Stereotaxis, Inc. (STXS) FY 2022 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
is a pioneer and global leader in surgical robotics for minimally invasive endovascular intervention. We design, manufacture and
market robotic systems, instruments and information systems for the interventional laboratory. Our proprietary robotic technology,
Robotic Magnetic Navigation (RMN), 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.

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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.

Our
primary products include the Genesis RMN System, the Odyssey Solution, and other related devices. We also offer to our
customers the Stereotaxis Imaging Model S x-ray System 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.

The
Stereotaxis Imaging Model S provides an integrated complete solution for a robotic interventional operating room. It is a
single-plane, full-power x-ray system and includes the c-arm, powered table, motorized boom, and large high-definition monitors. The
Stereotaxis Imaging Model S x-ray System incorporates modern fluoroscopy technology to support high quality imaging while minimizing
radiation exposure for patients and physicians. The combination of RMN Systems with Stereotaxis Imaging Model S is designed to
reduce 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 registration 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. Our prior generation robotic
magnetic navigation system, the Niobe System, and the Odyssey Solution, Cardiodrive, and various disposable interventional
devices have received regulatory clearance in the U.S., Europe, Canada, China, Japan and various other countries. We have received the
regulatory clearance, licensing and/or CE Mark approvals that allow us to market the Vdrive and Vdrive Duo Systems with
the V-CAS, V-Loop and V-Sono devices in the U.S., Canada and Europe. The Stereotaxis Imaging Model S x-ray System
is CE marked and cleared by the FDA.

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, 2022, we had approximately $14.8 million of backlog, consisting of outstanding purchase orders and other commitments
for these systems. Of the December 31, 2022 backlog, we expect approximately 89% to be recognized as revenue over the course of 2023.
We had backlog of approximately $10.1 million as of December 31, 2021. 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.

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We
have strategic relationships with technology leaders in the global interventional market. Through these strategic relationships we provide
compatibility between our robotic magnetic navigation system 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 integrated systems and devices and/or equivalent alternatives. 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.

COVID-19
Pandemic

The
impact of the COVID-19 pandemic has varied widely over time by individual geography. In 2021, resurgences of COVID-19 as well as hospital
staffing shortages depressed procedure volumes at various times throughout the year. After such resurgences procedure volumes would generally
stabilize or recover. Similarly, in 2022, procedure volumes continued to be challenged by periodic resurgences of COVID-19, ongoing hospital
staffing issues and other factors.

We
have experienced challenges and disruptions due to the pandemic such as worldwide supply chain disruptions, including shortages and inflationary
pressures, and logistics delays which makes it difficult for us to source parts and ship our products. Our customers have also experienced
similar supply chain issues as well as labor shortages, both of which have contributed to delayed hospital construction project timelines.
To-date, we have been generally able to conduct normal business activities albeit in a more deliberate manner than prior to the pandemic,
including taking action to increase inventory levels, but we cannot guarantee that they will not be impacted more severely in the future.

The
global healthcare system is continuing to respond to the unprecedented challenges posed by the COVID-19 pandemic. While
we cannot reliably estimate the ultimate duration of the impact or the severity of ongoing periodic resurgences thereof, 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.

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:

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.

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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:

Sublease
Revenue:

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 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
detail on deferred revenue. The Company did not have any impairment losses on its contract assets for the periods presented.

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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 $0.2 million as of December 31, 2022 and 2021. The Company did not incur any impairment losses during any of the periods presented.

Leases

The
Company accounts for leases in accordance with ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified
Topic 842. A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property,
plant or equipment for a period of time in exchange for consideration. The Company determines if a contract contains a lease at inception.
For contracts where the Company is the lessee, operating leases are included in operating lease right-of-use (“ROU”) assets
and operating lease liability on the Company’s balance sheet. The Company currently does not have any finance leases.

Operating
lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over
the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before
the lease commencement date, less lease incentives received. The Company uses its incremental borrowing rate based on the information
available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit
rate. Lease terms may include options to extend or terminate when the Company is reasonably certain that the option will be exercised.
Lease expense is recognized on a straight-line basis over the lease term.

The
Company also has lease arrangements with lease and non-lease components. The Company elected the practical expedient not to separate
non-lease components from lease components for the Company’s operating leases. Additionally, the Company applies the short-term
lease measurement and recognition exemption in which right of use assets and lease liabilities are not recognized for leases less than
twelve months.

As
disclosed in Note 7, on March 1, 2021, the Company entered into an office lease agreement (the “Lease”) with Globe Building
Company (the “Landlord”), under which the Company is leasing executive office space and manufacturing facilities of approximately
43,100 square feet of rentable space located at 710 N. Tucker Boulevard, St. Louis, Missouri (the “Premises”) that serves
as the Company’s new principal executive and administrative offices and manufacturing facility. Lease payments commenced on January
1, 2022 and the lease has a term of ten years, with two renewal options of five years each. The minimum annual rent under the terms of
the Lease ranges from approximately $0.8 million in 2022 to $1.0 million in 2031.

The
Company gained access to the Premises in the third quarter 2021 to begin constructing leasehold improvements. In accordance with ASC
842, the Company recorded a ROU asset and lease liability. The initial recognition of the ROU asset and lease liability was $5.9 million.
In the fourth quarter of 2021, the Company received an occupancy permit and relocated its operations
to the new leased space.

Cost
of Contracts

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
estimated warranty costs and are recorded at the time of sale. Cost of revenue from services and license fees are recorded when incurred.
Cost of sublease revenue is recorded on a straight-line basis.

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.

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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, 2022 and 2021

Revenue.
Revenue decreased from $35.0 million for the year ended December 31, 2021, to $28.1 million for the year ended December 31, 2022, a decrease
of approximately 20%. Revenue from sales of systems decreased from $11.2 million for the year ended December 31, 2021, to $6.8 million
for the year ended December 31, 2022, a decrease of approximately 39%, driven by decreased system sales volumes in the current year period.
Revenue from sales of disposable interventional devices, service and accessories decreased to $21.3 million for the year ended December
31, 2022, from $22.9 million for the year ended December 31, 2021, a decrease of approximately 7%, driven
by timing of service contract revenue, lower procedure volumes, and the strengthening of the U.S. dollar during the current year period.
Sublease revenue was $1.0 million for the year ended December 31, 2021. The sublease ended
December 31, 2021.

Cost
of Revenue. Cost of revenue decreased from $11.8 million for the year ended December 31, 2021, to $9.7 million for the year ended
December 31, 2022, a decrease of approximately 18%. As a percentage of our total revenue, overall gross margin remained consistent at
66% for the years ended December 31, 2022 and December 31, 2021. Cost of revenue for systems sold decreased from $7.5 million for the
year ended December 31, 2021 to $5.8 million for the year ended December 31, 2022, primarily due to decreased system sales volumes in
the current year period. Gross margin for systems decreased from $3.6 million for the year ended December 31, 2021 to $1.0 million for
the year ended December 31, 2022. Cost of revenue for disposables, service, and accessories increased to $3.9 million for the year ended
December 31, 2022 from $3.3 million for year ended December 31, 2021, driven by higher expenses incurred under service contracts in the
current year period. Gross margin for disposables, service and accessories was 82% for the current year period compared to 86% for the
year ended December 31, 2021. Cost of sublease revenue was $1.0 million the year ended December 31, 2021. The
sublease ended December 31, 2021.

Research
and Development Expense. Research and development expense increased from $10.2 million for the year ended December 31, 2021, to $10.6
million for the year ended December 31, 2022, an increase of approximately 4%. This increase was
primarily due to higher project spending and measured hiring in the current year period.

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Sales
and Marketing Expense. Sales and marketing expense increased from $11.9 million for the year ended December 31, 2021 to $12.3 million
for the year ended December 31, 2022, an increase of approximately 3%. This increase was primarily
due to higher travel expenses in the current year period.

General
and Administrative Expense. General and administrative expenses include finance, information systems, legal, and general management
expenses. General and administrative expenses increased from $14.0 million for the year ended December 31, 2021 to $14.4 million for
the year ended December 31, 2022, an increase of approximately 3%. This increase was primarily
driven by higher stock-based compensation expense for the previously announced CEO Performance Award partially offset by lower professional
service fees in the current year period.

Interest
Income (Expense). Net interest income was $0.5 million for the year ended December 31, 2022,
and net interest expense was less than $0.1 million for the year ended December 31, 2021. The increase for the year ended December 31,
2022 was driven by interest earned from investments.

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, 2022 and December 31, 2021 to reflect these uncertainties. As of December 31, 2022, we had gross federal net
operating loss carryforwards of approximately $121.7 million. We may not be able to utilize all of these loss carryforwards prior to
their expiration. The federal net operating loss carryforwards reflect accumulated book losses
reduced for the 2013 IRC Section 382 ownership change limitation of $236.4 million and approximately $159.2 million of book/tax differences
and expiration of unused carryforwards. The federal net operating loss carryforwards generated prior to the 2018 tax year will expire
between 2030 and 2037. The federal net operating losses generated in 2018 and thereafter will be carried forward indefinitely as a result
of changes in the tax law following the Tax Cuts and Jobs Act. As of December 31, 2022, we had gross state net operating loss carryforward
of approximately $32.8 million which will expire at various dates between 2023 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.

As
of December 31, 2022, our accumulated deficit was $517.0 million with cash and cash equivalents of $9.9 million, inclusive of restricted
cash, and $19.8 million in short-term investments. 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, 2022, and 2021, the Company did not have any debt.

Paycheck
Protection Program

The
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. Among
the provisions contained in the CARES Act was the creation of the Paycheck Protection Program that provides for Small Business Administration
(“SBA”) Section 7(a) loans for qualified small businesses. In general, the loan could be forgiven as long as the funds were
used for payroll related expenses as well as rent and utilities paid during the twenty-four-week period from the date of the loan and
as long as certain headcount and salary/wage levels were maintained. On April 10, 2020, the Company was informed by its lender, Midwest
BankCentre (the “Bank”), that the Bank received approval from the SBA to fund the Company’s request for a loan under
the SBA’s Paycheck Protection Program (“PPP Loan”). Per the terms of the PPP Loan, the Company received total proceeds
of approximately $2.2 million from the Bank on April 20, 2020. In accordance with the loan forgiveness requirements of the CARES Act,
the Company used the full proceeds from the PPP Loan primarily for payroll costs, rent and utilities. In March 2021, the Company applied
for loan forgiveness and in June 2021 full loan forgiveness was granted by the SBA. The Company recognized a net gain from debt extinguishment
of approximately $2.2 million.

Liquidity

The
following table summarizes our cash flow by operating, investing and financing activities for years ended December 31, 2022 and 2021
(in thousands):

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Net
cash used in operating activities. We used approximately $8.4 million and $2.9 million of cash in operating activities during the
years ended December 31, 2022 and 2021, respectively. The increase in cash used in operating activities was driven by the increased operating
loss and use of working capital in the current year period.

Net
cash used in investing activities. 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. We used less than $1.4 million of cash in investing activities during the year ended December 31, 2021 for the
purchase of equipment, design and construction costs associated with our new facility.

Net
cash provided by financing activities. We generated approximately $0.2 million and $0.5 million of cash for the years ended December
31, 2022 and 2021, respectively. The cash generated in both periods was driven by the exercise of stock options and our employee stock purchase program.

At
December 31, 2022, we had working capital of approximately $29.0 million, compared to a working capital of approximately $38.1 million
at December 31, 2021. The decrease in working capital was primarily driven by the net loss incurred during the year ended December 31,
2022.

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. The Company believes the cash, cash equivalents,
and investments on hand as of December 31, 2022, 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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