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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K/A
 (Amendment
No. 3)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-33452
 TomoTherapy Incorporated
 (Exact name of Registrant as specified in its charter)
 Wisconsin(State of Other Jurisdiction of 
Incorporation or Organization)
    
    39-1914727(I.R.S. Employer
Identification No.)1240 Deming Way, Madison, Wisconsin(Address of principal executive offices)
    
    53717(Zip Code)
 (608) 824-2800  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock
    
    NASDAQ Global Select Market
 Securities registered pursuant to section 12(g) of the Act:
None
 Yes o No þ
 Yes o No þ
 Yes þ No o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
  DOCUMENTS INCORPORATED BY REFERENCE




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EXPLANATORY NOTE
 Report of Management on Internal Control over Financial Reporting
 Report of Management on Internal Control over Financial
Reporting
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##### 



TomoTherapy Incorporated
 INDEX
 PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    21Item 1B. Unresolved Staff CommentsItem 2. Properties
    
    
    34Item 3. Legal Proceedings
    
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    
    35PART IIItem 5. Market for the Registrants Common Equity, Related Shareholder Matters and Issuer Purchases
of Equity Securities
    
    
    36Item 6. Selected Financial Data
    
    
    38Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    60Item 8. Financial Statements and Supplementary Data
    
    
    62Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    92Item 9A. Controls and Procedures
    
    
    92Item 9B. Other Information
    
    
    93PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    94Item 11. Executive Compensation
    
    
    94Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
    
    
    94Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    95Item 14. Principal Accountant Fees and Services
    
    
    95PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    96Signatures
    
    
    100Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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FORWARD-LOOKING STATEMENTS
 You should read the following discussion together with our consolidated financial statements
and notes to those financial statements, which are included in this report. This report contains
forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). The words anticipates, intends,
expects, could, should, plans, believes, estimates or words or phrases of similar
import generally identify forward-looking statements. You are cautioned that forward-looking
statements are subject to risks, trends and uncertainties that could cause actual results,
performance or achievements to differ materially from those expressed in any forward-looking
statements. Important factors that could cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements expressed or implied
by those statements include, but are not limited to, those set forth below in the section entitled
Risk Factors under Part I, Item 1A of this Annual Report on Form 10-K . We undertake no obligation
to, and expressly disclaim any such obligation to, update or revise any forward-looking statements
to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to
future results over time or otherwise, except as required by law.
 
 PART I
 
 Item 1. Business
 Overview
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Recent Developments
      Market Overview
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Radiation Treatment
   
    
    Intensity modulated radiation therapy.Intensity modulated radiation therapy, or IMRT,
involves varying, or modulating, the radiation beam intensity across the treatment area.
This technique attempts to conform the high dose region of the radiation beam more closely
with the shape of the tumor, enabling the delivery of higher doses of radiation to tumors
with a reduced impact on surrounding healthy tissue. Using IMRT, medical professionals can
design a more customized treatment plan for each patient.
 
    
    Image guided radiation therapy.Image guided radiation therapy, or IGRT, involves
delivering radiation guided by images of the treatment area taken shortly before treatment
using CT, x-ray, ultrasound or other imaging technologies. By combining imaging with
radiation treatment, clinicians can adjust the patients position relative to the radiation
source prior to each treatment to target the tumor more precisely. However, the precision
and effectiveness of IGRT depends largely on the quality of the images and the degree to
which the radiation delivery system is integrated with the images. Compared to traditional
IMRT without image guidance, accurate image guidance enables clinicians to improve patient
outcomes by concentrating higher doses of radiation at tumors and further reducing the
exposure of healthy tissue to radiation. According to the 2007 Radiation Oncology Market
Summary Report published by IMV in August of 2008, 33% of U.S. radiation therapy providers
plan on purchasing at least one linear accelerator over the next three years, with 99% of
those including an MLC to enable IMRT, and 94% including an electronic portal imaging
capability.
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
    
    Adaptive radiation therapy.Adaptive radiation therapy involves adjusting a patients
radiation therapy plan between fractions to account for changes in the patients anatomy,
the amount and location of the radiation received by the patient, and the size, shape and
location of the tumor. While there is no widely accepted definition of adaptive radiation
therapy, it has been characterized to include as little as an adjustment to the physical
position of the patient relative to the radiation source prior to treatment, as occurs
during IGRT, rather than adjustment to the treatment plan. We believe that adaptive
radiation therapy requires frequent adjustments to the treatment plan facilitated by both
the regular acquisition of updated quantitative images showing the location, geometry and
density of the tumor, as well as verification of the actual radiation dose received by the
patient throughout the entire course of treatment. We believe that achieving truly adaptive
radiation therapy currently represents the most significant challenge for existing radiation
therapy systems. According to the 2007 Radiation Oncology Market Summary Report published by
IMV in August of 2008, just over 10% of sites located in the United States incorporate CT
image guidance, and an estimated 510 radiation oncology departments, or 24%, reported plans
to acquire IGRT imaging devices over the next three years.
 
    
    Dose escalation.Higher doses of radiation have been shown to yield greater local
control of the tumor. The advent of innovative technological features in radiation therapy
treatment planning and delivery has allowed the clinical use of dose escalation, increasing
the radiation dose administered to tumors in the patient, which has resulted in improved
local tumor control and, in some cases, improved patient survival. Hypofractionation is an
evolving radiation therapy technique that involves reducing the number of fractions and
delivering larger doses of radiation per fraction. The benefits of hypofractionation include
patient convenience due to fewer visits and more efficient use of radiation therapy systems.
Stereotactic radiation therapy and stereotactic radiosurgery procedures, in which treatment
is provided in one to five sessions, are extreme examples of hypofractionation.
Hypofractionation has been used to date to treat only a limited number of tumor types. These
tumors are generally small and are located in a few specific, sensitive regions of the body,
such as the head and neck, spinal cord and lung, where the very high intensity radiation
involved in dose escalation increases the need for a radiation delivery system that is
capable of locating tumors and delivering radiation with high precision.
  
    
    Limited versatility and precision.The C-arm configuration of traditional radiation
therapy systems has a limited range and speed of motion due to its size and mechanical
structure. Most existing MLCs, which modulate or shape the radiation beams, also have
mechanical limitations that reduce their beam-shaping ability and the speed at which they
operate. These design elements limit the motion and dynamic range of IMRT intensities
capable of being delivered by traditional radiation therapy systems and often make it
impractical to deliver radiation from more than five to nine treatment angles during a
typical treatment session. These limited treatment angles reduce the ability to deliver
precisely targeted radiation that avoids healthy tissue. Such imprecision may prevent
clinicians from treating tumors near sensitive structures, such as the eye or the spinal
cord, or from re-treating patients in an area of the body that was previously exposed to
radiation and may be unable to tolerate additional exposure.
 
    
    Limited ability to provide frequent, quantitative images.Precise radiation therapy
requires frequent images that accurately depict the size, shape, location and density of the
tumor, which we refer to as quantitative images. Many traditional radiation therapy systems
either do not incorporate CT imaging functionality or use imaging technologies that do not
have the ability to generate quantitative images. Lacking this data, traditional radiation
therapy systems measure the amount of radiation emitted by the device based on the systems
performance specifications. This calculation does not provide the clinician with data
regarding the amount of radiation that was actually received by the patient or what tissue
within the patients body received any particular amount of radiation. In addition, most
radiation therapy systems that have imaging capabilities are not capable of performing daily
imaging of the patient due to concerns about the additional radiation exposure associated
with most imaging technologies. Since it is common for internal organs to shift and for the
size of the tumor to change during the course of treatment, failure to obtain updated images
and adapt the treatment plan throughout the course of treatment may result in a portion, or
potentially all, of the radiation dose missing the tumor and instead being absorbed by
healthy tissue.
 
    
    Failure to integrate multiple functions.Many traditional radiation therapy systems were
designed solely for the purpose of delivering radiation and therefore do not possess
integrated imaging, treatment planning, dose verification or quality assurance capabilities
necessary for more advanced treatment protocols. Some systems have subsequently been adapted
to include certain elements of this functionality by incorporating modular add-on devices to
legacy linear accelerator designs. These separate modular components can provide imaging,
treatment planning, quality assurance procedures or post-treatment analysis functionality.
However, this modular approach often requires the clinician to reconfigure and recalibrate
the system between patient imaging, treatment planning, radiation delivery and quality
assurance, which can increase the time required to plan and deliver treatments.
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The TomoTherapy Solution
  
    
    More versatile treatment capabilities.The Hi Art systems rigid ring gantry and
high-speed MLC allow treatment to be delivered continuously in a helical pattern 360 degrees
around the patients body, allowing radiation delivery from thousands of angles to improve
radiation dose distributions for some of the most challenging cases (now referred to as
TomoHelical). Moreover, with the release of TomoDirect, planned for the second half of 2009,
we believe the Hi Art system will gain new versatility to provide high quality, fixed beam
angle delivery for those cases suited to simple tangential beam radiation therapy.
Versatility in delivery modes effectively means efficient coverage of a wide range of
patient cases, while still maintaining high quality plans throughout. In addition, the Hi
Art system enables an operator to provide IMRT, IGRT or stereotactic treatments anywhere
within a cylindrical volume of 80 centimeters (2.6 feet) in diameter and up to 160
centimeters (5.3 feet) long. This expansive treatment field allows large areas of the body
to be treated in a single session and facilitates complex treatments, such as total bone
irradiation, which specifically irradiates bone marrow, and the treatment of widely distant
tumors. The Hi Art systems precision and versatility offers clinicians an extensive range
of treatment possibilities beyond those offered by other commercially available radiation
systems.
 
    
    Daily, quantitative imaging for better identification of tumors, dose verification and
treatment planning.The Hi Art system is the only commercially available radiation therapy
system offering integrated quantitative CT imaging capabilities, which depict the density of
tumors and healthy tissue more accurately than traditional radiation therapy systems. Our
integrated mega-voltage computerized tomography, or MVCT, which we market as our CTrue
imaging technology, enables quantitative imaging and delivers less radiation during the
imaging process compared to the imaging technologies used by other commercially available
radiation therapy systems. This lower dose allows the clinician to collect daily,
quantitative images, which can be used to monitor changes in the patients internal anatomy
and quickly and accurately quantify the amount of radiation absorbed by specific areas of
the patients body, including both tumors and healthy tissue. We believe that daily,
quantitative images are essential to optimizing patient treatment by enabling clinicians to
adapt the treatment plan in response to anatomical changes and the cumulative amount of
radiation received by specific areas within the patient over time. We believe that both of
these factors can have a significant impact on the targeting and amount of the radiation
dose to be delivered.
 
    
    Integrated treatment system for more precise radiation delivery.We believe that the
integration of our CTrue imaging technology, treatment planning and helical delivery mode of
radiation beams enables highly precise radiation delivery. Our planned adaptive software
allows clinicians to establish at the time of treatment the precise contours of a tumor and
any sensitive structures at risk. The Hi Art system uses a highly efficient dose computation
algorithm to ensure that the radiation beam conforms to the patients tumor and avoids
sensitive structures, providing a highly-targeted dose distribution. These features
significantly benefit patients by increasing the radiation delivered to cancerous tissues
and reducing damage to nearby healthy tissues. In addition, because the Hi Art system can
precisely deliver a high dose of targeted radiation, we believe that our system reduces the
temporary side effects and permanent damage to healthy tissue associated with traditional
radiation therapy systems. This capability allows clinicians to accelerate the treatment
regimen by increasing the radiation delivered to tumor cells in fewer fractions.
 
    
    Efficient clinical workflow for IGRT and adaptive radiation therapy.The Hi Art system
integrates into a single system all of the key elements for radiation therapy, including
treatment planning, CT image-guided patient positioning, treatment delivery, quality
assurance and adaptive planning. The imaging and treatment planning capabilities of many
traditional systems are more modular or require cumbersome add-ons or separate treatment
planning systems that result in clinicians taking more steps between scanning, planning and
treatment of patients, and may reduce the precision of treatment. Conversely, the integrated
imaging and treatment features of the Hi Art system allow clinicians to scan, plan and treat
cancer patients easily and efficiently. This capability enables healthcare providers to
increase patient throughput for sophisticated IGRT and adaptive radiation therapy procedures
using the Hi Art system. Daily images can be easily accessed remotely, via our TomoPortal
web-enabled interface, to verify patient positioning and collaboratively define patient
treatment strategies. Taking advantage of this integration capability, in mid-2007 we
introduced StatRT software to the Hi Art treatment system, allowing the full radiation
therapy process  CT scanning, treatment planning and treatment delivery  to be completed
much more rapidly than when using other systems. The software is currently used primarily to
enhance the quality of care for palliative and other time-critical cancer cases by allowing
patients to be treated immediately. This treatment option is not available for other systems
which lack full integrated capabilities, where scanning and treatment planning are usually
completed a full day or more prior to delivery of treatment.
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
    
    Low barriers to installation and implementation.All external beam radiation systems
must be housed in rooms which have special radiation shielding to capture any radiation not
absorbed by the patient. The Hi Art systems size and self-contained design allow customers
to retrofit the Hi Art system into existing treatment rooms previously used for legacy
radiation therapy systems and avoid, or reduce, the significant construction costs that can
be associated with building new, larger treatment rooms, which are required to install many
other radiation therapy systems. With both imaging and radiation delivery capabilities in
its ring gantry, the Hi Art system requires less space than other systems, which use large
moving arms to position the linear accelerator or incorporate adjacent imaging equipment
used for treatment planning. In addition, because the Hi Art system has an integrated
radiation beam stop, which captures radiation that passes through the patient, it requires
less radiation shielding in treatment room walls as compared to the shielding required by a
traditional system. We also preassemble, test and commission each Hi Art system at our
manufacturing facility, and ship the system almost fully assembled. This assembly process
typically allows radiation beam on within four days and treatments to begin within 45 days
after delivery.
 
    
    Platform for further technological advancements in adaptive radiation therapy.We
believe that the Hi Art system is the only commercially available treatment device that
enables truly adaptive radiation therapy because of its unique ability to provide daily,
quantitative images, high speed delivery of radiation from fixed beam angles or helically
from 360 degrees around the body and real-time verification of the dose received by the
patient. We believe that the combination of these design features and our integrated
treatment planning and optimization software will allow us to continue to enhance the Hi Art
systems adaptive capabilities to a point where clinicians will routinely and easily adjust
a patients treatment as needed.
  Our Strategy
  
    
    Increase market awareness of the Hi Art systems clinical and economic benefits.In
order to expand our installed base of Hi Art systems, we intend to continue to position the
Hi Art system as the most advanced radiation therapy system for treating a wide range of
cancer types effectively and efficiently. We intend to accomplish this through traditional
sales and marketing efforts, such as tradeshows, educational symposia, e-business avenues,
marketing materials, case studies and direct mail campaigns. An important aspect of our
sales and marketing efforts is also to raise awareness of the Hi Art system among patient
populations who are increasingly educated about treatment options and therefore help to
drive adoption of new technologies by clinicians. We also intend to educate clinicians about
using the Hi Art system to treat tumors that they may currently believe can be adequately
treated using competing technologies.
 
    
    Expand penetration into both currently served markets and the largely unserved, single
linear accelerator facility market.We initially sold the Hi Art system primarily to
customers who had multiple radiation treatment systems at a site. The clinicians at these
customer sites have typically treated their most complex and difficult cases on the Hi Art
system, while treating less complex cases using traditional radiation therapy systems that
treat with a fixed beam angle delivery. With the launch of TomoDirect in the second half of
2009, we believe we will be able to compete more effectively with the traditional radiation
therapy systems by providing a high quality fixed beam angle delivery mode for simpler
cases. This new versatility in treatment modality will, we believe, allow clinics to more
effectively balance dose delivery and patient case complexity and, thus, result in increased
demand for the Hi Art system at sites with multiple radiation treatment systems. In
addition, we believe this expanded versatility will make the Hi Art system more attractive
for clinics and other sites with only one radiation therapy system. Facilities with only one
linear accelerator must have the capacity to efficiently and effectively treat any patient,
regardless of clinical complexity. According to the 2007 Radiation Oncology Market Summary
Report published by IMV in August of 2008, 55% of all radiation oncology sites located in
the United States own only one linear accelerator. We believe the expanded versatility
offered by the combination of TomoDirect and TomoHelical treatment modes will help us to
more effectively penetrate this important market.
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
    
    Expand our worldwide sales presence.Our early sales and marketing efforts were
primarily focused on North America. As of December 31, 2008, 68% of our installed systems
were in North America. We have established both direct and indirect sales capabilities in
Western Europe and Asia-Pacific. Recently, we have established indirect sales capabilities
in Eastern Europe and the Middle East, where we believe that there is significant potential
to expand our installed base. We intend to continue to invest in direct and indirect sales
and marketing capabilities in international markets. In particular, we plan to focus on
optimizing capabilities in our current markets and expanding our sales capabilities in
Australia, and in select countries in Eastern Europe.
 
    
    Increase our profitability through cost reductions, scalable field service efficiencies
and improved operating leverage.Over the last three years our operating margins have been
impacted by our decision to invest in our global service and support infrastructure,
including the establishment of spare part depots and the addition of personnel to support
our international operations and anticipated future growth. In addition, we incurred
increased costs due to higher component costs during early production and the higher failure
rates of certain components. In order to increase our profitability, we are seeking to
decrease our reliance on single-source suppliers of key components in order to enable us to
negotiate better prices with a wider range of suppliers and to improve component
reliability. In addition, we are re-engineering higher cost, higher failure components in an
effort to improve reliability and reduce costs. We are also seeking to increase our
profitability by focusing our sales efforts in geographic markets where we currently have
installed Hi Art systems, thus leveraging scalable efficiencies of our existing service
employees and regional spare part depots. We believe this improved asset utilization will
position us to reduce the service infrastructure costs normally associated with increased
sales volumes.
 
    
    Continue to enhance our customer service and support capabilities.We believe that an
important differentiating feature of our business is our strong customer support. We have
invested heavily in our customer service and support infrastructure. We provide
comprehensive customer support beginning with a site-planning and installation team and
continuing through training, product technical support, access to physicist support that is
unique among our competitors, field service engineering and value-added proactive/reactive
maintenance services. We intend to enhance our technological advantages, infrastructure and
market presence by cross functional training of our field engineers with our installation
support personnel and our parts expediters with our call center personnel, as well as
implementing regional training programs to augment and refine our customer service.
 
    
    Enhance the Hi Art systems treatment capabilities through ongoing research and
development initiatives.In order to increase patient throughput and increase our
customers return on their investment, our research and development initiatives are focused
on more fully automating the treatment optimization and adaptive therapy processes, thereby
decreasing the time necessary for clinicians to develop and adapt treatment plans. For
example, in the fall of 2008, we announced the launch of TomoDirect software, which we
expect to begin installing in the second half of 2009. With TomoDirect, we believe we will
be able to compete more effectively with the traditional radiation therapy systems by
providing a high quality fixed beam angle delivery mode for simpler cases. We are also
engaged in initiatives to accommodate real-time patient movements during treatment. We
believe that these developments will further improve the precision of treatment offered by
the Hi Art system and increase patient throughput. In addition, we believe that our work in
remote and automatic quality assurance should reduce the amount of time and resources needed
to perform system verification and maintenance. We believe that these developments will
improve the precision of treatment and increase patient throughput.
 
    
    Continue to expand and protect our intellectual property portfolio.The Hi Art system is
comprised of multiple sophisticated proprietary components. We hold or license 27 U.S.
patents, 44 pending U.S. patent applications, over 95 foreign patents, and over 200 foreign
patent applications. These patents cover various components and techniques incorporated into
the Hi Art treatment system, such as the MLC, the patient couch and aspects of the helical
delivery of therapeutic radiation, or that are being incorporated into new technologies that
we are currently developing, all of which we believe will allow us to maintain a competitive
advantage in the field of radiation treatment. We will continue to seek patent protection
for our new inventions and seek licensing rights for inventions of others that we believe
can add substantial value to our products and services.
 
    
    Increase our commercial opportunities and growth through investments in or collaboration
with third parties.We believe that we can increase our commercial opportunities through a
combination of investments in and collaborations with third parties. We seek to identify
opportunities to collaborate in the development of new technologies that leverage our
existing operational infrastructure and distribution, provide our customers with improved or
additional capabilities or expand our growth opportunities into new markets. For example, in
April of 2008, we formed Compact Particle Acceleration Corporation to focus on the
development of a compact, lower-cost, intensity modulated proton therapy system. We also
will continue to evaluate opportunities to vertically integrate through investment in
suppliers of key components.
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The Hi Art System
  Clinical Workflow
  Patient imaging.
 Treatment planning and optimization.
 Patient positioning and treatment delivery.
 Dose verification.
  Technology
  Ring gantry.
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Quantitative fan beam CT.
 Multi-leaf collimator.
 Treatment planning system.
 Optimizer.
 Integrated database server.
 Primary beam stop and radiation beam shielding.
 Marketing and Sales
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Years Ended December 31,2008
    
    
    2007
    
    
    2006North America
    
    $
    135,977
    
    
    
    67
    %
    
    $
    129,493
    
    
    
    56
    %
    
    $
    88,937
    
    
    
    57
    %EMEA
    
    
    49,588
    
    
    
    24
    %
    
    
    61,337
    
    
    
    26
    %
    
    
    33,586
    
    
    
    22
    %Asia-Pacific
    
    
    19,024
    
    
    
    9
    %
    
    
    41,980
    
    
    
    18
    %
    
    
    33,579
    
    
    
    21
    %$
    204,589
    
    
    
    100
    %
    
    $
    232,810
    
    
    
    100
    %
    
    $
    156,102
    
    
    
    100
    %
   Customer Service and Support
  Site planning and installation.
 Training.
 Standard warranty and support services.
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Tomo Lifecycle Care.
 Online resources.
 
    
    TomoGateway.TomoGateway links our customer call centers directly to a customers Hi Art
system over a secure connection. Using this direct connection, our support staff can perform
online diagnostics, examine system log files and look at data immediately and easily to
assist customers in identifying and addressing problems with their units. Such accessible
data allows us to provide our customers with better support and helps our customers to
maintain high levels of system operability. Access to TomoGateway is included at no
additional charge during the standard one-year warranty period and with all Total TLC and
Partnership TLC packages.
 
    
    TomoExchange.TomoExchange is a secure, web-based tool that is designed to provide a
communication portal between us and our customers and to facilitate communication and
collaboration among all end users of Hi Art. The platform features e-mail integration and a
product feedback tool as well as an on-line forum that allows customers to share information
about the Hi Art system, learn about relevant upcoming events and review important
announcements. TomoExchange is available to all customers operating the Hi Art system at no
cost.
 Competition
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Research and Development
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Manufacturing and Suppliers
      Reimbursement
 United States Reimbursement Regulation
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Foreign Reimbursement Regulations
  Government Regulation
 United States Medical Device Regulation
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United States Privacy and Security Laws
  United States Fraud and Abuse Laws and Regulations
  Physician self-referral laws.
 Anti-kickback laws.
 Federal False Claims Act.
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State Certificate of Need Laws
  Foreign Regulation of Medical Devices
    Intellectual Property
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Employees
  Information Available to Investors
 www.sec.gov
 http://www.tomotherapy.com
 Executive Officers of the Registrant
  Name
    
    Age
    
    PositionFrederick A. Robertson
    
    
    53
    
    
    Chief Executive Officer, President and DirectorStephen C. Hathaway
    
    
    53
    
    
    Chief Financial Officer and TreasurerSteven G. Books
    
    
    59
    
    
    Chief Operating OfficerBrenda S. Furlow
    
    
    50
    
    
    Vice President, Secretary and General CounselThomas Rockwell Mackie
    
    
    54
    
    
    Chairman of the Board of Directors and Co-Founder
 Frederick A. Robertson M.D.
 Stephen C. Hathaway
 Steven G. Books
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Brenda S. Furlow, J.D.,
 Thomas Rockwell Mackie, Ph.D.
 
 Item 1A. Risk Factors
  Risks Related to Our Business
 We currently depend on sales of the Hi Art system for substantially all of our revenue, and, if we
are unable to grow or sustain sales of the Hi Art System, we may not generate sufficient revenue
to support our business.
  Because substantially all of our revenue is derived from sales of the Hi Art system, and because
of the long sales cycle and high unit price of the Hi Art system, our results of operations will
vary significantly from period to period. These fluctuations in revenue may make it difficult to
compare our results of operations across periods.
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We face competition from numerous competitors, many of whom have greater resources than we do,
which may make it more difficult for us to achieve significant market penetration and maintain or
increase our prices.
  Our reliance on single-source suppliers for critical components of the Hi Art system could harm
our ability to meet demand for our products in a timely and cost-effective manner.
   Sales of the Hi Art system may be adversely affected if clinicians do not widely adopt IGRT and
adaptive radiotherapy, which is an emerging cancer treatment technique.
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We may be unable to penetrate the market we currently serve or the unserved single linear
accelerator facility market if we fail to educate clinicians and patients about the benefits of
the Hi Art system and to implement enhancements to the system in a timely manner.
   Our ability to increase our profitability depends in part on maintaining our average selling
prices and increasing our gross margins on product sales, which we may not be able to achieve.
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Our ability to increase our profitability also depends in part on reducing our warranty and
service costs for the Hi Art system and improving our economies of scale, which we may not be able
to achieve.
  Our sales and receivables may be materially adversely impacted if the global economic problems
existing as of the date of this report on Form 10-K persist or worsen.
  If our backlog, which is an important measure of future revenue, declines further, our future
financial performance will be adversely affected.
   We may be required to use more cash generated from our initial public offering to pay expenses,
reducing our ability to use those proceeds for long-term investments.
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If we are unable to maintain existing research collaboration relationships, enter into new
collaboration arrangements in the future or enter into license agreements with our collaborators
and others, our ability to enhance the Hi Art system may be adversely affected.
    We rely on a third party to perform spare parts shipping and other logistics functions on our
behalf. A failure or disruption at our logistics provider would adversely impact our business.
  Changes in healthcare policies and changes to reimbursement to healthcare providers for use of the
Hi Art system could adversely affect sales of the Hi Art system.
   25




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##### Table of Contents



Our manufacturing operations are conducted at a single location, and any disruption at our
manufacturing facility could increase our expenses.
  We are dependent upon third-party local distributors to market and distribute the Hi Art system in
key markets.
   26




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##### Table of Contents



Our results of operations may be adversely affected by changes in foreign currency exchange rates.
  Technological breakthroughs in cancer treatment could render the Hi Art system obsolete.
  A significant percentage of our sales are outside of North America, and economic, political and
other risks associated with international sales and operations could adversely affect our sales or
make them less predictable.
   
    
    difficulties in enforcing agreements and collecting receivables in a timely manner
through the legal systems of many countries outside the United States;
 
    
    the potential failure to comply with foreign regulatory requirements to market the Hi Art
system on a timely basis or at all;
 
    
    availability of, and changes in, reimbursement within prevailing foreign health care
payment systems;
 
    
    difficulties in managing foreign relationships and operations, including any
relationships that we establish with foreign distributors or sales or marketing agents;
 
    
    limited protection for intellectual property rights in some countries;
 
    
    fluctuations in currency exchange rates;
 
    
    the possibility that foreign countries may impose additional withholding taxes or
otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign
trade;
 
    
    the possibility of material shipping delays; and
  27




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##### Table of Contents




    
    significant changes in the political, regulatory, safety or economic conditions in a
country or region in which we operate.
  Product liability suits, whether or not meritorious, could be brought against us due to an alleged
defective component of the Hi Art system or for the misuse of the Hi Art system. These suits could
result in expensive and time-consuming litigation, payment of substantial damages and an increase
in our insurance rates.
  We are subject to federal, state and foreign laws governing our business practices, which, if
investigated or violated, could subject us to costs and penalties, and cause adverse publicity.
     28




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##### Table of Contents



The effectiveness of procedures performed using conformal radiation therapy delivery systems like
the Hi Art system are not yet supported by long-term clinical data, and the medical community has
only begun to develop a large body of peer-reviewed literature that supports the Hi Art systems
efficacy.
  Our success will depend on our ability to attract and retain qualified personnel, while also
effectively managing employee costs.
  We may need to raise additional capital in the future and may be unable to do so on acceptable
terms. This could limit our ability to grow and carry out our business plan.
  In April 2008, we invested in continued development of a new compact proton therapy system through
a separate entity. If this development project is unsuccessful, or we are unable to raise the
additional capital that may be necessary for this project on acceptable terms, our ability to
diversify our business could be impaired.
   29




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##### Table of Contents



Risks Related to Our Intellectual Property
 If we are not able to meet the requirements of our license agreement with the Wisconsin Alumni
Research Foundation, or WARF, we could lose access to the technologies licensed thereunder and be
unable to manufacture, market or sell the Hi Art system.
  If we are not able to adequately protect our intellectual property and proprietary technology, our
competitive position, future business prospects and financial performance will be adversely
affected.
  
    
    current or future U.S. or foreign patent applications will be approved in a timely manner
or at all;
 
    
    our issued patents will protect our intellectual property and not be challenged by third
parties;
 
    
    we will develop patentable intellectual property;
 
    
    the validity of our patents will be upheld;
 
    
    the patents of others will not have an adverse effect on our ability to do business; or
 
    
    others will not independently develop similar or competing products or methods or design
around any patents that may be issued to us.
    30




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##### Table of Contents



We may initiate lawsuits to protect or enforce our patents or other intellectual property rights,
which could be expensive and, if we lose, could cause us to lose some of our intellectual property
rights.
   We may become subject to costly intellectual property litigation, which could affect our future
business and financial performance.
  We may be subject to claims that our employees have wrongfully used or disclosed alleged trade
secrets of their former employers.
  Risks Related to Regulatory Matters
 Modifications, upgrades and future products related to the Hi Art system or new indications may
require new FDA premarket approvals or 510(k) clearances, and such modifications, or any defects
in design or manufacture, may require us to recall or cease marketing the Hi Art system until
approvals or clearances are obtained.
   31




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The Hi Art system is subject to recalls even after receiving FDA clearance or approval, which
would harm our reputation, business and financial results.
  If we or our distributors do not obtain and maintain the necessary regulatory approvals in a
specific country, we will not be able to market and sell the Hi Art system in that country.
   32




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We must manufacture the Hi Art system in accordance with federal and state regulations, and we
could be forced to recall our installed systems or terminate production if we fail to comply with
these regulations.
  If we are found to have violated laws protecting the confidentiality of patient health
information, we could be subject to civil or criminal penalties, which could increase our
liabilities and harm our reputation or our business.
   Risks Related to Our Common Stock
 Our common stock has only been publicly traded since May 2007, and its price may fluctuate
substantially.
  
    
    fluctuations in quarterly revenue, net income and orders backlog;
 
    
    regulatory developments related to the manufacturing, marketing or sale of the Hi Art
system;
 
    
    announcements of technological innovations, new services or service enhancements,
strategic alliances or significant agreements by us or by our competitors;
 
    
    recruitment or departure of key personnel;
 
    
    changes in the estimates of our operating results or new orders, or changes in
recommendations by any securities analyst that elects to follow our common stock;
  33




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##### Table of Contents




    
    sales of large blocks of our common stock; and
 
    
    changes in accounting principles or changes in interpretations of existing principles,
which could affect our financial results.
  Anti-takeover provisions included in our amended and restated articles of incorporation and
amended and restated bylaws could delay or prevent a change of control of our company, which could
materially adversely impact the value of our common stock and may prevent or frustrate attempts by
our shareholders to replace or remove our current management.
  
    
    our Board of Directors is authorized to issue preferred stock in series, with the
designation, powers, preferences and rights of each series to be fixed by our Board of
Directors;
 
    
    a requirement that special meetings of shareholders be called only by our president, a
majority of our Board of Directors, such officer(s) as our Board of Directors may authorize
from time to time or by our president or secretary if a written request of the holders of
record of at least 25% of all the votes entitled to be cast upon the matter(s) set forth as
the purpose of the meeting in the written request is delivered to our president or secretary
and such written requirements satisfies certain information requirements contained in our
amended and restated bylaws;
 
    
    advance notice requirements for shareholder proposals and nominations; and
 
    
    the ability of our Board of Directors to amend our bylaws except where our articles of
incorporation or the Wisconsin Business Corporation Law reserves the power exclusively to
our shareholders or our shareholders, in adopting, amending or repealing a particular bylaw,
provide within the bylaws that our Board of Directors may not amend, repeal or readopt such
bylaw.
  
 Item 2. Properties
  
    
    an office building totaling approximately 61,000 square feet under a lease expiring in
2014;
 
    
    a manufacturing facility totaling approximately 64,000 square feet under a lease expiring
in 2018; and
 
    
    a portion of an office building totaling approximately 46,000 square feet under a lease
expiring in 2014.
  34




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
   35




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##### Table of Contents



PART II
 
 Item 5.
    
    Market for the Registrants Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
 Market Information
  High
    
    
    LowFiscal Year 2007First Quarter
    
    
    N/A
    
    
    
    N/ASecond Quarter (beginning May 9, 2007)
    
    $
    24.73
    
    
    $
    19.51Third Quarter
    
    $
    27.58
    
    
    $
    21.61Fourth Quarter
    
    $
    24.24
    
    
    $
    15.85Fiscal Year 2008First Quarter
    
    $
    20.16
    
    
    $
    12.56Second Quarter
    
    $
    15.00
    
    
    $
    6.79Third Quarter
    
    $
    10.00
    
    
    $
    4.45Fourth Quarter
    
    $
    5.00
    
    
    $
    1.81
 Holders
  Dividends
  Securities Authorized for Issuance under Equity Compensation Plans
  Performance Graph
   
 *
    
    $100 invested on May 9, 2007 in stock or in index  including reinvestment of dividends.  36




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##### Table of Contents



Recent Sales of Unregistered Securities.
            Use of Proceeds from Public Offering of Common Stock
   37




---



##### Table of Contents



Working capital
    
    $
    49.9Purchases of property and equipment
    
    
    14.0Purchases of test systems
    
    
    5.7Acquisition of Chengdu Twin Peak Accelerator Technology Inc.
    
    
    1.2Repayment of debt
    
    
    0.1Remaining net proceeds in cash, equivalents and short-term investments
    
    
    113.8Net proceeds from initial public offering
    
    $
    184.7
 
 Item 6. Selected Financial Data
  Consolidated Balance Sheet data (in thousands):
 As of December 31,2008(4)
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Restated)Cash and equivalents
    
    $
    65,967
    
    
    $
    191,780
    
    
    $
    20,137
    
    
    $
    30,396
    
    
    $
    1,950Short-term investments
    
    
    88,825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Receivables, net
    
    
    41,259
    
    
    
    44,108
    
    
    
    19,050
    
    
    
    14,235
    
    
    
    5,036Inventories, net
    
    
    63,983
    
    
    
    53,171
    
    
    
    40,026
    
    
    
    28,283
    
    
    
    15,740Working capital (deficit)
    
    
    185,228
    
    
    
    211,449
    
    
    
    7,446
    
    
    
    7,792
    
    
    
    (4,187
    )Total assets
    
    
    296,428
    
    
    
    325,142
    
    
    
    109,314
    
    
    
    82,303
    
    
    
    29,069Deferred revenue and customer deposits
    
    
    43,633
    
    
    
    35,338
    
    
    
    43,307
    
    
    
    49,281
    
    
    
    16,133Long-term debt (including current maturities)
    
    
    727
    
    
    
    841
    
    
    
    875
    
    
    
    214
    
    
    
    283Redeemable convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    212,663
    
    
    
    166,402
    
    
    
    84,234Total shareholders equity (deficit)
    
    
    213,594
    
    
    
    239,657
    
    
    
    (184,117
    )
    
    
    (151,406
    )
    
    
    (83,720
    )
  38




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##### Table of Contents



Consolidated Statement of Operations data (in thousands except per share data):
 Years Ended December 31,2008(4)
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Restated)Revenue
    
    $
    204,589
    
    
    $
    232,810
    
    
    $
    156,102
    
    
    $
    75,754
    
    
    $
    45,460Income (loss) before income tax, noncontrolling
interests and cumulative effect of change in
accounting principle
    
    
    (33,659
    )
    
    
    16,450
    
    
    
    7,731
    
    
    
    317
    
    
    
    3,032Income tax expense (benefit)
    
    
    6,931
    
    
    
    5,788
    
    
    
    (7,184
    )
    
    
    78
    
    
    
    151Noncontrolling interests
    
    
    7,102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting principle(1)
    
    
    
    
    
    
    
    
    
    
    (2,140
    )
    
    
    
    
    
    
    Net income (loss)
    
    
    (33,488
    )
    
    
    10,662
    
    
    
    12,775
    
    
    
    239
    
    
    
    2,881Accretion of redeemable convertible preferred stock(2)
    
    
    
    
    
    
    (237,582
    )
    
    
    (46,253
    )
    
    
    (68,075
    )
    
    
    (41,960
    )Net loss attributable to common shareholders
    
    $
    (33,488
    )
    
    $
    (226,920
    )
    
    $
    (33,478
    )
    
    $
    (67,836
    )
    
    $
    (39,079
    )Basic and diluted net loss per share attributable to
common shareholders
    
    $
    (0.67
    )
    
    $
    (6.35
    )
    
    $
    (3.78
    )
    
    $
    (8.48
    )
    
    $
    (5.40
    )Weighted average common shares used in computing
basic and diluted net loss per share attributable to
common shareholders
    
    
    50,199
    
    
    
    35,731
    
    
    
    8,856
    
    
    
    7,996
    
    
    
    7,234Pro forma basic net income per share(3)
    
    
    
    
    
    $
    0.24
    
    
    $
    0.36
    
    
    
    
    
    
    
    Pro forma diluted net income per share(3)
    
    
    
    
    
    $
    0.21
    
    
    $
    0.32
    
    
    
    
    
    
    
    Pro forma weighted average number of shares used in
computing basic net income per share(3)
    
    
    
    
    
    
    45,028
    
    
    
    35,366
    
    
    
    
    
    
    
    Pro forma weighted average number of shares used in
computing diluted net income per share(3)
    
    
    
    
    
    
    49,919
    
    
    
    40,130
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents impact of the adoption of Staff Position 150-5, Issuers
Accounting under Financial Accounting Standards Board (FASB) Statement
No. 150 for Freestanding Warrants and Other Similar Instruments on
Shares That Are Redeemable(FSP 150-5). Pursuant to FSP 150-5, we
were required to classify our outstanding warrants to purchase
preferred stock as a liability on our balance sheet and record
adjustments to their fair value in our statements of operations at the
end of each reporting period. For the year ended December 31, 2006,
the impact of the change in accounting principle was to decrease net
income by $3.1 million, consisting of a $2.2 million cumulative effect
adjustment for the change in accounting principle as of January 1,
2006, when the Company adopted FSP 150-5, and $0.9 million of expense
that was recorded in other income (expense), net to reflect the
increase in fair value between January 1, 2006 and December 31, 2006.
The warrants were subject to revaluation at each balance sheet date
and any change in fair value was recognized as a component of other
income (expense), net, until the completion of the Companys initial
public offering when the preferred warrants converted to common stock
warrants.(2)
    
    Accretion of redeemable convertible preferred stock represents the
impact attributable to the increase in the fair market value of shares
of our redeemable convertible preferred stock prior to their
conversion into shares of our common stock upon the closing of our
initial public offering. The holders of Series A, B, C and D preferred
stock had the option to put their stock back to us at the greater of
(i) the original purchase price plus accrued dividends, or (ii) the
fair market value of the stock. The holders of Series E preferred
stock had the option to put their stock back to us at the original
purchase price plus accrued dividends. The put option and the related
accretion of the preferred stock terminated upon the completion of our
initial public offering when all of our issued and outstanding shares
of preferred stock converted to common stock.(3)
    
    Pro forma net income per share gives effect to the conversion upon the
closing of our initial public offering of all of our issued and
outstanding shares of preferred stock on a one-for-one basis into
shares of our common stock.(4)
    
    We determined that our financial statements as of December 31, 2008
and for the year then ended required restatement to correct errors in
the accounting for income taxes. See Note C to our consolidated
financial statements for further information relating to the
restatement.  39




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read together with our audited consolidated financial
statements and the notes to those financial statements, which are included in this report. This
report may contain or incorporate by reference forward-looking statements made pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements reflect managements expectations,
estimates, and assumptions, based on information available at the time of the statement or, with
respect to any document incorporated by reference, available at the time that such document was
prepared. Forward-looking statements include, but are not limited to, statements regarding future
events, plans, goals, objectives, prospects, and expectations. Forward-looking statements are
often, but not always, made through the use of words such as believe, anticipate, should,
intend, plan, will, likely, expect, estimate, project, and similar expressions.
Forward-looking statements are not guarantees of future performance and involve risks,
uncertainties, and other factors, including, but not limited to, those discussed below under
Factors Affecting Our Financial Performance and those in the section entitled Risk Factors
under Part I, Item 1A of this Annual Report on Form 10-K , which may cause our actual results,
performance or achievements to be materially different from any future results, performance, or
achievements expressed or implied by those statements. We undertake no obligation to, and expressly
disclaim any such obligation to, update or revise any forward-looking statements to reflect changed
assumptions, the occurrence of anticipated or unanticipated events or changes to future results
over time or otherwise, except as required by law.
 Restatement
  Overview
     40




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Factors Affecting Our Financial Performance
  Incoming Orders
      Backlog
    41




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##### Table of Contents



Revenue
    
    
    Shipments of the Hi Art system generally occur 9 to 12 months after the order is
received. Timing of deliveries can be affected by factors out of our control such as
construction delays at customer project sites and customer credit issues. We generally
recognize revenue from a system sale upon customer acceptance, which usually occurs three to
four weeks after delivery. Each installation represents a significant percentage of our
revenue for a particular quarter.
 
    
    Our geographic mix of customers may impact our average selling prices. Increased sales of
the Hi Art system outside of North America have tended to favorably impact our gross margins
due to higher average selling prices in these markets. We intend to continue to expand our
international selling efforts, although we cannot be certain that favorable pricing trends
will continue nor can we be certain of how foreign currency exchange rates will impact our
financial results in the future.
 
    
    Our ability to demonstrate the clinical benefits of the Hi Art system compared to
competing systems is a factor in our ability to influence the market demand for the Hi Art
system. To compete effectively, we may need to offer additional features that could require
substantial internal resources to develop.
 
    
    Our focus on sales to for-profit, multi-center customers in the United States may require
us to lower selling prices, as these customers tend to be more price conscious. In addition,
we have a limited history of working with these for-profit, multi-center customers. Orders
from these customers may remain in backlog longer than those from customers who place single
unit orders, as units sold to multi-center customers tend to install sequentially over a
longer period of time.
 
    
    The Hi Art system is a major capital equipment item that represents a significant
purchase for most of our customers. If the global economy continues its downward trend, our
customers may choose to delay some of their capital spending, and, as a result, our incoming
orders and subsequent revenue recognition may be materially adversely affected.
  Service revenue.
    42




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##### Table of Contents



Cost of revenue
   Component supply and cost.
 Service and support expenses.
 Warranty.
  Research and development expenses
   Selling, general and administrative expenses
    43




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##### Table of Contents



Nonoperating expenses
  Interest income
  Income tax expense (benefit)
 Multiple taxing jurisdictions and projected financial earnings or losses.
 Deferred tax asset valuation allowance. Accounting for Income Taxes
 Noncontrolling interests
   44




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##### Table of Contents



Results of Operations
  Years Ended December 31,2008
    
    
    2007
    
    
    2006(Restated)Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    75.8
    
    
    
    62.8
    
    
    
    65.8Gross profit
    
    
    24.2
    
    
    
    37.2
    
    
    
    34.2Operating expenses:Research and development
    
    
    20.8
    
    
    
    14.7
    
    
    
    13.7Selling, general and administrative
    
    
    22.7
    
    
    
    18.2
    
    
    
    14.8Total operating expenses
    
    
    43.5
    
    
    
    32.9
    
    
    
    28.5Income (loss) from operations
    
    
    (19.3
    )
    
    
    4.3
    
    
    
    5.7Other income (expense)
    
    
    2.8
    
    
    
    2.8
    
    
    
    (0.7
    )Income (loss) before income tax, noncontrolling interests and cumulative effect
of change in accounting principle
    
    
    (16.5
    )
    
    
    7.1
    
    
    
    5.0Income tax expense (benefit)
    
    
    3.4
    
    
    
    2.5
    
    
    
    (4.6
    )Income (loss) before noncontrolling interests and cumulative effect of change in
accounting principle
    
    
    (19.9
    )
    
    
    4.6
    
    
    
    9.6Noncontrolling interests
    
    
    3.5
    
    
    
    0.0
    
    
    
    0.0Income (loss) before cumulative effect of change in accounting principle
    
    
    (16.4
    )
    
    
    4.6
    
    
    
    9.6Cumulative effect of change in accounting principle
    
    
    0.0
    
    
    
    0.0
    
    
    
    (1.4
    )Net income (loss)
    
    
    (16.4
    )%
    
    
    4.6
    %
    
    
    8.2
    %
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Revenue
  Years Ended December 31,2008
    
    
    2007Product revenue
    
    $
    174,929
    
    
    
    86
    %
    
    $
    213,900
    
    
    
    92
    %Service and other revenue
    
    
    29,660
    
    
    
    14
    
    
    
    18,910
    
    
    
    8$
    204,589
    
    
    
    100
    %
    
    $
    232,810
    
    
    
    100
    %
  Years Ended December 31,2008
    
    
    2007North America
    
    $
    135,977
    
    
    
    67
    %
    
    $
    129,493
    
    
    
    56
    %Europe
    
    
    49,588
    
    
    
    24
    
    
    
    61,337
    
    
    
    26Asia-Pacific
    
    
    19,024
    
    
    
    9
    
    
    
    41,980
    
    
    
    18$
    204,589
    
    
    
    100
    %
    
    $
    232,810
    
    
    
    100
    %
   45




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##### Table of Contents



Cost of revenue
     Research and development expenses
  Years Ended December 31,2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeHi Art R&D
    
    $
    33,616
    
    
    $
    30,304
    
    
    $
    3,312
    
    
    
    11
    %Proton Project /CPAC R&D
    
    
    8,941
    
    
    
    4,000
    
    
    
    4,941
    
    
    
    124$
    42,557
    
    
    $
    34,304
    
    
    $
    8,253
    
    
    
    24
    %
   46




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##### Table of Contents



Selling, general and administrative expenses
  Share-based compensation
 Share-Based Payment
 Other income (expense)
  Income tax expense
  Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Revenue
  Years Ended December 31,2007
    
    
    2006Product revenue
    
    $
    213,900
    
    
    
    92
    %
    
    $
    147,974
    
    
    
    95
    %Service and other revenue
    
    
    18,910
    
    
    
    8
    
    
    
    8,128
    
    
    
    5$
    232,810
    
    
    
    100
    %
    
    $
    156,102
    
    
    
    100
    %
  Years Ended December 31,2007
    
    
    2006North America
    
    $
    129,493
    
    
    
    56
    %
    
    $
    88,937
    
    
    
    57
    %Europe
    
    
    61,337
    
    
    
    26
    
    
    
    33,586
    
    
    
    22Asia-Pacific
    
    
    41,980
    
    
    
    18
    
    
    
    33,579
    
    
    
    21$
    232,810
    
    
    
    100
    %
    
    $
    156,102
    
    
    
    100
    %
   47




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##### Table of Contents



Cost of revenue
   Research and development expenses
  Years Ended December 31,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeHi Art R&D
    
    $
    30,304
    
    
    $
    21,397
    
    
    $
    8,907
    
    
    
    42
    %Proton Project /CPAC R&D
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    100$
    34,304
    
    
    $
    21,397
    
    
    $
    12,907
    
    
    
    60
    %
  Selling, general and administrative expenses
  Share-based compensation
   48




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##### Table of Contents



Other income (expense)
  Income tax expense (benefit)
  Liquidity and Capital Resources
  Financial Condition
  December 31, 2008Unrealized
    
    
    UnrealizedCost basis
    
    
    gains
    
    
    losses
    
    
    Fair ValueU.S. Government and Agency securities
    
    $
    69,317
    
    
    $
    1,963
    
    
    $
    
    
    
    $
    71,280Corporate bonds
    
    
    17,692
    
    
    
    62
    
    
    
    (209
    )
    
    
    17,545$
    87,009
    
    
    $
    2,025
    
    
    $
    (209
    )
    
    $
    88,825
   49




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##### Table of Contents



Cash Flows
 Cash flows from operating activities
    Cash flows from investing activities
    50




---



##### Table of Contents



Cash flows from financing activities
     Loans and Available Borrowings
     51




---



##### Table of Contents



Contractual Obligations and Commitments
  Payment Due by PeriodLess Than
    
    
    1-3
    
    
    3-5
    
    
    More ThanTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsOperating lease obligations
    
    $
    21,778
    
    
    $
    3,487
    
    
    $
    6,992
    
    
    $
    6,058
    
    
    $
    5,241Notes payable (including interest)
    
    
    770
    
    
    
    152
    
    
    
    488
    
    
    
    130
    
    
    
    Twin Peak acquisition payments
    
    
    2,160
    
    
    
    810
    
    
    
    1,350
    
    
    
    
    
    
    
    Minimum purchase agreement (1)
    
    
    6,972
    
    
    
    2,789
    
    
    
    4,183
    
    
    
    
    
    
    
    $
    31,680
    
    
    $
    7,238
    
    
    $
    13,013
    
    
    $
    6,188
    
    
    $
    5,241
 (1)
    
    Included in Minimum purchase agreement amounts are future purchase obligations under a supply
agreement for the purchase of xenon gas detectors from Hitachi Medical Corporation on a
non-exclusive basis; the agreement expires in June 2011. Refer to our current report on Form 8-K,
dated June 30, 2008, for more information.   Pending Litigation
   Operating Capital and Capital Expenditure Requirements
  
    
    Revenue generated by sales of the Hi Art system and service plans;
 
    
    Costs associated with our sales and marketing initiatives and manufacturing activities;
 
    
    The performance of the systems operating in the field and cost of maintaining those
systems;
 
    
    The level of investment needed in our service and support infrastructure;
  52




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##### Table of Contents




    
    Costs of our research and development activities; and
 
    
    Effects of competing technological and market developments.
   Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
   Revenue Recognition
 Revenue
Recognition Revenue Arrangements with
Multiple Deliverables
    53




---



##### Table of Contents



Software Revenue Recognition Software Revenue Recognition with Respect to Certain Agreements.
  Allowance for Doubtful Accounts
  Inventories
  Warranty Obligations
   54




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##### Table of Contents



Income Taxes
 Accounting for Income Taxes
  , Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
 Investments
 Fair Value Measurements Effective Date of FASB Statement No. 157
 
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
 
    
    Level 2  Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
 
    
    Level 3  Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
   55




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##### Table of Contents



Investment in CPAC
 Consolidated Financial Statements
 Share-Based Compensation
 Share-Based Payment
        56




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##### Table of Contents




    
    The issuance price of our series of preferred shares to third parties;
 
    
    Recent third-party transactions in our common stock;
 
    
    Valuations performed by an independent valuation firm;
 
    
    The liquidation preference and other rights of the preferred shares;
 
    
    Our revenue backlog and financial performance;
 
    
    Trends in the market for public companies involved in similar lines of business; and
 
    
    The fact that the option grants involved illiquid securities of a private company.
 Valuation of
Privately-Held-Company Equity Securities Issued as Compensation
  Valuation Methodologies Employed by Baker Tilly
    57




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Significant Factors in Determining the Fair Value as of Each Grant Date
  Number of
    
    
    
    
    
    
    Fair Value
    
    
    IntrinsicOptions
    
    
    Exercise
    
    
    Estimated
    
    
    ValueDate of Grant
    
    Granted
    
    
    Price
    
    
    per Share
    
    
    per ShareJanuary 2006
    
    
    34
    
    
    $
    4.99
    
    
    $
    4.99
    
    
    $
    May 2006
    
    
    47
    
    
    
    5.35
    
    
    
    5.35
    
    
    
    July 2006
    
    
    109
    
    
    
    5.35
    
    
    
    5.35
    
    
    
    October 2006
    
    
    190
    
    
    
    6.75
    
    
    
    6.75
    
    
    
    November 2006
    
    
    3
    
    
    
    6.75
    
    
    
    6.75
    
    
    
    December 2006
    
    
    1,958
    
    
    
    6.75
    
    
    
    8.40
    
    
    
    1.65
   
    
    On December 29, 2005, we sold 2,356,435 shares of Series E convertible preferred stock at
$5.94 per share, representing net proceeds of $13.9 million. We engaged Baker Tilly to
perform an independent valuation of our common stock based on this preferred stock
transaction. Baker Tilly determined that our common stock was valued at $4.99 per share as
of December 29, 2005. This valuation was then used for the option grants made in January
2006.
 
    
    In the second quarter of 2006, our Board of Directors determined that an updated
independent valuation should be obtained. Therefore, we engaged Baker Tilly to perform a
valuation of all classes of our capital stock. Baker Tilly issued a report dated May 16,
2006, which concluded that our common stock was valued at $5.35 per share as of March 31,
2006. This valuation was then used for the option grants made in May and July 2006. We
believe that there were no material events and no material changes in our financial
condition or prospects during this period that would have resulted in a change in the
valuation of a share of our common stock.
 
    
    On October 23, 2006, the Chairman of our Board of Directors, T. Rockwell Mackie, sold an
aggregate of 190,400 shares of common stock to two independent investors, and our then
President, Paul Reckwerdt, sold 190,400 common shares to a single independent investor. The
purchase price of all these shares was $6.75 per share resulting in aggregate proceeds of
$1.3 million to each seller. Given the significant size of the transactions and the fact
that these shares were sold to independent third parties, we concluded that our common stock
should be valued at $6.75 per share as of October 23, 2006. Both the buyers and sellers had
knowledge of the possibility that we would undertake an initial public offering. Stock
option grants were made based on this price in October and November 2006.
  58




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##### Table of Contents




    
    Management did not obtain an independent valuation report for the grants made on December
7, 2006 because management did not believe that there had been any material change in our
financial condition or prospects between October 23, 2006 and December 7, 2006. However,
after further consideration of an independent valuation study completed by Baker Tilly in
March 2007 with respect to the fair value of our common stock as of December 31, 2006,
management and our Board of Directors concluded that the stock options granted on December
7, 2006 were granted with an exercise price of $1.65 per share less than the fair value of
our common stock on December 7, 2006 as established by the December 31, 2006 valuation.
  Convertible Preferred Stock Warrant Liability
 Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
 Redeemable Convertible Preferred Stock
   59




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##### Table of Contents



Recent Accounting Pronouncements
  The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Accounting and Reporting of Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
   60




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##### Table of Contents



Interest Rate Risk
   Foreign Currency Exchange Rate Risk
  Inflation Risk
   61




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 TomoTherapy Incorporated and Subsidiaries
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    63Consolidated Balance Sheets
    
    
    66Consolidated Statements of Operations
    
    
    67Consolidated Statements of Temporary Equity and Shareholders Equity (Deficit)
    
    
    68Consolidated Statements of Cash Flows
    
    
    69Notes to Consolidated Financial Statements
    
    
    70
  62




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TomoTherapy Incorporated
     Internal Control  Integrated Framework )
  
  63




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TomoTherapy Incorporated
 Internal Control  Integrated Framework
      Internal Control  Integrated Framework
   64




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65




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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 December 31,2008
    
    
    2007(Restated)ASSETSCash and equivalents
    
    $
    65,967
    
    
    $
    191,780Short-term investments
    
    
    88,825
    
    
    
    Receivables, net
    
    
    41,259
    
    
    
    44,108Inventories, net
    
    
    63,983
    
    
    
    53,171Deferred tax assets
    
    
    496
    
    
    
    3,433Prepaid expenses and other current assets
    
    
    1,890
    
    
    
    1,622Total current assets
    
    
    262,420
    
    
    
    294,114Property and equipment, net
    
    
    22,157
    
    
    
    19,894Deferred tax assets
    
    
    
    
    
    
    4,492Other non-current assets, net
    
    
    11,851
    
    
    
    6,642TOTAL ASSETS
    
    $
    296,428
    
    
    $
    325,142LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    7,804
    
    
    $
    17,655Accrued expenses
    
    
    18,324
    
    
    
    21,699Accrued warranty
    
    
    7,431
    
    
    
    7,973Deferred revenue
    
    
    28,139
    
    
    
    15,517Customer deposits
    
    
    15,494
    
    
    
    19,821Total current liabilities
    
    
    77,192
    
    
    
    82,665Other non-current liabilities
    
    
    3,487
    
    
    
    2,820Total liabilities
    
    
    80,679
    
    
    
    85,485COMMITMENTS AND CONTINGENCIES (Note F)Noncontrolling interests
    
    
    2,155
    
    
    
    SHAREHOLDERS EQUITYPreferred stock, $1 par value, 10,000,000
shares authorized at December 31, 2008 and
December 31, 2007; no shares issued and
outstanding at December 31, 2008 and December
31, 2007
    
    
    
    
    
    
    Common stock, $ .01 par value, 200,000,000
shares authorized at December 31, 2008 and
December 31, 2007; 52,065,400 and 52,063,768
shares issued and outstanding at December 31,
2008 and 49,742,209 and 49,740,577 shares
issued and outstanding at December 31, 2007
    
    
    506
    
    
    
    497Additional paid-in capital
    
    
    659,379
    
    
    
    652,688Treasury stock, 1,632 shares at cost
    
    
    
    
    
    
    Accumulated other comprehensive income (loss)
    
    
    202
    
    
    
    (523
    )Accumulated deficit
    
    
    (446,493
    )
    
    
    (413,005
    )Total shareholders equity
    
    
    213,594
    
    
    
    239,657TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    296,428
    
    
    $
    325,142
   66




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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Restated)Revenue
    
    $
    204,589
    
    
    $
    232,810
    
    
    $
    156,102Cost of revenue
    
    
    155,083
    
    
    
    146,137
    
    
    
    102,653Gross profit
    
    
    49,506
    
    
    
    86,673
    
    
    
    53,449Operating expenses:Research and development
    
    
    42,557
    
    
    
    34,304
    
    
    
    21,397Selling, general and administrative
    
    
    46,336
    
    
    
    42,307
    
    
    
    23,119Total operating expenses
    
    
    88,893
    
    
    
    76,611
    
    
    
    44,516Income (loss) from operations
    
    
    (39,387
    )
    
    
    10,062
    
    
    
    8,933Other income (expense):Interest income
    
    
    4,754
    
    
    
    6,056
    
    
    
    1,292Interest expense
    
    
    (49
    )
    
    
    (221
    )
    
    
    (1,172
    )Other income (expense), net
    
    
    1,023
    
    
    
    553
    
    
    
    (1,322
    )Total other income (expense)
    
    
    5,728
    
    
    
    6,388
    
    
    
    (1,202
    )Income (loss) before income tax, noncontrolling interests and
cumulative effect of change in accounting principle
    
    
    (33,659
    )
    
    
    16,450
    
    
    
    7,731Income tax expense (benefit)
    
    
    6,931
    
    
    
    5,788
    
    
    
    (7,184
    )Income (loss) before noncontrolling interests and cumulative effect of
change in accounting principle
    
    
    (40,590
    )
    
    
    10,662
    
    
    
    14,915Noncontrolling interests
    
    
    7,102
    
    
    
    
    
    
    
    Income (loss) before cumulative effect of change in accounting principle
    
    
    (33,488
    )
    
    
    10,662
    
    
    
    14,915Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (2,140
    )Net income (loss)
    
    
    (33,488
    )
    
    
    10,662
    
    
    
    12,775Accretion of redeemable convertible preferred stock
    
    
    
    
    
    
    (237,582
    )
    
    
    (46,253
    )Net loss attributable to common shareholders
    
    $
    (33,488
    )
    
    $
    (226,920
    )
    
    $
    (33,478
    )Net loss per share attributable to common shareholders:Basic and diluted
    
    $
    (0.67
    )
    
    $
    (6.35
    )
    
    $
    (3.78
    )Weighted average common shares outstanding used in computing net loss
per share attributable to common shareholders:Basic and diluted
    
    
    50,199
    
    
    
    35,731
    
    
    
    8,856
   67




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##### Table of Contents



TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF TEMPORARY EQUITY
 AND SHAREHOLDERS EQUITY (DEFICIT)
 (In thousands)
 Temporary Equity
    
    

Shareholders Equity (Deficit)Redeemable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedConvertible
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income (loss)
    
    
    Deficit
    
    
    Equity (Deficit)Balance at December 31, 2005
    
    
    25,221
    
    
    $
    166,402
    
    
    
    8,438
    
    
    $
    84
    
    
    $
    1,013
    
    
    $
    
    
    
    $
    (152,503
    )
    
    $
    (151,406
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,775
    
    
    
    12,775Accretion of preferred stock to redemption
value
    
    
    
    
    
    
    46,253
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,253
    )
    
    
    (46,253
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    826
    
    
    
    9
    
    
    
    970
    
    
    
    
    
    
    
    
    
    
    
    979Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    
    
    
    
    232Reclassification of warrants to liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (444
    )
    
    
    
    
    
    
    
    
    
    
    (444
    )Issuance costs for Series E preferred stock
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2006
    
    
    25,221
    
    
    
    212,663
    
    
    
    9,264
    
    
    
    93
    
    
    
    1,771
    
    
    
    
    
    
    
    (185,981
    )
    
    
    (184,117
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,662
    
    
    
    10,662Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (523
    )
    
    
    
    
    
    
    (523
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,139Accretion of preferred stock to redemption
value
    
    
    
    
    
    
    237,582
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (237,582
    )
    
    
    (237,582
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    2,850
    
    
    
    28
    
    
    
    3,155
    
    
    
    
    
    
    
    
    
    
    
    3,183Exercise of common stock warrants
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of preferred stock warrants
    
    
    456
    
    
    
    3,993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of contingent common shares
    
    
    
    
    
    
    
    
    
    
    1,289
    
    
    
    13
    
    
    
    91
    
    
    
    
    
    
    
    (104
    )
    
    
    Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,318
    
    
    
    
    
    
    
    
    
    
    
    3,318Income tax benefit related to stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,763
    
    
    
    
    
    
    
    
    
    
    
    4,763Reclassification of warrant liability to
equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    165Initial public offering, net of issuance
costs of $2.7 million
    
    
    
    
    
    
    
    
    
    
    10,603
    
    
    
    106
    
    
    
    184,575
    
    
    
    
    
    
    
    
    
    
    
    184,681Issuance of common stock under employee
stock purchase plan
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    869
    
    
    
    
    
    
    
    
    
    
    
    869Conversion of redeemable convertible
preferred stock
    
    
    (25,677
    )
    
    
    (454,238
    )
    
    
    25,677
    
    
    
    257
    
    
    
    453,981
    
    
    
    
    
    
    
    
    
    
    
    454,238Balance at December 31, 2007
    
    
    
    
    
    
    
    
    
    
    49,741
    
    
    
    497
    
    
    
    652,688
    
    
    
    (523
    )
    
    
    (413,005
    )
    
    
    239,657Net loss (Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,488
    )
    
    
    (33,488
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    725
    
    
    
    
    
    
    
    725Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,763
    )Issuance of common stock under
employee stock purchase plan
    
    
    
    
    
    
    
    
    
    
    270
    
    
    
    3
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    540Issuance of restricted stock
    
    
    
    
    
    
    
    
    
    
    1,494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    555
    
    
    
    6
    
    
    
    1,415
    
    
    
    
    
    
    
    
    
    
    
    1,421Exercise of common stock warrants
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,731
    
    
    
    
    
    
    
    
    
    
    
    4,731Balance at December 31, 2008 (Restated)
    
    
    
    
    
    $
    
    
    
    
    52,064
    
    
    $
    506
    
    
    $
    659,379
    
    
    $
    202
    
    
    $
    (446,493
    )
    
    $
    213,594
   68




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##### Table of Contents



TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Restated)Cash flows from operating activities:Net income (loss)
    
    $
    (33,488
    )
    
    $
    10,662
    
    
    $
    12,775Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    8,682
    
    
    
    6,503
    
    
    
    3,053Share-based compensation
    
    
    4,731
    
    
    
    3,318
    
    
    
    232Excess tax benefit from share-based compensation
    
    
    
    
    
    
    (4,763
    )
    
    
    Deferred income tax provision (benefit)
    
    
    7,269
    
    
    
    3,544
    
    
    
    (7,797
    )Noncontrolling interests
    
    
    (7,102
    )
    
    
    
    
    
    
    Other noncash items
    
    
    308
    
    
    
    877
    
    
    
    2,995Changes in operating assets and liabilities:Receivables
    
    
    1,271
    
    
    
    (25,058
    )
    
    
    (4,815
    )Inventories
    
    
    (10,269
    )
    
    
    (13,145
    )
    
    
    (11,743
    )Other assets
    
    
    (416
    )
    
    
    (608
    )
    
    
    (176
    )Accounts payable
    
    
    (9,836
    )
    
    
    3,695
    
    
    
    6,618Accrued expenses
    
    
    (4,718
    )
    
    
    10,222
    
    
    
    6,350Accrued warranty
    
    
    (542
    )
    
    
    2,666
    
    
    
    2,384Deferred revenue
    
    
    12,466
    
    
    
    (4,687
    )
    
    
    9,110Customer deposits
    
    
    (4,815
    )
    
    
    (3,282
    )
    
    
    (15,084
    )Other liabilities
    
    
    295
    
    
    
    
    
    
    
    Net cash provided by (used in) operating activities
    
    
    (36,164
    )
    
    
    (10,056
    )
    
    
    3,902Cash flows from investing activities:Purchases of property and equipment
    
    
    (7,596
    )
    
    
    (8,320
    )
    
    
    (10,974
    )Purchases of test systems
    
    
    (2,777
    )
    
    
    (2,963
    )
    
    
    (4,671
    )Purchases of short-term investments
    
    
    (87,009
    )
    
    
    
    
    
    
    Other investing activities
    
    
    (2,217
    )
    
    
    (487
    )
    
    
    (378
    )Net cash used in investing activities
    
    
    (99,599
    )
    
    
    (11,770
    )
    
    
    (16,023
    )Cash flows from financing activities:Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    900Payments on notes payable
    
    
    (114
    )
    
    
    (34
    )
    
    
    (25
    )Proceeds from initial public offering, net of issuance costs
    
    
    
    
    
    
    184,681
    
    
    
    Proceeds from issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    8Proceeds from employee stock purchase plan
    
    
    540
    
    
    
    869
    
    
    
    Proceeds from exercises of stock options and warrants
    
    
    1,429
    
    
    
    3,713
    
    
    
    979Proceeds from issuance of CPAC common stock
    
    
    9,257
    
    
    
    
    
    
    
    Excess tax benefit from share-based compensation
    
    
    
    
    
    
    4,763
    
    
    
    Net cash provided by financing activities
    
    
    11,112
    
    
    
    193,992
    
    
    
    1,862Effect of exchange rate changes on cash and equivalents
    
    
    (1,162
    )
    
    
    (523
    )
    
    
    Increase (decrease) in cash and equivalents
    
    
    (125,813
    )
    
    
    171,643
    
    
    
    (10,259
    )Cash and equivalents at beginning of year
    
    
    191,780
    
    
    
    20,137
    
    
    
    30,396Cash and equivalents at end of year
    
    $
    65,967
    
    
    $
    191,780
    
    
    $
    20,137Supplemental disclosure of cash flow information:Interest paid
    
    $
    70
    
    
    $
    233
    
    
    $
    97Income taxes paid
    
    
    386
    
    
    
    1,165
    
    
    
    172Supplemental disclosure of noncash investing activities and financing activities:Leasehold improvements funded by landlord
    
    $
    143
    
    
    $
    524
    
    
    $
    Reclassification of preferred stock warrants to liability
    
    
    
    
    
    
    
    
    
    
    444Reclassification of preferred stock warrants to equity
    
    
    
    
    
    
    3,630
    
    
    
    
   69




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##### Table of Contents



TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  DESCRIPTION OF BUSINESS
 Organization
  Initial Public Offering
  Follow-on Public Offering
  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
  Principles of Consolidation
 Consolidated Financial Statements
 Reclassification
   70




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##### Table of Contents



Fair Value of Financial Instruments
  Cash and equivalents
  Investments
   December 31, 2008Unrealized
    
    
    UnrealizedCost basis
    
    
    gains
    
    
    losses
    
    
    Fair ValueU.S. Government and Agency securities
    
    $
    69,317
    
    
    $
    1,963
    
    
    $
    
    
    
    $
    71,280Corporate bonds
    
    
    17,692
    
    
    
    62
    
    
    
    (209
    )
    
    
    17,545$
    87,009
    
    
    $
    2,025
    
    
    $
    (209
    )
    
    $
    88,825
  December 31, 2008Cost basis
    
    
    Fair ValueDue in one year or less
    
    $
    16,676
    
    
    $
    16,815Due after one year through five years
    
    
    70,333
    
    
    
    72,010$
    87,009
    
    
    $
    88,825
 Fair Value Measurements Effective Date of FASB Statement No. 157
 
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
 
    
    Level 2  Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities, quoted prices in markets that are
not active, or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
  71




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##### Table of Contents




    
    Level 3  Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
  Concentration of Credit Risk and Other Risks and Uncertainties
    Accounts Receivable
   Inventories
   December 31,2008
    
    
    2007Raw materials
    
    $
    47,721
    
    
    $
    41,405Work-in-process
    
    
    5,614
    
    
    
    8,722Finished goods
    
    
    10,648
    
    
    
    3,044$
    63,983
    
    
    $
    53,171
  72




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##### Table of Contents



Property and Equipment
  December 31,2008
    
    
    2007Furniture and equipment
    
    $
    11,019
    
    
    $
    8,659Computer equipment
    
    
    6,292
    
    
    
    5,533Computer software
    
    
    5,140
    
    
    
    4,867Leasehold improvements
    
    
    9,784
    
    
    
    9,150In process
    
    
    2,704
    
    
    
    12034,939
    
    
    
    28,329Less: Accumulated depreciation and amortization
    
    
    (12,782
    )
    
    
    (8,435
    )$
    22,157
    
    
    $
    19,894
  Furniture and equipment
    
    5 to 10 yearsComputer equipment and software
    
    3 to 5 yearsLeasehold improvements
    
    Lesser of useful life or the remaining lease term
  Long-lived Assets
 Accounting for the Impairment on Disposal
of Long-lived Assets
  Accrued Expenses
  December 31,2008
    
    
    2007Commissions, severance and payroll-related
    
    $
    6,290
    
    
    $
    6,597Bonuses
    
    
    108
    
    
    
    5,249Other
    
    
    12,073
    
    
    
    9,853$
    18,471
    
    
    $
    21,699
 Warranty Cost
   73




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##### Table of Contents



December 31,2008
    
    
    2007
    
    
    2006Balance, beginning of period
    
    $
    7,973
    
    
    $
    5,307
    
    
    $
    2,923Charged to cost of revenue
    
    
    11,049
    
    
    
    12,600
    
    
    
    10,138Adjustments related to change in estimate
    
    
    1,180
    
    
    
    (86
    )
    
    
    (244
    )Actual product warranty expenditures
    
    
    (12,771
    )
    
    
    (9,848
    )
    
    
    (7,510
    )Balance, end of period
    
    $
    7,431
    
    
    $
    7,973
    
    
    $
    5,307
 Deferred Revenue
   Revenue Recognition
 Revenue
Recognition Revenue Arrangements with
Multiple Deliverables
     74




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##### Table of Contents



Software Revenue Recognition Software Revenue Recognition with Respect to Certain Agreements.
  Shipping and Handling Costs
 Accounting for Shipping and Handling Fees and Costs,
 Research and Development Costs
  Software Development Costs
  Advertising Expenses
  Share-Based Compensation
 Share-Based
Payment
   75




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##### Table of Contents



Years Ended December 31,2008
    
    
    2007
    
    
    2006Cost of revenue
    
    $
    820
    
    
    $
    634
    
    
    $
    136Research and development
    
    
    1,464
    
    
    
    1,049
    
    
    
    61Selling, general and administrative
    
    
    2,447
    
    
    
    1,635
    
    
    
    35Income tax benefit
    
    
    
    
    
    
    (449
    )
    
    
    (41
    )$
    4,731
    
    
    $
    2,869
    
    
    $
    191
 Foreign Currency
  Income Taxes
 Accounting for Income
Taxes
 , Accounting for Uncertainty
in Income Taxes  an Interpretation of FASB Statement No. 109
 Other Comprehensive Income (Loss)
   Years Ended December 31,2008
    
    
    2007
    
    
    2006Foreign currency translation adjustments
    
    $
    (401
    )
    
    $
    (523
    )
    
    $
    Net unrealized investment gain (loss), net of tax
    
    
    1,126
    
    
    
    
    
    
    
    $
    725
    
    
    $
    (523
    )
    
    $
    
 Stock Split
   76




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##### Table of Contents



Net Income (Loss) Per Share of Common Stock
  Years Ended December 31,2008
    
    
    2007
    
    
    2006(Restated)Basic and diluted:Income (loss) before cumulative effect of change in accounting principle
    
    $
    (0.67
    )
    
    $
    0.30
    
    
    $
    1.68Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (0.24
    )Net income (loss)
    
    $
    (0.67
    )
    
    $
    0.30
    
    
    $
    1.44Net loss attributable to common shareholders
    
    $
    (0.67
    )
    
    $
    (6.35
    )
    
    $
    (3.78
    )Weighted average common shares outstanding used in computing net loss per
share attributable to common shareholders:Basic and diluted
    
    
    50,199
    
    
    
    35,731
    
    
    
    8,856
    Years Ended December 31,2008
    
    
    2007
    
    
    2006Stock options and warrants
    
    
    5,776
    
    
    
    6,338
    
    
    
    9,622Restricted stock
    
    
    1,472
    
    
    
    
    
    
    
    Preferred stock (as if converted)
    
    
    
    
    
    
    
    
    
    
    25,221Contingent common shares
    
    
    
    
    
    
    
    
    
    
    1,2897,248
    
    
    
    6,338
    
    
    
    36,132
 Segment Information
 Disclosures about Segments of an Enterprise and Related Information,
  Years Ended December 31,2008
    
    
    2007
    
    
    2006Product revenue
    
    $
    174,929
    
    
    $
    213,900
    
    
    $
    147,974Service and other revenue
    
    
    29,660
    
    
    
    18,910
    
    
    
    8,128$
    204,589
    
    
    $
    232,810
    
    
    $
    156,102
  Years Ended December 31,2008
    
    
    2007
    
    
    2006North America
    
    $
    135,977
    
    
    $
    129,493
    
    
    $
    88,937Europe
    
    
    49,588
    
    
    
    61,337
    
    
    
    33,586Asia-Pacific
    
    
    19,024
    
    
    
    41,980
    
    
    
    33,579$
    204,589
    
    
    $
    232,810
    
    
    $
    156,102
  77




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##### Table of Contents



Change in Accounting Principle
 Issuers Accounting under FASB
Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are
Redeemable
 Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Accounting and Reporting of Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
 Determination of the
Useful Life of Intangible Assets Goodwill and Other Intangible Assets
  78




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##### Table of Contents



The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles
 NOTE C  RESTATEMENTS AND REVISIONS
 Restatements
   
    
    The Company originally presented net deferred tax assets on its 2008 Consolidated
Balance Sheet without reduction of $3,594,000 in deferred tax asset credit carryforwards,
for unrecognized tax benefits specifically related to these items as contemplated by ASC
740-10-45-11. The Company subsequently corrected the balance to include this treatment
resulting in a $3,594,000 reduction in both Other Non-current Liabilities and Non-current
Deferred Tax Assets. The 2007 financial statements were similarly revised to reduce
deferred tax asset credit carryforwards by $2,498,000 for specifically related unrecognized
tax benefits.
 
    
    The Company established and recorded a 100% valuation allowance against net deferred tax
assets without regard to the $3,594,000 in unrecognized tax benefits described above. This
caused both a valuation allowance and an unrecognized tax benefit to be recorded for the
same items as reflected in the Companys original Form 10-K submission. The Company
subsequently corrected this treatment by reversing the corresponding valuation allowance,
resulting in a $3,594,000 reduction in Income Tax Expense and a $3,594,000 increase in
Non-current Deferred Tax Assets.
 
    
    In originally determining the amount of valuation allowance to record for 2008, the
Company did not consider $690,000 in deferred tax liabilities recorded for unrealized
investment gains on available for sale securities reflected in Accumulated Other
Comprehensive Income (Loss). Under the principles of ASC 740-10-30-17 and -18, the deferred
tax liabilities related to the available for sale securities reduce the requirement for a
valuation allowance of similar amount. The Company subsequently adjusted its valuation
allowance for this item, which increased Non-current Deferred Tax Assets by $690,000 and
reduced Income Tax Expense by $690,000.
 
    
    The Company revised the 2007 financial statements to increase additional paid-in-capital
and deferred tax assets to reflect the realization of $963,000 in additional tax benefits
related to excess stock option deductions rather than the utilization of net operating
losses. The $963,000 in deferred tax assets corresponding to the net operating losses
recorded in 2007 required the Company to record an equivalent amount of valuation allowance
in 2008. As a result, 2008 Tax Expense increased $963,000 and Non-current Deferred Tax
Assets decreased by $963,000.
 
    
    The Company recorded a non-significant refinement in estimate of current taxes payable
and deferred taxes related to non-material taxing jurisdictions and reclassifications
between current and deferred taxes associated with the October 2008 Twin Peak acquisition.
These adjustments resulted in a $79,000 decrease to Income Tax Expense, a $147,000 decrease
to Current Taxes Payable (included in Accrued Expenses) and a $68,000 increase to
Non-current Deferred Tax Liabilities (included in Other Non-current Liabilities).
 
    
    The Company adjusted the balance sheet classification of deferred tax assets and
liabilities to incorporate the corrections noted above including the effect of allocating
the adjusted 2008 valuation allowance on a pro-rata basis as contemplated by ASC
740-10-45-5. This resulted in several reclassification adjustments that are additive to the
other corrections noted above, including a $496,000 increase to Current Deferred Tax Assets,
a $690,000 decrease in Non-current Deferred Tax Assets and a $194,000 decrease to
Non-current Deferred Tax Liabilities (included in Other Non-current Liabilities).
  79




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
(In thousands)
 December 31, 2008As Originally
    
    
    
    
    
    
    AsReported
    
    
    Adjustment
    
    
    RestatedASSETSCash and equivalents
    
    $
    65,967
    
    
    $
    
    
    
    $
    65,967Short-term investments
    
    
    88,825
    
    
    
    
    
    
    
    88,825Receivables, net
    
    
    41,259
    
    
    
    
    
    
    
    41,259Inventories, net
    
    
    63,983
    
    
    
    
    
    
    
    63,983Deferred tax assets
    
    
    
    
    
    
    496
    
    
    
    496Prepaid expenses and other current assets
    
    
    1,890
    
    
    
    
    
    
    
    1,890Total current assets
    
    
    261,924
    
    
    
    496
    
    
    
    262,420Property and equipment, net
    
    
    22,157
    
    
    
    
    
    
    
    22,157Other non-current assets, net
    
    
    11,851
    
    
    
    
    
    
    
    11,851TOTAL ASSETS
    
    $
    295,932
    
    
    $
    496
    
    
    $
    296,428LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    7,804
    
    
    $
    
    
    
    $
    7,804Accrued expenses
    
    
    18,471
    
    
    
    (147
    )
    
    
    18,324Accrued warranty
    
    
    7,431
    
    
    
    
    
    
    
    7,431Deferred revenue
    
    
    28,139
    
    
    
    
    
    
    
    28,139Customer deposits
    
    
    15,494
    
    
    
    
    
    
    
    15,494Total current liabilities
    
    
    77,339
    
    
    
    (147
    )
    
    
    77,192Other non-current liabilities
    
    
    7,207
    
    
    
    (3,720
    )
    
    
    3,487TOTAL LIABILITIES
    
    
    84,546
    
    
    
    (3,867
    )
    
    
    80,679Noncontrolling interests
    
    
    2,155
    
    
    
    
    
    
    
    2,155SHAREHOLDERS EQUITYCommon stock
    
    
    506
    
    
    
    
    
    
    
    506Additional paid-in capital
    
    
    658,416
    
    
    
    963
    
    
    
    659,379Accumulated other comprehensive income (loss)
    
    
    202
    
    
    
    
    
    
    
    202Accumulated deficit
    
    
    (449,893
    )
    
    
    3,400
    
    
    
    (446,493
    )TOTAL SHAREHOLDERS EQUITY
    
    
    209,231
    
    
    
    4,363
    
    
    
    213,594TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    295,932
    
    
    $
    496
    
    
    $
    296,428
 CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
 Year ended December 31, 2008As Originally
    
    
    
    
    
    
    AsReported
    
    
    Adjustment
    
    
    RestatedLoss before income tax and noncontrolling interests
    
    $
    (33,659
    )
    
    $
    
    
    
    $
    (33,659
    )Income tax expense
    
    
    10,331
    
    
    
    (3,400
    )
    
    
    6,931Loss before noncontrolling interests
    
    
    (43,990
    )
    
    
    3,400
    
    
    
    (40,590
    )Noncontrolling interests
    
    
    7,102
    
    
    
    
    
    
    
    7,102Net loss
    
    $
    (36,888
    )
    
    $
    3,400
    
    
    $
    (33,488
    )Net loss per share basic and diluted
    
    $
    (0.73
    )
    
    $
    0.06
    
    
    $
    (0.67
    )
  80




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##### Table of Contents



Revisions
  CONSOLIDATED BALANCE SHEETS
(In thousands)
 December 31, 2007As Originally
    
    
    
    
    
    
    AsReported
    
    
    Adjustment
    
    
    RevisedASSETSTotal current assets
    
    $
    294,114
    
    
    $
    
    
    
    $
    294,114Property and equipment, net
    
    
    19,894
    
    
    
    
    
    
    
    19,894Deferred tax assets
    
    
    6,027
    
    
    
    (1,535
    )
    
    
    4,492Other non-current assets, net
    
    
    6,642
    
    
    
    
    
    
    
    6,642TOTAL ASSETS
    
    $
    326,677
    
    
    $
    (1,535
    )
    
    $
    325,142LIABILITIES AND SHAREHOLDERS EQUITYTotal current liabilities
    
    $
    82,665
    
    
    $
    
    
    
    $
    82,665Other non-current liabilities
    
    
    5,318
    
    
    
    (2,498
    )
    
    
    2,820TOTAL LIABILITIES
    
    
    87,983
    
    
    
    (2,498
    )
    
    
    85,485SHAREHOLDERS EQUITYCommon stock
    
    
    497
    
    
    
    
    
    
    
    497Additional paid-in capital
    
    
    651,725
    
    
    
    963
    
    
    
    652,688Accumulated other comprehensive income (loss)
    
    
    (523
    )
    
    
    
    
    
    
    (523
    )Accumulated deficit
    
    
    (413,005
    )
    
    
    
    
    
    
    (413,005
    )TOTAL SHAREHOLDERS EQUITY
    
    
    238,694
    
    
    
    963
    
    
    
    239,657TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    326,677
    
    
    $
    (1,535
    )
    
    $
    325,142
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Year Ended December 31, 2007As Originally
    
    
    
    
    
    
    AsReported
    
    
    Adjustment
    
    
    RevisedCash flows from operating activities:Net income
    
    $
    10,662
    
    
    $
    
    
    
    $
    10,662Excess tax benefit from share-based compensation
    
    
    (3,800
    )
    
    
    (963
    )
    
    
    (4,763
    )Other operating activities
    
    
    (15,955
    )
    
    
    
    
    
    
    (15,955
    )Net cash used in operating activities
    
    
    (9,093
    )
    
    
    (963
    )
    
    
    (10,056
    )Net cash used in investing activities
    
    
    (11,770
    )
    
    
    
    
    
    
    (11,770
    )Cash flows from financing activities:Excess tax benefit from share-based compensation
    
    
    3,800
    
    
    
    963
    
    
    
    4,763Other financing activities
    
    
    189,229
    
    
    
    
    
    
    
    189,229Net cash provided by financing activities
    
    
    193,029
    
    
    
    963
    
    
    
    193,992Effect of exchange rate changes on cash and equivalents
    
    
    (523
    )
    
    
    
    
    
    
    (523
    )Increase in cash and equivalents
    
    
    171,643
    
    
    
    
    
    
    
    171,643Cash and equivalents at beginning of year
    
    
    20,137
    
    
    
    
    
    
    
    20,137Cash and equivalents at end of year
    
    $
    191,780
    
    
    $
    
    
    
    $
    191,780
  81




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##### Table of Contents



NOTE D  LONG-TERM DEBT AND NOTES PAYABLE
     Years Ended December 31,2009
    
    $
    1332010
    
    
    1372011
    
    
    3302012
    
    
    1022013
    
    
    25Thereafter
    
    
    $
    727
 NOTE E  INCOME TAXES
  Years Ended December 31,2008
    
    
    2007
    
    
    2006(Restated)Current:Federal
    
    $
    12
    
    
    $
    1,269
    
    
    $
    172State
    
    
    (396
    )
    
    
    841
    
    
    
    441Foreign
    
    
    46
    
    
    
    134
    
    
    
    Total current
    
    
    (338
    )
    
    
    2,244
    
    
    
    613Deferred
    
    
    7,269
    
    
    
    3,544
    
    
    
    (7,797
    )Total provision (benefit) for income tax
    
    $
    6,931
    
    
    $
    5,788
    
    
    $
    (7,184
    )
  Years Ended December 31,2008
    
    
    2007
    
    
    2006(Restated)Provision at statutory rate
    
    
    (35.0
    )%
    
    
    35.0
    %
    
    
    35.0
    %Permanent differences
    
    
    3.1
    
    
    
    5.2
    
    
    
    2.1State income taxes, net of federal effect
    
    
    (1.8
    )
    
    
    2.2
    
    
    
    5.9Change in valuation allowance including federal net operating losses and credits
    
    
    69.9
    
    
    
    1.7
    
    
    
    (135.4
    )Change in statutory rate for deferred taxes
    
    
    0.0
    
    
    
    0.0
    
    
    
    (3.6
    )Nondeductible warrant expense
    
    
    0.0
    
    
    
    0.0
    
    
    
    4.3Research and development credits
    
    
    (3.7
    )
    
    
    (6.6
    )
    
    
    0.0Other
    
    
    (5.3
    )
    
    
    (2.3
    )
    
    
    (1.2
    )Effective income tax rate
    
    
    27.2
    %
    
    
    35.2
    %
    
    
    (92.9
    )%
  82




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##### Table of Contents



Years Ended December 31,2008
    
    
    2007(Restated)Deferred tax assets:Federal and state operating loss carryforwards
    
    $
    8,625
    
    
    $
    1,441Tax credit carryforwards
    
    
    1,768
    
    
    
    840Warranty and bad debt reserves
    
    
    3,537
    
    
    
    4,029Inventory
    
    
    4,815
    
    
    
    3,375Employee benefits
    
    
    2,232
    
    
    
    666Other
    
    
    712
    
    
    
    484Total deferred tax assets
    
    
    21,689
    
    
    
    10,835Deferred tax liabilities:Tax depreciation in excess of book depreciation
    
    
    694
    
    
    
    654Unrealized gains
    
    
    690
    
    
    
    Patents
    
    
    418
    
    
    
    235Other
    
    
    1,038
    
    
    
    495Total deferred tax liabilities
    
    
    2,840
    
    
    
    1,384Net deferred tax asset
    
    
    18,849
    
    
    
    9,451Valuation allowance
    
    
    (19,355
    )
    
    
    (1,526
    )$
    (506
    )
    
    $
    7,925
       83




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##### Table of Contents



Accounting for Contingencies
  December 31,2008
    
    
    2007Balance, beginning of period
    
    $
    3,009
    
    
    $
    1,765Additions based on tax positions related to the period
    
    
    1,053
    
    
    
    1,244Balance, end of period
    
    $
    4,062
    
    
    $
    3,009
 NOTE F  COMMITMENTS AND CONTINGENCIES
  Pending Litigation
    84




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##### Table of Contents



Operating leases
    Years Ended December 31,2009
    
    $
    3,4872010
    
    
    3,5712011
    
    
    3,4212012
    
    
    3,0862013
    
    
    2,972Thereafter
    
    
    5,241$
    21,778
 NOTE G  TEMPORARY EQUITY AND SHAREHOLDERS EQUITY (DEFICIT)
 Redeemable Convertible Preferred Stock
  Warrants
  Issuers Accounting under
FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are
Redeemable
   85




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##### Table of Contents



Contingent Common Shares
 Application of Issue No 98-5 to Certain Convertible Instruments
 NOTE H  STOCK INCENTIVE PLANS
   Incentive Stock Options
    
    
    Restricted StockWeighted-Shares
    
    
    Number of
    
    
    Weighted-
    
    
    
    
    
    
    AverageAvailable
    
    
    Options
    
    
    Average
    
    
    Number of
    
    
    Grant Datefor Grant
    
    
    Outstanding
    
    
    Exercise Price
    
    
    Shares
    
    
    Fair ValueBalance at December 31, 2005
    
    
    1,309
    
    
    
    7,702
    
    
    $
    2.06
    
    
    
    
    
    
    $
    Authorized
    
    
    3,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    (2,341
    )
    
    
    2,341
    
    
    
    6.63
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    (826
    )
    
    
    1.18
    
    
    
    
    
    
    
    Cancelled
    
    
    61
    
    
    
    (61
    )
    
    
    3.04
    
    
    
    
    
    
    
    Balance at December 31, 2006
    
    
    2,293
    
    
    
    9,156
    
    
    
    3.30
    
    
    
    
    
    
    
    Granted
    
    
    (232
    )
    
    
    232
    
    
    
    20.65
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    (2,850
    )
    
    
    1.12
    
    
    
    
    
    
    
    Cancelled
    
    
    16
    
    
    
    (207
    )
    
    
    4.80
    
    
    
    
    
    
    
    Balance at December 31, 2007
    
    
    2,077
    
    
    
    6,331
    
    
    
    4.24
    
    
    
    
    
    
    
    Granted
    
    
    (1,860
    )
    
    
    340
    
    
    
    8.26
    
    
    
    1,520
    
    
    
    6.02Exercised or Issued
    
    
    
    
    
    
    (555
    )
    
    
    2.56
    
    
    
    (21
    )
    
    
    2.56Cancelled
    
    
    49
    
    
    
    (342
    )
    
    
    6.95
    
    
    
    (27
    )
    
    
    6.10Balance at December 31, 2008
    
    
    266
    
    
    
    5,774
    
    
    $
    5.17
    
    
    
    1,472
    
    
    $
    6.02Exercisable at December 31, 2008
    
    
    
    
    
    
    3,437
    
    
    $
    4.37
    
    
    
    
    
    
    $
    
  86




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##### Table of Contents



Incentive Stock Options
    
    
    Restricted StockWeighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageNumber of
    
    
    Grant Date
    
    
    Number of
    
    
    Grant DateShares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair ValueBalance at December 31, 2005
    
    
    4,996
    
    
    $
    2.89
    
    
    
    
    
    
    $
    Granted
    
    
    2,341
    
    
    
    6.63
    
    
    
    
    
    
    
    Vested
    
    
    (1,544
    )
    
    
    2.55
    
    
    
    
    
    
    
    Forfeited
    
    
    (133
    )
    
    
    3.31
    
    
    
    
    
    
    
    Balance at December 31, 2006
    
    
    5,660
    
    
    
    4.52
    
    
    
    
    
    
    
    Granted
    
    
    232
    
    
    
    20.65
    
    
    
    
    
    
    
    Vested
    
    
    (1,373
    )
    
    
    3.28
    
    
    
    
    
    
    
    Forfeited
    
    
    (98
    )
    
    
    6.25
    
    
    
    
    
    
    
    Balance at December 31, 2007
    
    
    4,421
    
    
    
    5.71
    
    
    
    
    
    
    
    Granted
    
    
    340
    
    
    
    8.26
    
    
    
    1,520
    
    
    
    6.02Vested
    
    
    (2,189
    )
    
    
    5.19
    
    
    
    (32
    )
    
    
    6.10Forfeited
    
    
    (235
    )
    
    
    7.91
    
    
    
    (16
    )
    
    
    6.10Balance at December 31, 2008
    
    
    2,337
    
    
    $
    6.36
    
    
    
    1,472
    
    
    $
    6.02
  Number of
    
    
    Remaining
    
    
    Number of
    
    
    Weighted-Options
    
    
    Contractual Life
    
    
    Options
    
    
    AverageRange of Exercise Price
    
    Outstanding
    
    
    (Years)
    
    
    Exercisable
    
    
    Exercise Price$0.10  $2.38
    
    
    242
    
    
    
    5.01
    
    
    
    242
    
    
    $
    0.86$2.82
    
    
    1,590
    
    
    
    6.05
    
    
    
    1,032
    
    
    
    2.82$3.09  $3.46
    
    
    1,444
    
    
    
    3.33
    
    
    
    1,038
    
    
    
    3.46$4.50  $6.10
    
    
    254
    
    
    
    4.29
    
    
    
    112
    
    
    
    5.43$6.75
    
    
    1,877
    
    
    
    3.92
    
    
    
    950
    
    
    
    6.75$9.76  $27.20
    
    
    367
    
    
    
    4.95
    
    
    
    63
    
    
    
    20.175,774
    
    
    
    4.48
    
    
    
    3,437
    
    
    
    4.37Aggregate intrinsic value (in thousands)
    
    $
    368
    
    
    
    
    
    
    $
    368
    
    
    On December 29, 2005, the Company sold 2,356,435 shares of Series E convertible preferred
stock at $5.94 per share for net proceeds of $13.9 million. Using this information, the
Company engaged an independent valuation firm, Baker Tilly to perform a valuation of its
common shares based on this preferred stock transaction. The independent valuation report
concluded that the common stock was valued at $4.99 per share as of December 29, 2005. This
valuation was then used for the option grant made in January 2006.
  87




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##### Table of Contents




    
    In the second quarter of 2006, the Companys Board of Directors determined that an
updated independent valuation should be performed. The Company engaged the same independent
valuation firm that completed the valuation for the January 2006 grants to perform a
valuation of all classes of stock. The independent valuation firm, Baker Tilly issued a
report dated May 16, 2006, which concluded that the Companys common stock was valued at
$5.35 per share as of March 31, 2006. This valuation was then used for the option grants
made in May and July 2006.
 
    
    On October 23, 2006, the Chairman of the Companys Board of Directors, T. Rockwell
Mackie, sold an aggregate of 190,400 shares of common stock to two third-party investors,
and then President, Paul Reckwerdt, sold 190,400 common shares to a single third-party
investor. The purchase price of all these shares was $6.75 per share resulting in aggregate
proceeds of $1.3 million to each seller. Given the significant size of the transactions and
the fact that these shares were sold to third-party investors, the Company concluded that
its common stock should be valued at $6.75 per share as of this date. Stock option grants
were made based on this price in October, November and early December 2006. Subsequent to
the December 7, 2006 option grant date, the Companys Board of Directors determined based
upon an independent valuation performed as of December 31, 2006, that the fair value per
share was $8.40.
   Number of
    
    
    
    
    
    
    Fair Value
    
    
    IntrinsicOptions
    
    
    Exercise
    
    
    Estimated
    
    
    ValueDate of Grant
    
    Granted
    
    
    Price
    
    
    per Share
    
    
    per ShareJanuary 2006
    
    
    34
    
    
    $
    4.99
    
    
    $
    4.99
    
    
    $
    May 2006
    
    
    47
    
    
    
    5.35
    
    
    
    5.35
    
    
    
    July 2006
    
    
    109
    
    
    
    5.35
    
    
    
    5.35
    
    
    
    October 2006
    
    
    190
    
    
    
    6.75
    
    
    
    6.75
    
    
    
    November 2006
    
    
    3
    
    
    
    6.75
    
    
    
    6.75
    
    
    
    December 2006
    
    
    1,958
    
    
    
    6.75
    
    
    
    8.40
    
    
    
    1.65
 Accounting for Stock Issued to Employees
   Years Ended December 31,2008
    
    
    2007
    
    
    2006Expected term (years)
    
    
    4.25
    
    
    
    4.25
    
    
    
    4.25Risk-free interest rate
    
    
    1.6
    %
    
    
    3.4
    %
    
    
    4.5
    %Expected volatility
    
    
    46-53
    %
    
    
    45-46
    %
    
    
    65
    %Expected dividend
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected forfeiture rate
    
    
    5.5
    %
    
    
    5.5
    %
    
    
    2.9
    %Weighted-average fair value at grant date
    
    $
    8.26
    
    
    $
    20.65
    
    
    $
    8.01
  88




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##### Table of Contents



NOTE I  RETIREMENT PLAN
  NOTE J  EMPLOYEE STOCK PURCHASE PLAN
   NOTE K  RELATED PARTY TRANSACTIONS
    NOTE L  INVESTMENT IN COMPACT PARTICLE ACCELERATION CORPORATION
     89




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##### Table of Contents



CONSOLIDATING BALANCE SHEETS
(In thousands)
(unaudited)
 December 31, 2008TomoTherapy
    
    
    CPAC
    
    
    Adjustments
    
    
    Consolidated(Restated)
    
    
    
    
    
    
    
    
    
    
    (Restated)Current assets
    
    $
    261,794
    
    
    $
    806
    
    
    $
    (180
    )
    
    $
    262,420Investment in affiliate
    
    
    1,901
    
    
    
    
    
    
    
    (1,901
    )
    
    
    Other non-current assets, net
    
    
    33,353
    
    
    
    2,556
    
    
    
    (1,901
    )
    
    
    34,008TOTAL ASSETS
    
    $
    297,048
    
    
    $
    3,362
    
    
    $
    (3,982
    )
    
    $
    296,428Current liabilities
    
    $
    77,051
    
    
    $
    321
    
    
    $
    (180
    )
    
    $
    77,192Other non-current liabilities
    
    
    3,465
    
    
    
    22
    
    
    
    
    
    
    
    3,487Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    2,155
    
    
    
    2,155Common stock
    
    
    506
    
    
    
    178
    
    
    
    (178
    )
    
    
    506Additional paid-in capital
    
    
    661,280
    
    
    
    10,980
    
    
    
    (12,881
    )
    
    
    659,379Accumulated other comprehensive loss
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    202Accumulated deficit
    
    
    (445,456
    )
    
    
    (8,139
    )
    
    
    7,102
    
    
    
    (446,493
    )TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    297,048
    
    
    $
    3,362
    
    
    $
    (3,982
    )
    
    $
    296,428
 CONSOLIDATING STATEMENTS OF OPERATIONS
(In thousands)
(unaudited)
 Year Ended December 31, 2008TomoTherapy
    
    
    CPAC
    
    
    Adjustments
    
    
    Consolidated(Restated)
    
    
    
    
    
    
    
    
    
    
    (Restated)Revenue
    
    $
    204,589
    
    
    $
    
    
    
    $
    
    
    
    $
    204,589Cost of revenue
    
    
    155,083
    
    
    
    
    
    
    
    
    
    
    
    155,083Gross profit
    
    
    49,506
    
    
    
    
    
    
    
    
    
    
    
    49,506Operating expenses:Research and development
    
    
    35,316
    
    
    
    7,241
    
    
    
    
    
    
    
    42,557Selling, general and administrative
    
    
    45,411
    
    
    
    925
    
    
    
    
    
    
    
    46,336Total operating expenses
    
    
    80,727
    
    
    
    8,166
    
    
    
    
    
    
    
    88,893Loss from operations
    
    
    (31,221
    )
    
    
    (8,166
    )
    
    
    
    
    
    
    (39,387
    )Other income
    
    
    5,701
    
    
    
    27
    
    
    
    
    
    
    
    5,728Loss before income tax and noncontrolling interests
    
    
    (25,520
    )
    
    
    (8,139
    )
    
    
    
    
    
    
    (33,659
    )Income tax expense
    
    
    6,931
    
    
    
    
    
    
    
    
    
    
    
    6,931Loss before noncontrolling interests
    
    
    (32,451
    )
    
    
    (8,139
    )
    
    
    
    
    
    
    (40,590
    )Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    7,102
    
    
    
    7,102Net income (loss)
    
    $
    (32,451
    )
    
    $
    (8,139
    )
    
    $
    7,102
    
    
    $
    (33,488
    )
 NOTE M  ACQUISITION
   90




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##### Table of Contents



Business Combinations
 FinalPurchase PriceAllocation(In thousands)Tangible assets
    
    $
    883Intangible assets
    
    
    1,315Total assets acquired
    
    
    2,198Liabilities
    
    
    (980
    )Net assets acquired
    
    $
    1,218
  NOTE N  OTHER EVENTS
   NOTE O  QUARTERLY FINANCIAL DATA (unaudited)
 Fiscal year 2008First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Total(In thousands, except per share amounts)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(1)
    
    
    Year(Restated)
    
    
    (Restated)Revenue
    
    $
    38,900
    
    
    $
    52,021
    
    
    $
    27,374
    
    
    $
    86,294
    
    
    $
    204,589Gross profit (loss)
    
    
    8,218
    
    
    
    12,525
    
    
    
    (907
    )
    
    
    29,670
    
    
    
    49,506Income (loss) from operations
    
    
    (11,975
    )
    
    
    (11,154
    )
    
    
    (23,401
    )
    
    
    7,143
    
    
    
    (39,387
    )Net loss
    
    
    (6,172
    )
    
    
    (6,861
    )
    
    
    (12,953
    )
    
    
    (7,502
    )
    
    
    (33,488
    )Basic and diluted net loss per share
    
    $
    (0.12
    )
    
    $
    (0.14
    )
    
    $
    (0.26
    )
    
    $
    (0.15
    )
    
    $
    (0.67
    )Shares used in basic and diluted per share calculation
    
    
    50,024
    
    
    
    50,173
    
    
    
    50,244
    
    
    
    50,352
    
    
    
    50,199Fiscal year 2007First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    TotalQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    YearRevenue
    
    $
    51,163
    
    
    $
    43,715
    
    
    $
    59,221
    
    
    $
    78,711
    
    
    $
    232,810Gross profit
    
    
    21,811
    
    
    
    14,524
    
    
    
    22,070
    
    
    
    28,268
    
    
    
    86,673Income (loss) from operations
    
    
    6,031
    
    
    
    (2,261
    )
    
    
    1,320
    
    
    
    4,972
    
    
    
    10,062Net income (loss)
    
    
    3,886
    
    
    
    (653
    )
    
    
    2,583
    
    
    
    4,846
    
    
    
    10,662Net income (loss) attributable to common shareholders
    
    
    (131,062
    )
    
    
    (103,287
    )
    
    
    2,583
    
    
    
    4,846
    
    
    
    (226,920
    )Basic net income (loss) per share
    
    
    (12.13
    )
    
    
    (3.15
    )
    
    
    0.05
    
    
    
    0.10
    
    
    
    (6.35
    )Diluted net income (loss) per share
    
    $
    (12.13
    )
    
    $
    (3.15
    )
    
    $
    0.05
    
    
    $
    0.09
    
    
    $
    (6.35
    )Shares used in basic per share calculation
    
    
    10,804
    
    
    
    32,819
    
    
    
    49,130
    
    
    
    49,547
    
    
    
    35,731Shares used in diluted per share calculation
    
    
    10,804
    
    
    
    32,819
    
    
    
    54,405
    
    
    
    54,066
    
    
    
    35,731
 
 (1)
    
    During the quarter ended December 31, 2008, the Company established a
100% valuation allowance reserve against its net deferred tax assets
of $17.8 million. The Company determined that its financial statements
as of December 31, 2008 and for the year then ended required
restatement to correct errors in the accounting for income taxes. See
Note C to our consolidated financial statements for further
information relating to the restatement.  91




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of disclosure controls and procedures.
 Report of management on internal control over financial reporting.
  Internal
Control-Integrated Framework
 Internal Control-Integrated Framework
   92




---



##### Table of Contents



Changes in internal control over financial reporting.
 Certificates.
 
 Item 9B. Other Information
     93




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  www.tomotherapy.com
     
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters
 Equity Compensation Plan Information
  Number of securitiesremaining available forNumber of securities
    
    
    
    
    
    
    future issuance underto be issued upon
    
    
    Weighted average
    
    
    equity compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding options,
    
    
    outstanding options,
    
    
    securities reflected inwarrants and rights
    
    
    warrants and rights
    
    
    the first column)Equity compensation plans approved by security holders
    
    
    5,776
    
    
    $
    5.17
    
    
    
    266Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    5,776
    
    
    $
    5.17
    
    
    
    266
   94




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
   95




---



##### Table of Contents



PART IV
 Item 15. Exhibits and Financial Statement Schedules
 1. Financial Statements
  2. Financial Statement Schedule
 SCHEDULE IIValuation and Qualifying AccountsBalance at
    
    
    
    
    
    
    
    
    
    
    Balance at(In thousands)
    
    
    
    beginning of
    
    
    
    
    
    
    
    
    
    
    end ofDecember 31,
    
    Description
    
    year
    
    
    Increases
    
    
    Deductions
    
    
    year2008
    
    Valuation allowance for deferred tax assets (Restated) (1)
    
    $
    1,526
    
    
    $
    17,877
    
    
    $
    48
    
    
    $
    19,3552007
    
    Valuation allowance for deferred tax assets
    
    $
    1,253
    
    
    $
    297
    
    
    $
    24
    
    
    $
    1,5262006
    
    Valuation allowance for deferred tax assets
    
    $
    13,137
    
    
    $
    113
    
    
    $
    11,997
    
    
    $
    1,2532008
    
    Reserve for excess and obsolete inventory
    
    $
    9,243
    
    
    $
    1,549
    
    
    $
    2,439
    
    
    $
    8,3532007
    
    Reserve for excess and obsolete inventory
    
    $
    5,261
    
    
    $
    5,973
    
    
    $
    1,991
    
    
    $
    9,2432006
    
    Reserve for excess and obsolete inventory
    
    $
    1,496
    
    
    $
    3,945
    
    
    $
    180
    
    
    $
    5,2612008
    
    Allowance for doubtful accounts receivable
    
    $
    
    
    
    $
    928
    
    
    $
    
    
    
    $
    9282007
    
    Allowance for doubtful accounts receivable
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2006
    
    Allowance for doubtful accounts receivable
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    We determined that our financial statements as of December 31, 2008 and for the year then
ended required restatement to correct errors in the accounting for income taxes. See Note C to
our consolidated financial statements for further information relating to the restatement.  3. Exhibits
   96




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    (9)
    
    Amended and Restated Articles of Incorporation of the Company3.2
    (9)
    
    Amended and Restated Bylaws of the Company4.1
    (2)
    
    Form of the Companys Common Stock Certificate10.1
    (1)
    
    Lease Agreement, dated January 26, 2005, between the Company and Old Sauk Trails Park Limited Partnership10.2
    (1)
    
    Lease Agreement, dated October 28, 2005, between the Company and Adelphia, LLC10.3
    (1)+
    
    Incentive Stock Option Plan, as amended, and forms of option agreements thereunder10.4
    (1)+
    
    2000 Stock Option Plan, as amended, and forms of option agreements thereunder10.5
    (1)+
    
    2002 Stock Option Plan, as amended, and forms of option agreements thereunder10.6
    (1)
    
    Standard Terms and Conditions of Sale10.7
    (1)
    
    International Standard Terms and Conditions of Sale10.8
    (1)
    
    Tomo Lifecycle Care and Partnership Terms and Conditions10.9
    (1)
    
    Logistics Services Agreement, dated September 7, 2005, between the Company and Kuehne+ Nagel, Inc.10.10
    (2)
    
    Development and OEM Supply Agreement, dated January 27, 2003, between the Company and Analogic
Corporation10.11
    (2)+
    
    2007 Equity Incentive Plan10.12
    (2)+
    
    2007 Employee Stock Purchase Plan10.13
    (2)
    
    Form of Noncompetition Agreement10.14
    (2)
    
    Form of Assignment of Inventions Agreement10.15
    (2)
    
    Form of Confidentiality Agreement10.16
    (3)
    
    License Agreement 98-0228, dated February 22, 1999, between the Company and Wisconsin Alumni Research
Foundation10.17
    (4)+
    
    Deferred Compensation Plan10.18
    (5)
    
    Amendment to License Agreement 98-0228, dated April 16, 2007, between the Company and Wisconsin Alumni
Research Foundation10.19
    (6)
    
    Stock Purchase Agreement, dated April 25, 2008, between Compact Particle Acceleration Corporation and
its investors10.20
    (6)
    
    Shareholder Agreement, dated April 25, 2008, between Compact Particle Acceleration Corporation and its
investors10.21
    (6)
    
    Investors Rights Agreement, dated April 25, 2008, between Compact Particle Acceleration Corporation and
its investors10.22
    (6)
    
    Limited Exclusive License Agreement, dated February 23, 2007, between the Company and Regents of the
University of California10.23
    (6)
    
    Amendment One to Limited Exclusive License Agreement, dated April 8, 2008, between the Company and
Lawrence Livermore National Security, LLC10.24
    (6)
    
    Limited Exclusive Sublicense Agreement, dated April 25, 2008, between the Company and Compact Particle
Acceleration Corporation10.25
    (7)
    
    Supply Agreement, dated June 25, 2008, between the Company and Hitachi Medical Corporation
  97




---



##### Table of Contents



ExhibitNumber
    
    Description10.26
    (8)
    
    Equity Interest Transfer Agreement, dated September 11, 2008, among the Company, Sichuan Nanguang Vacuum
Technology Incorporated Ltd., and Yao Chongguo10.27
    (9)
    
    Form of Indemnification Agreement for Directors, Executive Officers, and Controller10.28
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Frederick A. Robertson10.29
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Stephen C. Hathaway10.30
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Steven G. Books10.31
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Paul J. Reckwerdt10.32
    (10)+
    
    Amendment to Noncompetition Agreement, dated December 16, 2008, between the Company and Paul J. Reckwerdt10.33
    (11)
    
    Amendment to License Agreement 98-0228, dated December 23, 2008, between the Company and Wisconsin
Alumni Research Foundation10.34
    (11)
    
    Long-term Purchase Agreement, dated December 22, 2008, among the Company, e2v, Inc. and e2v Technologies
(UK) Limited10.35
    (12)
    
    Manufacture and Supply Agreement, dated January 13, 2009 and effective October 8, 2008, between the
Company and Siemens AG Healthcare Sector, Components & Vacuum Technology10.37
    (13)+
    
    Employment Agreement dated November 5, 2008 between the Company and Brenda S. Furlow10.38
    (13)
    
    Loan Agreement dated December 1, 2007 between the Company and M&I Marshall & Ilsley Bank10.39
    (13)
    
    Promissory Note dated December 1, 2008 by the Company in favor of M&I Marshall & Ilsley Bank10.40
    (13)+
    
    First Amendment to Employment Agreement dated March 12, 2009 between the Company and Stephen C. Hathaway23.1
    *
    
    Consent of Grant Thornton LLP, independent registered public accounting firm23.2
    *
    
    Consent of Baker Tilly Valuation, LLC31.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Previously filed as an exhibit to the Companys registration
statement on Form S-1 filed with the SEC on February 12, 2007 (File
No. 333-140600).(2)
    
    Previously filed as an exhibit to Amendment No. 2 to the Companys
registration statement on Form S-1 filed with the SEC on April 16,
2007 (File No. 333-140600).(3)
    
    Previously filed as an exhibit to Amendment No. 3 to the Companys
registration statement on Form S-1 filed with the SEC on April 19,
2007 (File No. 333-140600).(4)
    
    Previously filed as an exhibit to Amendment No. 3 to the Companys
registration statement on Form S-1 filed with the SEC on April 19,
2007 (File No. 333-140600) and terminated as reported in Form 8-K
filed with the SEC on February 10, 2009 (File No. 001-33452).(5)
    
    Previously filed as an exhibit to the Companys registration
statement on Form S-1 filed with the SEC on September 21, 2007 (File
No. 333-146219).(6)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on April 28, 2008 (File No. 001-33452).(7)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on June 30, 2008 (File No. 001-33452).  98




---



##### Table of Contents



(8)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on September 17, 2008 (File No.
001-33452).(9)
    
    Previously filed as an exhibit to the Companys Quarterly Report on
Form 10-Q filed with the SEC on November 7, 2008 (File No.
001-33452).(10)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on December 17, 2008 (File No.
001-33452).(11)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on December 30, 2008 (File No.
001-33452).(12)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on January 16, 2009 (File No. 001-33452).(13)
    
    Previously filed as an exhibit to the Companys annual report on Form
10-K filed with the SEC on March 12, 2009 (File No. 001-33452).*
    
    Filed herewith.
    
    Confidential treatment has been requested for portions of this
exhibit. These portions have been omitted from the corresponding
filing and submitted separately to the SEC.+
    
    Executive compensation plan or arrangement.  99




---



##### Table of Contents



SIGNATURES
  Dated: January 14, 2010
    TomoTherapy IncorporatedBy:
    /s/  Frederick A. RobertsonFrederick A. Robertson, M.D.Chief Executive Officer and President POWER OF ATTORNEY
 Form 10-K
  Name
    
    Position/s/ Frederick A. Robertson, M.D.

Frederick A. Robertson, M.D.
    
    Chief Executive Officer,
President and Director
(principal executive officer)/s/ Thomas E. Powell

Thomas E. Powell
    
    Chief Financial Officer and
Treasurer
(principal financial and accounting officer)*

T. Rockwell Mackie, Ph.D.
    
    Director*

John J. Greisch
    
    Director*

Sam R. Leno
    
    Director*

H. Jonathan McCloskey
    
    Director*

John J. McDonough
    
    Director*

Cary J. Nolan
    
    Director*

Carlos A. Perez, M.D.
    
    Director*

Roy T. Tanaka
    
    Director*

Frances S. Taylor
    
    Director
 *By:
    
    /s/ Brenda S. Furlow

Attorney-in-Fact, pursuant
to the power of attorney
filed as part of the
Original 10-K
  100




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    (9)
    
    Amended and Restated Articles of Incorporation of the Company3.2
    (9)
    
    Amended and Restated Bylaws of the Company4.1
    (2)
    
    Form of the Companys Common Stock Certificate10.1
    (1)
    
    Lease Agreement, dated January 26, 2005, between the Company and Old Sauk Trails Park Limited Partnership10.2
    (1)
    
    Lease Agreement, dated October 28, 2005, between the Company and Adelphia, LLC10.3
    (1)+
    
    Incentive Stock Option Plan, as amended, and forms of option agreements thereunder10.4
    (1)+
    
    2000 Stock Option Plan, as amended, and forms of option agreements thereunder10.5
    (1)+
    
    2002 Stock Option Plan, as amended, and forms of option agreements thereunder10.6
    (1)
    
    Standard Terms and Conditions of Sale10.7
    (1)
    
    International Standard Terms and Conditions of Sale10.8
    (1)
    
    Tomo Lifecycle Care and Partnership Terms and Conditions10.9
    (1)
    
    Logistics Services Agreement, dated September 7, 2005, between the Company and Kuehne+ Nagel, Inc.10.10
    (2)
    
    Development and OEM Supply Agreement, dated January 27, 2003, between the Company and Analogic
Corporation10.11
    (2)+
    
    2007 Equity Incentive Plan10.12
    (2)+
    
    2007 Employee Stock Purchase Plan10.13
    (2)
    
    Form of Noncompetition Agreement10.14
    (2)
    
    Form of Assignment of Inventions Agreement10.15
    (2)
    
    Form of Confidentiality Agreement10.16
    (3)
    
    License Agreement 98-0228, dated February 22, 1999, between the Company and Wisconsin Alumni Research
Foundation10.17
    (4)+
    
    Deferred Compensation Plan10.18
    (5)
    
    Amendment to License Agreement 98-0228, dated April 16, 2007, between the Company and Wisconsin Alumni
Research Foundation10.19
    (6)
    
    Stock Purchase Agreement, dated April 25, 2008, between Compact Particle Acceleration Corporation and
its investors10.20
    (6)
    
    Shareholder Agreement, dated April 25, 2008, between Compact Particle Acceleration Corporation and its
investors10.21
    (6)
    
    Investors Rights Agreement, dated April 25, 2008, between Compact Particle Acceleration Corporation and
its investors10.22
    (6)
    
    Limited Exclusive License Agreement, dated February 23, 2007, between the Company and Regents of the
University of California10.23
    (6)
    
    Amendment One to Limited Exclusive License Agreement, dated April 8, 2008, between the Company and
Lawrence Livermore National Security, LLC10.24
    (6)
    
    Limited Exclusive Sublicense Agreement, dated April 25, 2008, between the Company and Compact Particle
Acceleration Corporation10.25
    (7)
    
    Supply Agreement, dated June 25, 2008, between the Company and Hitachi Medical Corporation
  101




---



##### Table of Contents



ExhibitNumber
    
    Description10.26
    (8)
    
    Equity Interest Transfer Agreement, dated September 11, 2008, among the Company, Sichuan Nanguang Vacuum
Technology Incorporated Ltd., and Yao Chongguo10.27
    (9)
    
    Form of Indemnification Agreement for Directors, Executive Officers, and Controller10.28
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Frederick A. Robertson10.29
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Stephen C. Hathaway10.30
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Steven G. Books10.31
    (9)+
    
    Employment Agreement, dated November 5, 2008, between the Company and Paul J. Reckwerdt10.32
    (10)+
    
    Amendment to Noncompetition Agreement, dated December 16, 2008, between the Company and Paul J. Reckwerdt10.33
    (11)
    
    Amendment to License Agreement 98-0228, dated December 23, 2008, between the Company and Wisconsin
Alumni Research Foundation10.34
    (11)
    
    Long-term Purchase Agreement, dated December 22, 2008, among the Company, e2v, Inc. and e2v Technologies
(UK) Limited10.35
    (12)
    
    Manufacture and Supply Agreement, dated January 13, 2009 and effective October 8, 2008, between the
Company and Siemens AG Healthcare Sector, Components & Vacuum Technology10.37
    (13)+
    
    Employment Agreement dated November 5, 2008 between the Company and Brenda S. Furlow10.38
    (13)
    
    Loan Agreement dated December 1, 2007 between the Company and M&I Marshall & Ilsley Bank10.39
    (13)
    
    Promissory Note dated December 1, 2008 by the Company in favor of M&I Marshall & Ilsley Bank10.40
    (13)+
    
    First Amendment to Employment Agreement dated March 12, 2009 between the Company and Stephen C. Hathaway23.1
    *
    
    Consent of Grant Thornton LLP, independent registered public accounting firm23.2
    *
    
    Consent of Baker Tilly Valuation, LLC31.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Previously filed as an exhibit to the Companys registration
statement on Form S-1 filed with the SEC on February 12, 2007 (File
No. 333-140600).(2)
    
    Previously filed as an exhibit to Amendment No. 2 to the Companys
registration statement on Form S-1 filed with the SEC on April 16,
2007 (File No. 333-140600).(3)
    
    Previously filed as an exhibit to Amendment No. 3 to the Companys
registration statement on Form S-1 filed with the SEC on April 19,
2007 (File No. 333-140600).(4)
    
    Previously filed as an exhibit to Amendment No. 3 to the Companys
registration statement on Form S-1 filed with the SEC on April 19,
2007 (File No. 333-140600) and terminated as reported in Form 8-K
filed with the SEC on February 10, 2009 (File No. 001-33452).(5)
    
    Previously filed as an exhibit to the Companys registration
statement on Form S-1 filed with the SEC on September 21, 2007 (File
No. 333-146219).(6)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on April 28, 2008 (File No. 001-33452).  102




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##### Table of Contents



(7)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on June 30, 2008 (File No. 001-33452).(8)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on September 17, 2008 (File No.
001-33452).(9)
    
    Previously filed as an exhibit to the Companys Quarterly Report on
Form 10-Q filed with the SEC on November 7, 2008 (File No.
001-33452).(10)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on December 17, 2008 (File No.
001-33452).(11)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on December 30, 2008 (File No.
001-33452).(12)
    
    Previously filed as an exhibit to the Companys current report on
Form 8-K filed with the SEC on January 16, 2009 (File No. 001-33452).(13)
    
    Previously filed as an exhibit to the Companys annual report on Form
10-K filed with the SEC on March 12, 2009 (File No. 001-33452).*
    
    Filed herewith.
    
    Confidential treatment has been requested for portions of this
exhibit. These portions have been omitted from the corresponding
filing and submitted separately to the SEC.+
    
    Executive compensation plan or arrangement.  103