Stereotaxis, Inc. (STXS) FY 2023 MD&A

ITEM 7. 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-K. Operating results are not necessarily indicative of results that may occur in future periods.

This
report includes various forward-looking statements that are subject to risks and uncertainties, many of which are beyond our control.
Our actual results could differ materially from those anticipated in these forward looking statements as a result of various factors,
including those set forth in Item 1A. “Risk Factors.” Forward-looking statements discuss matters that are not historical
facts. Forward-looking statements include, but are not limited to, discussions regarding our operating strategy, sales and marketing
strategy, regulatory strategy, our industry generally, overall economic conditions, our financial condition, liquidity and capital resources,
our results of operations, and the impact of the ongoing coronavirus (“COVID-19”) pandemic and our responses to it. 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 robotic systems, instruments and information systems for the interventional laboratory. Our proprietary
robotic technology, Robotic Magnetic Navigation, fundamentally transforms endovascular interventions using precise computer-controlled
magnetic fields to directly control the tip of flexible interventional catheters or devices. Direct control of the tip of an interventional
device, in contrast to all manual hand-held devices that are controlled from their handle, can improve the precision, stability, reach
and safety of these devices during procedures.

Our
primary clinical focus has been electrophysiology, specifically cardiac ablation procedures for the treatment of arrhythmias. Cardiac
ablation has become a well-accepted therapy for arrhythmias and a multi-billion-dollar medical device market with expectations for substantial
long-term growth. We have shared our aspiration and a product strategy to expand the clinical focus of our technology to several additional
endovascular indications including coronary, neuro, and peripheral interventions.

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

Our
primary products include the Genesis RMN System, the Odyssey Solution, and other related devices. Through our strategic
relationships with fluoroscopy system manufacturers, providers of catheters and electrophysiology mapping systems, and other parties,
we offer our customers magnetically compatible x-ray systems and other accessory devices.

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

The
Odyssey Solution consolidates lab information onto one large integrated display, enabling physicians to view and control all the
key information in the operating room. This is designed to improve lab layout and procedure efficiency. The system also features a remote
viewing and recording capability called Odyssey Cinema, which is an innovative solution that delivers synchronized content for
optimized workflow, advanced care, and improved productivity. This tool includes an archiving capability that allows clinicians to store
and replay entire procedures or segments of procedures. This information can be accessed from locations throughout the hospital local
area network and over the global Odyssey Network providing physicians with a tool for clinical collaboration, remote consultation, and
training.

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We
have arrangements with fluoroscopy system manufacturers to provide such
systems in a bundled purchase offer for hospitals establishing robotic interventional operating rooms. These are single-plane, full-power
x-ray systems and include the c-arm and powered table. The combination of RMN Systems with our partnered x-ray systems reduces the cost
of acquisition, the ongoing cost of ownership, and the complexity of installation of a robotic electrophysiology practice.

We
promote our full suite of products in a typical hospital implementation, subject to regulatory approvals or clearances. This implementation
requires a hospital to agree to an upfront capital payment and recurring payments. The upfront capital payment typically includes equipment
and installation charges. The recurring payments typically include disposable costs for each procedure, equipment service costs beyond
the warranty period, and ongoing software updates. In hospitals where our full suite of products has not been implemented, equipment
upgrade or expansion can be implemented upon purchasing of the necessary upgrade or expansion.

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

Not
all products have and/or require regulatory clearance in all of the markets we serve. Please refer to “Regulatory Approval”
in Item 1 for a description of the regulatory clearance, licensing, and/or approvals we currently have or are pursuing.

As
of December 31, 2023, we had approximately $14.7 million of backlog, consisting of outstanding purchase orders and other commitments
for these systems. Of the December 31, 2023 backlog, we expect approximately 81% to be recognized as revenue over the course of 2024.
We had backlog of approximately $14.8 million as of December 31, 2022. There can be no assurance that we will recognize such revenue
in any particular period or at all because some of our purchase orders and other commitments are subject to contingencies that are outside
our control. These orders and commitments may be revised, modified or canceled, either by their express terms, as a result of negotiations
or by project changes or delays. In addition, the sales cycle for the robotic magnetic navigation system is lengthy and generally involves
construction or renovation activities at customer sites. Consequently, revenues and/or orders resulting from sales of our robotic magnetic
navigation system can vary significantly from one reporting period to the next.

We
have strategic relationships with technology leaders and innovators in the global interventional market. Through these strategic relationships
we provide compatibility between our robotic magnetic navigation system, x-ray systems, and digital imaging and 3D catheter location
sensing technology, as well as disposable interventional devices. The maintenance of these strategic relationships, or the establishment
of equivalent alternatives, is critical to our commercialization efforts. There are no guarantees that any existing strategic relationships
will continue, and efforts are ongoing to ensure the availability of compatible systems and devices and/or equivalent alternatives. For example, prior to the expiration of our agreement Biosense Webster
on December 31. 2022, we received quarterly royalty payments based on net revenues from sales of co-developed catheters with Biosense
Webster. Such royalty payments represented 7% of revenue for the year ended December 31, 2022. We
cannot provide assurance as to the timeline of the ongoing availability of such compatible systems or our ability to obtain equivalent
alternatives on competitive terms or at all.

Risks
and Uncertainties

Future
results of operations could be materially adversely impacted by macroeconomic and geopolitical factors. The Company continues to
experience difficulties with periodic worldwide supply chain disruptions, including shortages and inflationary pressures, and
logistics delays which make it difficult for us to source parts and ship our products. We have generally been able to conduct normal
business activities albeit in a more deliberate manner than prior to the pandemic, including taking action to increase inventory
levels and engaging in discussions with our vendors on contractual obligations, but we cannot guarantee that they will not be impacted more severely in the future. Our suppliers and contract
manufacturers have experienced, and may continue to experience, similar difficulties. If our manufacturing operations or supply
chains are materially interrupted, it may not be possible for us to timely manufacture or service our products at required levels,
or at all. Changes in economic conditions and supply chain constraints could lead to higher inflation than previously experienced or
expected, which could, in turn, lead to an increase in costs. We may be unable to raise the prices of our products sufficiently to
keep up with the rate of inflation. A material reduction or interruption in any of our manufacturing processes or a substantial
increase in costs would have a material adverse effect on our business, operating results, and financial condition.

Many
of our hospital customers, for whom the purchase of our system involves a significant capital purchase which may be part of a larger
construction project at the customer site (typically the construction of a new building), may themselves be under economic pressures.
Hospitals continue to experience challenges with staffing and cost pressures as supply chain constraints and inflation drive up operating
costs. This may cause delays or cancellations of current purchase orders and other commitments and may exacerbate the long and variable
sales and installation cycles for our robotic magnetic navigation systems. Our hospital customers have also experienced challenges in
sourcing supplies, such as catheters, needed to perform procedures. Such shortages have, and may continue to, put pressure on procedures
and our disposable revenue.

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Any
disruption to the capital markets could negatively impact our ability to raise capital. If the capital markets are disrupted for an extended
period of time and we need to raise additional capital, such capital may not be available on acceptable terms, or at all. Disruptions
to the capital markets and other financing sources could also negatively impact our hospital customers’ ability to raise capital
or otherwise obtain financing to fund their operations and capital projects. Such could result in delayed spending on current projects,
a longer sales cycle for new projects where a large capital commitment is required, and decreased demand for our disposable products
as well as an increased risk of customer defaults or delays in payments for our system installations, service contracts and disposable
products.

In
addition to the aforementioned macroeconomic factors, the COVID-19 pandemic or similar occurrences may continue to negatively affect
demand for both our systems and our disposable products. In the past, we have experienced business disruptions, including travel restrictions
on us and our third-party distributors, which negatively affected our complex sales, marketing, installation, distribution and service
network relating to our products and services. We also experienced reductions in demand for our disposable products as our healthcare
customers (physicians and hospitals) re-prioritized the treatment of patients and diverted resources away from non-coronavirus areas,
leading to the performance of fewer procedures in which our disposable products are used. Significant decreases to our capital or recurring
revenues could have a material adverse effect on our business, operating results, and financial condition. While we cannot reliably estimate
the ultimate duration of the impact or the severity of ongoing periodic resurgences of pandemic-related issues, we continue to anticipate
periodic disruptions to our manufacturing operations, supply chains, procedures volumes, service activities, and capital system orders
and placements, any of which could have a material adverse effect on our business, financial condition, results of operations, or cash
flows. The impact has varied widely over time by individual geography. In 2022, procedure volumes were challenged by periodic resurgences
of COVID-19, ongoing hospital staffing issues and other factors. In the first quarter of 2023, the most recent COVID-19 resurgences in
China continued to negatively impact our procedure volumes in that region, but as infections and hospitalization decreased, we saw a
recovery of procedure volumes.

Concentration
of Credit Risk

Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities.
Our investments may include, at any time, a diversified portfolio of cash equivalents and short- and long-term investments in a variety
of high-quality securities, including money market funds, U.S. treasury and U.S. government agency securities, corporate notes and bonds,
commercial paper, non-U.S. government agency securities, and municipal notes. The Company’s exposure to any individual corporate
entity is limited by policy. Deposits may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the
event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance
Corporation (FDIC). The Company closely monitors events involving limited liquidity, defaults, non-performance or other
adverse developments that affect financial institutions or other companies in the financial services industry or the financial services
industry generally, including Silicon Valley Bank. On March 10, 2023, Silicon Valley Bank (“SVB”), where the Company maintained
accounts with a cash balance of less than 6% of the Company’s total cash, cash equivalents and marketable securities, was closed
by the California Department of Financial Protection and Innovation and the FDIC was appointed as receiver. On March 12, 2023, the U.S.
Department of the Treasury, Federal Reserve Board, and FDIC released a joint statement announcing that the FDIC would complete its resolution
of SVB in a manner that fully protected all depositors at SVB and that depositors would have access to all of their money starting March
13, 2023. On March 26, 2023, it was announced that First-Citizens Bank & Trust Company would assume all of SVB’s deposits and
loans as of March 27, 2023. During the periods presented, the Company has not experienced any losses on its deposits of cash, cash equivalents
or marketable securities.

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, revenue and expenses and related disclosures. We review our estimates
and judgments on an ongoing 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.

Investments
Valuation

Our
investments may include, at any time, a diversified portfolio of cash equivalents and short- and long-term investments in a variety of
high-quality securities, including money market funds, U.S. treasury and U.S. government agency securities, corporate notes and bonds,
commercial paper, non-U.S. government agency securities, and municipal notes. The assessment of the fair value of investments can be
difficult and subjective. Generally accepted accounting principles for fair value measurement establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets and liabilities (“Level 1”) and the lowest priority to unobservable inputs
(“Level 3”). The three levels of the fair value hierarchy are described below:

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Each
level of input has different levels of subjectivity and difficulty involved in determining fair value. Valuation of Level 1 and 2 instruments
generally do not require significant management judgment, and the estimation is not difficult. Level 3 instruments include unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The
determination of fair value for Level 3 instruments requires the most management judgment and subjectivity. There were no Level 3 securities
for the periods presented.

Revenue
Recognition

The
Company accounts for revenue in accordance with Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from
Contracts with Customers.

We
generate revenue from the initial capital sales of systems as well as recurring revenue from the sale of our proprietary disposable devices,
from royalties paid to the Company on the sale of various devices as provided by co-development and co-placement arrangements, and from
other recurring revenue including ongoing software updates and service contracts.

In
accordance with Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers,”
we account for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights
of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We
record our revenue based on consideration specified in the contract with each customer, net of any taxes collected from customers that
are remitted to government authorities.

For
contracts containing multiple products and services the Company accounts for individual products and services as separate performance
obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package,
and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company recognizes
revenues as the performance obligations are satisfied by transferring control of the product or service to a customer.

For
arrangements with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone
selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services.
If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market
conditions and entity-specific factors including, but not limited to, features and functionality of the products and services and market
conditions. The Company regularly reviews standalone selling prices and updates these estimates as necessary.

Our
revenue recognition policy affects the following revenue streams in our business as follows:

Systems:

Disposables:

Royalty:

Other
Recurring Revenue:

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The
Company invoices its customers based on the billing schedules in its sales arrangements. Contract assets primarily represent the difference
between the revenue that was earned but not billed on service contracts and revenue from system contracts that was recognized based on
the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Customer deposits
primarily relate to future system sales but can also include deposits on disposable sales. Deferred revenue is primarily related to service
contracts, for which the service fees are billed up-front, generally quarterly or annually, and for amounts billed in advance for system
contracts for which some performance obligations remain outstanding. For service contracts, the associated deferred revenue is generally
recognized ratably over the service period. For system contracts, the associated deferred revenue is recognized when the remaining performance
obligations are satisfied. See Note 2 to the financial statements for additional details on deferred revenue. The Company did not have
any impairment losses on its contract assets for the periods presented.

Assets
Recognized from the Costs to Obtain a Contract with a Customer

The
Company has determined that sales incentive programs for the Company’s sales team meet the requirements to be capitalized as the
Company expects to generate future economic benefits from the related revenue generating contracts after the initial capital sales transaction.
The costs capitalized as contract acquisition costs included in prepaid expenses and other assets in the Company’s balance sheets
were $0.1 million and $0.2 million as of December 31, 2023 and 2022, respectively. The Company did not incur any impairment losses during
any of the periods presented.

Cost
of Contracts

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

Stock-based
Compensation

Stock
compensation expense, which is a non-cash charge, results from stock option, non-qualified stock options, stock appreciation rights,
and restricted share grants made to employees, directors, and third-party consultants at the fair value of the grants. For time-based
awards, the fair value of options and stock appreciation rights granted was determined using the Black-Scholes valuation method which
gives consideration to the estimated value of the underlying stock at the date of grant, the exercise price of the option, the expected
dividend yield and volatility of the underlying stock, the expected life of the option and the corresponding risk-free interest rate.
The fair value of the grants of restricted shares and units was determined based on the closing price of our stock on the date of grant.
Stock compensation expense for options, stock appreciation rights and for time-based restricted share grants and units is amortized on
a straight-line basis over the vesting period of the underlying issue, generally over four years except for grants to directors which
are generally earned over a period of six months. Stock compensation expense for performance-based restricted shares, if any, is amortized
on a straight-line basis over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives.
Compensation expense is recognized only for those options expected to vest, net of actual forfeitures. Estimates of the expected life
of options have been based on the average of the vesting and expiration periods, which is the simplified method under general accounting
principles for share-based payments. Estimates of volatility utilized in calculating stock-based compensation have been prepared based
on historical data. Actual experience to date has been consistent with these estimates.

For
market-based awards, stock-based compensation expense is recognized over the minimum service period regardless of whether or not the
market target is probable of being achieved. The fair value of such awards is estimated on the grant date using Monte Carlo simulations.

The
amount of compensation expense to be recorded in future periods may increase if we make additional grants of options, stock appreciation
rights or restricted shares. The amount of expense to be recorded in future periods may decrease if the requisite service periods are
not completed.

Valuation
of Inventory

We
value our inventory at the lower of the actual cost of our inventory, as determined using the first-in, first-out (FIFO) method, or its
current net realizable value. We periodically review our physical inventory for excess, obsolete, and potentially impaired items and
reserve accordingly. Our reserve estimate for excess and obsolete is based on expected future use. Excess manufacturing overhead costs
attributable to idle facility expenses or abnormally low production volumes are excluded from inventory and recorded as an expense in
the period incurred.

Income
Taxes

Deferred
tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities
using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts expected to be realized. We have established a valuation
allowance against the entire amount of our deferred tax assets net of liabilities because we are not able to conclude, due to our history
of operating losses, that it is more likely than not that we will be able to realize any portion of the deferred tax assets.

In
assessing whether and to what extent deferred tax assets are realizable, we consider whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible. We consider projected future taxable
income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, limitations imposed
by Section 382 of the Internal Revenue Code and projections for future losses over periods which the deferred tax assets are deductible,
we determined that a 100% valuation allowance of deferred tax assets net of liabilities was appropriate.

Results
of Operations

Comparison
of the Years ended December 31, 2023 and 2022

Revenue.
Revenue decreased from $28.1 million for the year ended December 31, 2022, to $26.8 million for the year ended December 31, 2023, a decrease
of approximately 5%. Revenue from sales of systems increased from $6.8 million for the year ended December 31, 2022, to $8.7 million
for the year ended December 31, 2023, an increase of approximately 28%, driven by increased system sales volumes in the current year
period. Revenue from sales of disposable interventional devices, service and accessories decreased to $18.0 million for the year ended
December 31, 2023, from $21.3 million for the year ended December 31, 2022, a decrease of approximately 15%. The decrease was primarily
driven by prior period royalties paid to the Company by Biosense Webster on the sale of co-developed catheters during the term of the
agreement and by lower procedure volumes related to Biosense Webster catheter shortages.

Cost
of Revenue. Cost of revenue increased from $9.7 million for the year ended December 31, 2022, to $11.9 million for the year
ended December 31, 2023, an increase of approximately 23%. As a percentage of our total revenue, overall gross margin was 56% and
66% for the years ended December 31, 2023, and December 31, 2022, respectively. The decrease was primarily due to changes in product mix. Cost of
revenue for systems sold increased from $5.8 million for the year ended December 31, 2022, to $8.1 million for the year ended
December 31, 2023, primarily due to increased system sales volumes and period costs in the current year period. Gross margin for
systems decreased from $1.0 million for the year ended December 31, 2022, to $0.7 million for the year ended December 31, 2023. Cost
of revenue for disposables, service, and accessories remained consistent at $3.9 million for years ended December 31, 2022, and
2023. Gross margin for disposables, service and accessories was 79% for the current year period compared to 82% for the year ended
December 31, 2022, driven by changes in product mix and higher costs under service contracts in the current year period.

Research
and Development Expense. Research and development expenses decreased from $10.6 million for the year ended December 31, 2022, to
$10.3 million for the year ended December 31, 2023, a decrease of approximately 3%. This decrease
was primarily due to project timing in the current year period.

Sales
and Marketing Expense. Sales and marketing expenses remained consistent with $12.4 million for the year ended December 31, 2023,
as compared to $12.3 million for the year ended December 31, 2022, an increase of less than 1%.

General
and Administrative Expense. General and administrative expenses include finance, information systems, legal, and general management
expenses. General and administrative expenses decreased from $14.4 million for the year ended December 31, 2022, to $14.1 million for
the year ended December 31, 2023, a decrease of approximately 2%. This decrease was primarily driven
by lower administrative expenses, professional
service fees and reduced currency loss in the current year period.

Interest
Income. Net interest income was $1.1 million for the year ended December 31, 2023, and
$0.5 million for the year ended December 31, 2022. The increase was driven by increased interest rates and higher return on invested
balances in the current year period.

Income
Taxes

Realization
of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. Accordingly, net deferred
tax assets have been fully offset by valuation allowances as of December 31, 2023, and December 31, 2022, to reflect these
uncertainties. As of December 31, 2023, we had gross federal net operating loss carryforwards of approximately $127.4 million. The
federal net operating loss carryforwards reflect accumulated book losses reduced for the 2013 IRC Section 382 ownership change
limitation of $213.7 million, book/tax differences and expiration of unused carryforwards. The federal net operating loss
carryforwards generated prior to the 2018 tax year of approximately $98.8 million will expire between 2030 and 2037. The federal net
operating losses generated in 2018 and thereafter will be carried forward indefinitely as a result to changes in the tax law
following the Tax Cuts and Jobs Act. As of December 31, 2023, we had gross state net operating loss carryforward of approximately
$40.2 million which will expire at various dates between 2024 and 2042 if not utilized.

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, cash equivalents, and investments.

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As
of December 31, 2023, our accumulated deficit was $537.7 million with cash and cash equivalents of $20.6 million, inclusive of restricted
cash. Since inception, we have financed our operations primarily through cash generated by operations and proceeds from our debt and
stock offerings.

Capital
Resources

As
of December 31, 2023 and 2022, the Company did not have any debt.

Liquidity

The
following table summarizes our cash flow by operating, investing and financing activities for years ended December 31, 2023 and 2022
(in thousands):

Net
cash used in operating activities. We used approximately $9.1 million and $8.4 million of cash in operating activities during the
years ended December 31, 2023 and 2022, respectively. The increase in cash used in operating activities was driven by the increased operating
loss offset by changes in working capital in the current year period.

Net
cash provided by (used in) investing activities. Cash provided by investing activities for the year ended December 31, 2023,
consisted of $19.8 million. The cash generated during the year
ended December 31, 2023, was from proceeds received from the maturity of short-term investments of $20.1 million, partially offset
by $0.4 million of cash paid for equipment, construction and design costs associated with our new facility. Cash
used in investing activities for the year ended December 31, 2022, consisted primarily of purchases of investments of $19.7 million
and $2.4 million paid for equipment, design and construction costs associated with our new facility.

Net
cash provided by financing activities. We generated approximately $0.1 million and $0.2 million of cash for the years ended December
31, 2023 and 2022, respectively. The cash generated in both periods was driven by the exercise of stock options and our employee stock
purchase program.

At
December 31, 2023, we had working capital of approximately $20.0 million, compared to a working capital of approximately $29.0 million
at December 31, 2022. The decrease in working capital was primarily driven by the net loss incurred during the year ended December 31,
2023.

Our
principal source of liquidity is cash provided by operations and by the issuance of common stock through the exercise of stock
options and our employee stock purchase program as well as cash received from past equity raises. In addition, the Company filed a
universal shelf registration statement on Form S-3 with the SEC in May 2023, which was declared effective by the SEC on June 6,
2023, registering for sale up to $100.0 million of any combination of our common stock, preferred stock, debt securities, warrants,
rights and/or units from time to time and at prices and on terms that we may determine. The net proceeds of any securities we sell
under our shelf registration statement may be used for general corporate purposes, including among other possible uses, the
acquisition of companies or businesses, repayment and refinancing of debt, working capital and capital expenditures. At this time,
we have no plans to sell any such securities under our shelf registration statement.

The
Company believes the cash, and cash equivalents on hand as of December 31, 2023, will be sufficient to meet its obligations as they become
due in the ordinary course of business for at least 12 months following the date of the financial statements included in this Annual
Report on Form 10-K, as well as for periods beyond that 12-month period. Our cash requirements depend on numerous factors, including
success of clinical adoption within the installed base of robotic magnetic systems, new placements of capital systems, the resources
we devote to developing and supporting our products, and other factors. We expect to continue to fund our operations with cash resources
primarily generated from the proceeds of our past equity raises and from our working capital. In the future, we may finance cash needs
through the sale of other equity securities or non-core assets, strategic collaboration agreements, debt financings or through distribution
rights.

Off-Balance
Sheet Arrangements

We
do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities
often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities
involving non-exchange traded contracts. As a result, we are not materially exposed to any financing, liquidity, market or credit risk
that could have arisen if we had engaged in these relationships.

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