Convertible Preferred Stock And Stockholders' Equity | 11. Convertible Preferred Stock and Stockholders’ Equity The holders of common stock are entitled one vote for each share held and to receive dividends whenever funds are legally available and when declared by the Board of Directors subject to the prior rights of holders of all classes of stock having priority rights as dividends and the conditions of the Revolving Credit Agreement. No dividends have been declared or paid as of December 31, 2016 . Convertible Preferred Stock and Warrants On September 26, 2016, the Company entered into a Securities Purchase Agreement with certain institutional and other accredited investors whereby it agreed to sell, for an aggregate purchase price of $24.0 million, (i) an aggregate of 24,000 shares of Series A Convertible Preferred Stock, par value $0.001 with a stated value of $1,000 per share which are convertible into shares of the Company’s common stock and (ii) warrants to purchase an aggregate of 36,923,078 shares of common stock. The transaction closed on September 29, 2016. The Company received net proceeds from the sale of the convertible preferred stock and warrants of $23.0 million, after offering expenses. The Company used $13.0 million of the funds to satisfy in full all amounts outstanding under the Loan Agreement with Healthcare Royalty Partners, as noted above, and anticipates using the remaining proceeds for general corporate purposes. The designations, preferences, powers and rights of the convertible preferred shares are set forth in a Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (“Certificate of Designations”) filed with the Delaware Secretary of State. The convertible preferred shares are entitled to vote on an as-converted basis with the common stock, subject to specified beneficial ownership issuance limitations. The convertible preferred shares bear dividends at a rate of six percent ( 6% ) per annum, which are cumulative and accrue daily from the date of issuance on the $1,000 stated value. Such dividends will not be paid in cash except in connection with any liquidation, dissolution or winding up of the Company or any redemption of the convertible preferred shares. Instead the value of the accrued dividends is added to the liquidation preference of the convertible preferred shares and will increase the number of shares of common stock issuable upon conversion. Each convertible preferred share is convertible at the option of the holder from and after the date of issuance with no expiration date, at an initial conversion price of $0.65 per share, subject to adjustment in the event of stock splits, dividends, mergers, sales of all or substantially all of our assets or similar transactions, subject to specified beneficial ownership issuance limitations. Each holder of convertible preferred shares has the right to require us to redeem such holder’s convertible preferred shares upon the occurrence of specified events, which include certain business combinations, the sale of all or substantially all of the Company’s assets or the sale of more than 50% of the outstanding shares of the Company’s common stock. In addition, the Company has the right to redeem the convertible preferred shares in the event of a change of control as defined in the Certificate of Designations. The convertible preferred shares rank senior to our common stock as to distributions and payments upon the liquidation, dissolution and winding up of the Company. No such distributions or payments upon the liquidation, dissolution and winding up of the Company may be made to the holders of common stock unless and until the holders of convertible preferred shares have received the stated value of $1,000 per share plus any accrued and unpaid dividends. Until all convertible preferred shares have been converted or redeemed, no dividends may be paid on the common stock without the express written consent of the holders of a majority of the outstanding convertible preferred shares. In the event that dividends or other distributions of assets are made or paid by the Company to the holders of the common stock, the holders o f convertible preferred shares are entitled to participate in such dividend or distribution on an as-converted basis. On the date of the issuance, the fair value of the convertible preferred stock was greater than the allocated proceeds received for the Series A convertible preferred stock. As such, the Company accounted for the beneficial conversion feature under ASC 470-20, Debt with Conversion feature under ASC 470-20, Debt with Conversion and Other Options. The Company recorded a deemed dividend charge of $6.1 million for the accretion of a discount on the Series A convertible preferred stock. The deemed dividend was a non-cash transaction and is reflected below net loss to arrive at net loss available to common stockholders. Since the convertible preferred shares are subject to conditions for redemption that are outside the Company’s control, the convertible preferred shares are presently reported in the mezzanine section of the balance sheet. The warrants issued in conjunction with the convertible preferred stock have an exercise price equal to $0.70 per share subject to adjustments as provided under the terms of the warrants. The warrants are exercisable through September 29, 2021, subject to specified beneficial ownership issuance limitations. The warrants may be exercised by any holder on a cashless basis if, at any time after the date that is 180 days after the closing, the registration statement required by the Registration Rights Agreement described below is not effective and available for resale of all of the shares of common stock issuable upon exercise of such holder’s warrants. Due to the fact that the warrants are puttable upon the occurrence of certain events outside of the Company’s control, the warrants qualify as liabilities under ASC 480-10. The calculated fair value of the warrants is classified as a liability and is periodically re-measured with any changes in value recognized in “Other income (expense)” in the Statements of Operations. See Note 1 2 for additional details. On December 2, 2016 100 shares of convertible preferred stock plus accumulated dividends were converted into 155,439 common shares. Listing Transfer to OTCQX ® Best Market On August 2, 2016, the Company received a determination letter from the Nasdaq Hearings Panel (the “Panel”) notifying the Company that its common stock would be delisted from The Nasdaq Capital Market (“Nasdaq”) and that suspension of trading in the shares would be effective at the open of business on August 4, 2016. The determination letter also indicated that Nasdaq would complete the delisting by filing a Form 25 Notification of Delisting with the Securities Exchange Commission, after applicable appeal periods have lapsed. The Panel made the determination to delist the Company’s common stock because the Company did not demonstrate compliance with the minimum $35 million market value of listed securities requirement for a period of ten consecutive trading days by August 1, 2016, as required by a decision previously issued by the Panel on May 2, 2016. The Company’s shares of common stock commenced trading on the OTCQX ® Best Market on August 4, 2016 under the Company’s current ticker symbol of “STXS.” Controlled Equity Offering The Company entered into a Controlled Equity Offering SM sales agreement (the “Sales Agreement”) in May 2014, as amended on March 26, 2015, with Cantor Fitzgerald & Co. (“Cantor”), as agent and/or principal, pursuant to which the Company could issue and sell, from time to time, shares of its common stock having an aggregate gross sales price of up to $18.0 million. The Company paid Cantor a commission of 3.0% of the gross proceeds from any common stock sold through the Sales Agreement. There were no proceeds from the Controlled Equity Offering during the twelve months ended December 31, 2016. The Sales Agreement expired in November 2016 upon the expiration of our Registration Statement on Form S-3. The Company has reserved shares of common stock for conversion of convertible preferred stock, exercise of warrants, and the issuance of options granted under the Company’s stock option plan and its stock purchase plan as follows: December 31, December 31, 2016 2015 Warrants 38,963,443 2,120,365 Series A Convertible Preferred Stock Series 47,844,562 - Stock award plans 1,524,996 731,442 Employee Stock Purchase Plan 192,290 231,298 88,525,291 3,083,105 Stock Award Plans The Company has various stock plans that permit the Company to provide incentives to employees and directors of the Company in the form of equity compensation. In August 2012, the Board of Directors adopted a stock incentive plan (the 2012 Stock Incentive Plan) which was subsequently approved by the Company’s stockholders. This plan replaces the 2002 Stock Incentive Plan which expired on March 25, 2012. The 2012 Stock Incentive Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units to employees, directors, and consultants. Options granted under the 2012 Stock Incentive Plan expire no later than ten years from the date of grant. The exercise price of each incentive stock option shall not be less than 100% of the fair value of the stock subject to the option on the date the option is granted. The vesting provisions of individual options may vary, but incentive stock options generally vest 25% on the first anniversary of each grant and 1/48 per month over the next three years. Stock appreciation rights are rights to acquire a calculated number of shares of the Company’s common stock upon exercise of the rights. The number of shares to be issued is calculated as the difference between the exercise price of the right and the aggregate market value of the underlying shares on the exercise date divided by the market value as of the exercise date. Stock appreciation rights granted under the 2012 Stock Incentive Plan generally vest 25% on the first anniversary of such grant and 1/48 per month over the next three years and expire no later than ten years from the date of grant. The Company generally issues new shares upon the exercise of stock options and stock appreciation rights. Restricted share grants are either time-based or performance-based. Time-based restricted shares generally cliff vest three years after grant. Performance-based restricted shares vest upon the achievement of performance objectives which are determined by the Company’s Board of Directors. Restricted stock unit grants are time-based and generally vest over a period of four years. Options granted to non-employee directors expire no later than ten years from the date of grant. The exercise price of options to non-employee directors shall not be less than 100% of the fair value of the stock subject to the option on the date the option is granted. Initial grants of options to new directors generally vest over a two year period. Annual grants to directors generally vest upon the earlier of one year or the next stockholder meeting. A summary of the option and stock appreciation rights activity for the year ended December 31, 201 6 is as follows: Number of Options/SARs Range of Exercise Price Weighted Average Exercise Price per Share Outstanding, December 31, 2015 706,494 $1.45 - $116.40 $9.34 Granted 1,000 $1.55 $1.55 Exercised - - - Forfeited (35,607) $1.74 - $99.00 $19.79 Outstanding, December 31, 2016 671,887 $1.45 - $116.40 $8.77 As of December 31, 201 6 , the weighted average remaining contractual life of the options and stock appreciation rights outstanding was 7.06 years . Of the 671,887 options and stock appreciation rights that were out standing as of December 31, 2016 , 429,029 were vested and exercisable with a weighted average exercise price of $12.15 per share and a weighted average remaining term of 6.64 years. A summary of the options and stock appreciation rights outstanding by range of exercise price is as follows: Year Ended December 31, 2016 Number of Weighted Weighted Weighted Options Average Exercise Options Average Average Currently Price Per Vested Range of Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Share $0.00 - $10.00 581,142 7.67 years $ 3.07 338,284 $ 3.26 $30.01 - $40.00 58,745 4.03 years $ 34.86 58,745 $ 34.86 $40.01 - $50.00 12,250 2.44 years $ 43.90 12,250 $ 43.90 $50.01 - $60.00 12,250 1.41 years $ 54.90 12,250 $ 54.90 $90.01+ 7,500 0.33 years $ 113.60 7,500 $ 113.60 671,887 7.06 years $ 8.77 429,029 $ 12.15 The intrinsic value of options and stock appreciation rights is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options and stock appreciation rights that were i n-the-money at December 31, 2016 . The intrinsic value of the options and stock appreciation rights outstanding at December 31, 2016 and the intrinsic value of fully vested options and stock appreciation rights outstanding at December 31, 2016 were zero based on a closing share price of $0.65 on December 31, 2016 . No options or stock appreciation rights were exercised under the Company’s stock option plans during the years ended December 31, 2015 or 2016 and the Company realized no proceeds during these periods . The weighted average grant date fair value of options and stock appreciation rights granted during the year ended December 31, 2016 was $1.55 per share. A summary of the restricted stock unit activity for the year ended December 31, 2016 is as follows: Number of Restricted Stock Units Weighted Average Grant Date Fair Value per Unit Outstanding, December 31, 2015 752,008 $2.63 Granted 862,600 $0.84 Vested (317,962) $2.45 Forfeited (129,547) $1.51 Outstanding, December 31, 2016 1,167,099 $1.48 The intrinsic value of restricted stock units outstanding at December 31, 2016 was $0.8 million based on a closing share price of $0.65 as of December 31, 2016 . During the year ended December 31, 201 6 , the aggregate intrinsic value of restric ted stock units vested was $0.3 million determined at the date of vesting. During the fourth quarter of 201 6 , the Company adjusted its estimated forfeiture rate s based on historical information, which resulted in an increase to share-based compensation of approximately $0.2 million for the year ended December 31, 2016 . As of December 31, 2016 , the total compensation cost related to options, stock appreciation rights and non-vested stock granted to employees under the Company’s stock award plans but not yet recognized was approximately $1.8 million , net of estimated forfeitures of approx imately $0.3 million. This cost will be amortized over a weighted average period of approximately one and a half years on a straight-line basis over the underlying estimated service periods and will be adjusted for subsequent changes in forfeitures. 2009 Employee Stock Purchase Plan In 2009, the Company adopted its 2009 Employee Stock Purchase Plan (“ESPP”) . In June 2014, our shareholders approved a proposal to amend the ESPP to increase the number of shares authorized for issuance under the ESPP by 250,000 shares. Eligible employees have the opportunity to participate in a new purchase period every 3 mo nths . Under the te rms of the plan, employees can purchase up to 15% of their compensation of the Company’s common stock, subject to an annual maximum of $25,000 , at 95% of the fair market value of the stock at the end of the purchase period, subject to certain plan limitations. As of December 31, 201 6 , there were 192,290 remaining shares available for issuance under the Employee Stock Purchase Plan. |