses increased to $7.9 million from $7.4 million for the six months ended June 30, 2010 and 2009,
respectively, an increase of approximately 7%. This increase was primarily due to increased customer training costs and foreign currency fluctuation.

Other Income. Other income represents the 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. The primary drivers of fluctuations in this balance are changes in the
Companys stock price from one period to the next.



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Interest Income. Interest income remained consistent at less than $0.1 million for
the six months ended June 30, 2010 and 2009.

Interest Expense. Interest expense decreased to $1.3 million for the
six months ended June 30, 2010 from $1.8 million for the six months ended June 30, 2009, primarily due to lower average debt balances outstanding.

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 June 30, 2010 we had $22.0 million of cash and equivalents. We had a working capital deficit of approximately ($0.2) million compared to working capital of $22.9 million as of
June 30, 2010 and December 31, 2009, respectively. The decrease in working capital is primarily due to the reclassification of $10 million of debt from long-term to current and the $13.1 million use of cash from operating activities.

The following table summarizes our cash flow by operating, investing and financing activities for each of the six month
periods ended June 30, 2010 and 2009 (in thousands):



|                                                     |      |                  |         |      |  |   |         |  
|---------------------------------------------------- | ---- | ---------------- | ------- | ---- |  | - | ------- | -
|                                                     |      | Six Months Ended |        
|                                                     |      | June 30,         |        
|                                                     | 2010 |                  |         | 2009 | 
|                                                     |      |                 
|Cash Flow used in Operating Activities               |      | $                | (13,134 | )    |  | $ | (16,066 | )
|                                                     |      |                 
|Cash Flow used in Investing Activities               |      |                  | (549    | )    |  |   | (1,246  | )
|                                                     |      |                 
|Cash Flow provided by (used in) Financing Activities |      |                  | 5,150   |      |  |   | (264    | )

Net cash used in
operating activities. We used approximately $13.1 million and $16.1 million of cash for operating activities during the six months ended June 30, 2010 and 2009, respectively. This decrease was driven by an improvement in our cash position
of operating assets and liabilities as well as a decrease in the net loss of $2.7 million.

Net cash used in investing
activities. We used approximately $0.5 million and $1.2 million of cash for purchases of equipment during the six months ended June 30, 2010 and 2009, respectively.

Net cash provided by (used in) financing activities. We generated approximately $5.2 million of cash compared to a $0.3 million
use of cash for the six months ended June 30, 2010 and 2009, respectively. This increase in cash was primarily due to additional borrowings against our line of credit during the six months ended June 30, 2010.

Borrowing facilities

In December 2009, the Company amended its agreement with its primary lender to extend the maturity of the current working capital line of
credit from March 31, 2010 to March 31, 2011 and to increase the total availability under the line from $25 million to $30 million, retaining the $10 million sublimit for borrowings supported by guarantees from stockholders who are
affiliates of two members of its board of directors (Lenders) and considered to be related parties. Under the revised facility the Company is required to maintain a minimum tangible net worth as defined in the agreement.
Interest on the facility accrues at the rate of prime plus 0.5% subject to a floor of 6% for the amount under guarantee and prime plus 1.75% subject to a floor of 7% for the remaining amounts.

As of June 30, 2010, the Company had $15.5 million outstanding under the revolving line of credit and a current borrowing capacity
of $19.8 million based on the Companys collateralized assets, including amounts already drawn. As such, the Company had the ability to borrow an additional $4.3 million under the revolving line of credit at June 30, 2010. As of
June 30, 2010, the Company was in compliance with all covenants of the bank loan agreement and had no remaining availability on its Lender loan and guarantee.

The revolving line of credit is secured by substantially all of the Companys assets. The Company is also 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 the primary lender.



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In June 2007, the Company entered into a term note due in June 2010 with its primary lender
for $2,000,000. The Company was required to make equal payments of principal and interest, at prime plus 1%, through June 2010, at which time the term note matured.

In July 2008, the Company and Biosense Webster entered into an amendment to their existing agreements relating to the development and
sale of catheters. Pursuant to the amendment, Biosense Webster agreed to pay to the Company $10.0 million as an advance on royalty amounts that were owed at the time the amendment was executed or would be owed in the future by Biosense Webster to
the Company pursuant to the royalty provisions of one of the existing agreements. The Company and Biosense Webster also agreed that an aggregate of up to $8.0 million of certain agreed upon research and development expenses that were owed at the
time the amendment was executed or may be owed in the future by the Company to Biosense Webster pursuant to the existing agreement would be deferred and will be due, together with any unrecouped portion of the $10.0 million royalty advance, on the
Final Payment Date (as defined below). Interest on the outstanding and unrecouped amounts of the royalty advance and deferred research and development expenses will accrue at an interest rate of the prime rate plus 0.75%. Outstanding royalty
advances and deferred research and development expenses and accrued interest thereon will be recouped by Biosense Webster by deductions from royalty amounts otherwise owed to the Company from Biosense Webster pursuant to the existing agreement. The
Company has the right to prepay any amounts due pursuant to the Amendment at any time without penalty. As of June 30, 2010, approximately $18.0 million had been advanced by Biosense Webster to the Company pursuant to the amendment. As of
June 30, 2010, $7.8 million of royalty payments owed by Biosense had been used to reduce the advances and the remaining approximately $11.2 million of amounts owed to Biosense Webster has been classified as debt in the accompanying balance
sheet including $4.0 million as short-term debt and $7.2 million as long-term debt. The Company recorded research and development expenses of $0.1 million and $0.3 million and royalties within disposables, service and accessories revenue of $0.9
million and $1.9 million for the three and six months ended June 30, 2010, related to this agreement.

All funds owed by
the Company to Biosense Webster must be repaid on the sooner of December 31, 2011 or the date of an Accelerating Recoupment Event as defined below (the Final Payment Date). Commencing on May 15, 2010 the Company was required to
make quarterly payments (the Supplemental Payments) to Biosense Webster equal to the difference between the aggregate royalty payments recouped by Biosense Webster from the Company (other than royalty amounts attributable to Biosense
Websters sales of irrigated catheters) in such quarter and $1 million, until the earlier of (1) the date all funds owed by the Company to Biosense Webster pursuant to the Amendment are fully repaid or (2) the Final Payment Date. An
Accelerating Recoupment Event means any of the following: (i) the closing of any equity-based registered public financing transaction or in the event of convertible debt, the conversion of such debt into equity which raises at least
$50 million for the Company; (ii) the failure of the Company to make any Supplemental Payment; or (iii) a change of control of the Company (as defined in the amendment).

Cash flow

We expect to have negative cash flow from operations in 2010. Throughout 2010, we expect to continue the development and commercialization
of our existing products and, to a lesser extent, our research and development programs and the advancement of new products into clinical development. We expect that our sales and marketing expenditures and our general and administrative expenses
will increase in 2010 in order to support our product commercialization efforts. Until we can generate significant cash flow from our operations, we expect to continue to fund our operations with existing cash resources that were primarily generated
from the proceeds of our public offerings, private sales of our equity securities and working capital and equipment financing loans. In the future, we may finance future cash needs through the sale of other equity securities, strategic collaboration
agreements and debt financings. 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.

As currently structured, the $30 million working capital facility as well as the financing commitment provided by the Lenders expires on
March 31, 2011 although we currently anticipate we will be able to renew the facility on substantially similar terms. While we believe our existing cash, cash equivalents and borrowing facilities will be sufficient to fund our operating
expenses and capital equipment requirements through the next 12 months (assuming extensions of the guarantee from the Lenders as well as the revolving line of credit following March 31, 2011), we cannot assure that we will not require
additional financing before that time. We also cannot assure that such 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.



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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 arise if we had engaged in these relationships.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Foreign Exchange Risk

We operate mainly in the U.S., Europe and Asia and we expect to continue to sell our products both within and outside of the U.S. Although
the majority of our revenue and expenses are transacted in U.S. dollars, a portion of our activities are conducted in Euros and to a lesser extent, in other currencies. As such, we have foreign exchange exposure with respect to non-U.S. dollar
revenues and expenses as well as cash balances, accounts receivable and accounts payable balances denominated in non-US dollar currencies. Our international activities are subject to risks typical of international activities, including, but not
limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Future fluctuations in the value of these currencies may affect the price
competitiveness of our products. In addition, because we have a relatively long installation cycle for our systems, we will be subject to risk of currency fluctuations between the time we execute a purchase order and the time we deliver the system
and collect payments under the order, which could adversely affect our operating margins. As of June 30, 2010 we have not hedged exposures in foreign currencies or entered into any other derivative instruments.

For the six months ended June 30, 2010, sales denominated in foreign currencies were approximately 20% of total revenue and as such,
our revenue would have decreased by approximately $0.5 million if the U.S. dollar exchange rate used would have strengthened by 10%. For the six months ended June 30, 2010, expenses denominated in foreign currencies were approximately 13% of
our total expenses and as such, our operating expenses would have decreased by approximately $0.4 million if the U.S. dollar exchange rate used would have strengthened by 10%. In addition, we have assets and liabilities denominated in foreign
currencies. A 10% strengthening of the U.S. dollar exchange rate against all currencies with which we have exposure at June 30, 2010 would not have materially affected the carrying amounts of those net assets.

Interest Rate Risk

We have exposure to interest rate risk related to our investment portfolio. The primary objective of our investment activities is to
preserve principal while at the same time maximizing the income we receive from our invested cash without significantly increasing the risk of loss. Our interest income is sensitive to changes in the general level of U.S. interest rates. When
appropriate, we invest our excess cash primarily in U.S. government securities and marketable debt securities of financial institutions and corporations with strong credit ratings. These instruments generally have maturities of two years or less
when acquired. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions. Accordingly, we believe that while the instruments we typically purchase are
subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes
that affect market risk sensitive instruments.

We have exposure to market risk related to any investments we might hold.
Market liquidity issues might make it impossible for the Company to liquidate its holdings or require that the Company sell the securities at a substantial loss. As of June 30, 2010, the Company did not hold any investments.

We have exposure to interest rate risk related to our borrowings as the interest rates for certain of our outstanding loans are subject
to increase should the interest rate increase above a defined percentage. However, because our outstanding debt is subject to minimum interest rates ranging from 5.75% to 7.0%, a hypothetical increase in interest rates of 100 basis points would have
resulted in no increase in interest expense for the six months ended June 30, 2010.

Inflation Risk

We do not believe that inflation has had a material adverse impact on our business or operating results during the
periods covered by this report.



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##### Table of Contents

|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Disclosure Controls and Procedures: The Companys management, with the participation of the Companys Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act)), as of the end of the period covered by this report. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management
is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of
such period, the Companys disclosure controls and procedures were effective.

Changes In Internal Control Over
Financial Reporting: The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Companys internal control over financial reporting to
determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. Based on that evaluation,
there has been no such change during the period covered by this report.



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##### Table of Contents

STEREOTAXIS, INC.

PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

We are
involved from time to time in various lawsuits and claims arising in the ordinary 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
|-------- | ------------

Our Risk
Factors are discussed in our Annual Report on Form 10-K for the year ended December 31, 2009.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

On June 4, 2010, the Company entered into an agreement to issue 450,000 shares of its common stock to a consultant (the
Purchaser) in exchange for intellectual property rights related to the Companys products. The Company issued 200,000 shares upon execution of the agreement and will issue an aggregate of 250,000 shares in annual installments on the
first three anniversaries of the agreement. The unissued shares meet the criteria for equity classification under Accounting Standards Codification 480 Distinguishing Liabilities from Equity and therefore, are recorded in additional paid-in capital.
There was no cash consideration paid for the securities. The securities were issued in consideration of the assignment to the Company of the Purchasers rights in certain intellectual property, including patent applications, in all inventions
and discoveries in the Companys business field (as defined in the agreement) that had been developed under various other agreements, which were terminated. The securities were sold by the Company in a private placement exempt from registration
under Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder. There were no underwriters or placement agents involved in the transaction.



|                |  |                                            |  |                                       |  |                                                                                          |  |                                                                                                                   
|--------------- |  | ------------------------------------------ |  | ------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------
|Period          |  | Total Number of Shares(or Units) Purchased |  | Average Price Paidper Share (or Unit) |  | Total Number of Shares (orUnits) Purchased as Part ofPublicly Announced Plansor
Programs |  | Maximum Number (orApproximate Dollar Value)of Shares (or Units) thatMay Yet Be
PurchasedUnder the Plans orPrograms
|June 4, 2010(1) |  | 200,000                                    |  | 3.70                                  |  |                                                                                          |  | 250,000                                                                                                           
|                |  |                                            |  |                                       |  |                                                                                          |  |                                                                                                                   
|Total           |  | 200,000                                    |  | 3.70                                  |  |                                                                                         |  | 250,000                                                                                                           
|                |  |                                            |  |                                       |  |                                                                                          |  |                                                                                                                   



|(1) | Shares issued in exchange for intellectual property related to Stereotaxis products.
|--- | ------------------------------------------------------------------------------------



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | [RESERVED]
|------- | ----------

None.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|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: August 6, 2010 |  | By:               |  | /S/    MICHAEL P.
KAMINSKI
|                     |  |                   |  | Michael P. Kaminski,      
|                     |  |                   |  | Chief Executive Officer   
|                     |  |                  
|Date: August 6, 2010 |  | By:               |  | /S/    DANIEL J.
JOHNSTON 
|                     |  |                   |  | Daniel J. Johnston,       
|                     |  |                   |  | Chief Financial Officer   



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EXHIBIT INDEX



|       |  |                                                                                                                                                                                                                                                                       
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                           
|       | 
|3.1(1) |  | Restated Certificate of Incorporation of the Company                                                                                                                                                                                                                  
|       | 
|3.2(1) |  | Restated Bylaws of the Company                                                                                                                                                                                                                                        
|       | 
|10.1 # |  | 2002 Stock Incentive Plan, as amended and restated May 26, 2010 (filed herewith).                                                                                                                                                                                     
|       | 
|10.2  |  | Fifth Amendment to the Development Alliance and Supply Agreement, dated as of July 30, 2010, between the Registrant and Biosense Webster, Inc., incorporated by reference to Exhibit
10.1 of the Registrants Form 8-K/A (File No. 000-50884) filed on August 3, 2010.
|       | 
|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).                                                                                                                                          



|(1) | This exhibit was previously filed as an exhibit to the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (filed
November 12, 2004) (File No. 000-50884), and is incorporated herein by reference.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|# | Indicates management contract or compensatory plan.
|- | ---------------------------------------------------

| | Confidential treatment granted as to certain portions, which portions are omitted and filed separately with the Securities and Exchange Commission.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------



22