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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
 Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number:
    001-33452
 TomoTherapy
    Incorporated
 (Exact name of Registrant as
    specified in its charter)
  Wisconsin

39-1914727(State of Other Jurisdiction
    of
    Incorporation or Organization)

(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)

www.tomotherapy.com(Registrants internet
    address)   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
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





TomoTherapy
    Incorporated
  INDEX
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


20Item 1B.


Unresolved Staff Comments


36Item 2.


Properties


36Item 3.


Legal Proceedings


36Item 4.


[Reserved]


36PART IIItem 5.


Market for the Registrants Common Equity,
    Related Shareholder Matters and Issuer Purchases of Equity
    Securities


37Item 6.


Selected Financial Data


41Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


43Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


61Item 8.


Financial Statements and Supplementary Data


62Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


91Item 9A.


Controls and Procedures


91Item 9B.


Other Information


92PART 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


97EX-10.33EX-10.38EX-10.45EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2   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  General
    Overview
  state-of-the-art
   3




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Recent
    Developments
     4




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Market
    Overview
          Radiation
    Treatment
   5




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
    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.
    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, size, shape and density of the tumor, as well as
    verification of the actual radiation dose received by the
    patient throughout the entire course of treatment.
    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, lung and prostrate, 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.
    Advanced delivery.  Ultimately, clinicians are
    seeking an advanced treatment delivery system that includes
    image-guided IMRT with advanced plan adaptation capabilities
    that can deliver treatments more effectively and efficiently
    than possible in conventional systems available today. From the
    patients standpoint, shorter treatment times can mean
    greater comfort since treatments often involve the patient being
    immobilized on a rigid treatment couch. Shorter treatment
    sessions decrease waiting times and, since treatments are
    delivered in fractions over the course of many days, can mean
    fewer disruptions to a patients daily routine. From the
    clinicians standpoint, shorter treatment times can lessen
    the chance of a tumor moving during treatment and can increase
    the number of patients treated per day. Shorter treatment times
    and increased patient throughput means increased clinical
    capacity (which is a particular concern in countries with lower
    numbers of treatment machines per capita), helping to decrease
    the cost per treatment and opening greater access to advanced
    care for more patients. An advanced delivery system that is
    capable of dynamically modifying the 6




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shape of the beam and couch speed within a single treatment
    fraction will allow better tracking and treatment of targeted
    tumor volumes with greater overall efficiency.    
    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 anatomic 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. 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 have imaging subsystems that are
    not suited to use for daily imaging of the patient due to
    concerns about the additional radiation exposure. 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 subsequently have 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 architectural approach can have safety and accuracy
    implications because the onus for checking proper data
    transmission and receipt often falls back to manual methods
    forced upon the user. This can mean a user reconfigures and
    recalibrates the system between patient imaging, treatment
    planning, radiation delivery and quality assurance. In addition
    to imposing manual intervention and safety concerns, this
    approach unfortunately can also mean more time is required to
    plan and deliver treatments, thus reducing patient throughput.  The
    TomoTherapy Solution
    
    More versatile treatment capabilities.  The
    TomoTherapy treatment systems rigid ring gantry platform
    enables more precise and more efficient treatments by
    eliminating the need for the repeated adjustment and
    re-calibration steps necessitated by imaging and treating the
    patient on different systems and mechanically adjusting the
    C-arm to treat from different angles. The high-speed MLC is
    integrated with the linear accelerator and consists of 64
    individual low leakage tungsten leaves that move across the beam
    in less than 20 milliseconds to either block or allow the
    passage of radiation, effectively shaping the beam as it is 7




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emitted. The shape of the treatment field is defined by the
    pattern of all of the highly modulated beamlets. The TomoTherapy
    treatment systems are capable of quickly delivering tens of
    thousands of beamlets. The combination of the ring gantry and
    the high-speed MLC allow treatment to be delivered continuously
    in a helical pattern 360 degrees around the patients body,
    allowing radiation delivery from all angles to improve radiation
    dose distributions for some of the most challenging cases (which
    we refer to as TomoHelical). Moreover, with our recent release
    of the TomoDirect product, we believe the TomoTherapy treatment
    systems gain new versatility to provide high quality, fixed
    angle beams for those cases suited to simple tangential beam
    radiation delivery. 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 TomoTherapy treatment systems enable an operator to provide
    image-guided IMRT 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
    TomoTherapy treatment systems precision and versatility
    offers clinicians an extensive range of treatment possibilities
    which, we believe, are beyond those offered by other
    commercially available radiation systems.  
    Daily, quantitative imaging for better identification of
    tumors, dose verification and treatment
    planning.  The TomoTherapy treatment systems are
    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, uses a low-intensity, fan beam
    CT to collect quantitative images prior to each treatment. These
    images allow lung tissue, fat, muscle and bone to be clearly
    distinguished. In addition, because of the low radiation dose
    involved, the clinician can collect daily, quantitative images,
    which can be used to monitor changes in the patients
    internal anatomy and quickly adapt the plan if deemed clinically
    necessary. In addition to being prone to certain imaging
    artifacts, the higher doses of radiation associated with the
    typical cone beam imaging subsystems in many competing radiation
    delivery devices may lead clinicians to avoid daily imaging,
    making those imaging systems less useful for identifying subtle
    changes to the tumor or internal patient anatomy. We believe
    that daily, quantitative, relatively low dose images are
    essential to optimizing patient treatment by enabling clinicians
    to adapt the treatment plan in response to anatomical changes.
    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
    TomoTherapy treatment systems use 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 while reducing damage to nearby
    healthy tissues. In addition, because the TomoTherapy treatment
    systems can precisely deliver a high dose of targeted radiation,
    we believe that our systems reduce 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 dose delivered to tumor cells in fewer fractions.
    Efficient clinical workflow for IGRT and adaptive radiation
    therapy.  The TomoTherapy treatment systems
    integrate 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 and safety of treatment. Conversely, the integrated
    imaging and treatment features of the TomoTherapy treatment
    systems 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 8




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TomoTherapy treatment systems. 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, our StatRT software allows the full radiation
    therapy process  CT scanning, treatment planning and
    treatment delivery  to be completed much more rapidly
    than when using other less-integrated 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 software option is not
    available for other systems which lack full integration, where
    scanning and treatment planning are usually completed a full day
    or more prior to delivery of treatment.  
    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 TomoTherapy treatment systems size and self-contained
    design allow customers to retrofit it 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
    often required to install many other radiation therapy systems.
    With both imaging and radiation delivery capabilities in its
    ring gantry, the TomoTherapy treatment system requires less
    space than other linear accelerator systems, which use large
    moving arms to position the linear accelerator or incorporate
    adjacent imaging equipment used for treatment planning. In
    addition, because the TomoTherapy treatment 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 TomoTherapy treatment system at our manufacturing facility,
    and ship the system almost fully assembled. This assembly
    process typically allows radiation beam on within
    four days and first patient treatments to begin within 30 to
    45 days after delivery.
    Platform for further technological advancements in adaptive
    radiation therapy.  We believe that the
    TomoTherapy treatment systems are the only commercially
    available treatment devices that enable truly adaptive radiation
    therapy because of their 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 TomoTherapy treatment
    systems adaptive capabilities to a point where clinicians
    will routinely and easily adjust a patients treatment as
    needed, thereby remaining true to the intent of the original
    treatment plan.  Our
    Strategy
    
    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. In order to expand our installed base, we
    intend to continue to position both the Hi Art system and our
    fully featured TomoHD treatment system as the most advanced
    radiation therapy systems for treating a wide range of cancer
    types effectively, efficiently and safely. With the addition of
    TomoDirect software, which will be standard on the TomoHD
    treatment system and optional on the Hi Art treatment system, we
    believe we are 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
    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
    TomoTherapy treatment systems at sites with multiple radiation
    treatment systems. In addition, we believe this expanded
    versatility will make the TomoTherapy treatment 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 9




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the United States own only one linear accelerator. We believe
    the expanded versatility offered by the combination of
    TomoDirect and TomoHelical treatment modes available in our
    TomoTherapy treatment systems will help us to more effectively
    penetrate this large and important market. In addition, our
    TomoMobile relocatable radiation therapy system enables
    technology upgrades at single and dual linear accelerator sites
    without losing patient referrals, and also allows a customer to
    market-test new radiation therapy centers with minimal
    facilities investments. TomoTherapy remains committed to
    introducing our treatment systems to a broader array of targeted
    market segments while also reducing technology adoption barriers.  
    Expand our worldwide sales presence.  Our early
    sales and marketing efforts were primarily focused on North
    America. As of December 31, 2009, 65% of our installed
    systems were in North America. We have established both direct
    and indirect sales capabilities in Western and Eastern Europe,
    Asia-Pacific, and the Middle East. We intend to continue to
    invest selectively in direct and indirect sales and marketing
    capabilities in international markets. Our most recent
    geographic expansion was the addition of a new distributor in
    Australia and New Zealand, which we added in December 2009. In
    particular, we plan to focus on enhancing our capabilities in
    our current markets and on expanding our sales capabilities in
    other select countries in Eastern Europe and Latin America.
    Increase our service profitability and enhance our customer
    support capabilities.  We provide extensive
    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 for remedial repairs and
    value-added preventive maintenance services. In the past several
    years, however, our operating margins have been adversely
    impacted by our investments in our global service and support
    infrastructure to support single installation market centers, as
    well as the high failure rates of certain components. In order
    to improve our service profitability, we are continuing to
    decrease our reliance on single-source suppliers of key
    components enabling us to negotiate better prices with a wider
    range of suppliers and to improve component reliability. We are
    also seeking to increase our profitability by focusing our sales
    efforts to develop concentrations of placements in new and
    existing geographic markets, thereby facilitating scalable
    efficiencies of our existing service employees and regional
    storage locations for service spare parts. We believe this
    improved asset utilization will position us to reduce the
    service infrastructure costs normally associated with increased
    global sales volumes. In addition, we are taking a number of
    important steps to provide more efficient and cost-effective
    service, including developing remote diagnostics, proactive
    system monitoring and service restoration capabilities so that
    we may perform these functions without dispatching a local
    engineer. We continue to outsource certain functions that are
    not core competencies, and cross train our field engineers with
    our installation support personnel, as well as implement
    regional training programs to augment and refine our customer
    service.
    Enhance the TomoTherapy treatment systems capabilities
    and diversify our product portfolio 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 integrated treatment
    optimization and adaptive therapy processes, thereby decreasing
    the time necessary for clinicians to develop and adapt treatment
    plans. For example, we recently began installing our new
    TomoDirect software, which we believe will enable us to compete
    more effectively with the traditional radiation therapy systems
    by providing a high quality fixed beam angle delivery mode for
    simpler, routine cases. We recently announced the launch of our
    TomoHD treatment system, which will include both the helical and
    fixed beam treatment modalities, along with a variety of other
    standard features and functional enhancements. We are currently
    engaged in initiatives to accommodate real-time patient
    movements during treatment, as well as real-time adaptive
    software and dose verification software. We believe that these
    developments will further improve the quality of treatment
    offered by the TomoTherapy treatment systems 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 routine system
    verification and maintenance.
    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 10




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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 workflow capabilities or expand our
    growth opportunities into new markets. For example, in April
    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.  Marketing
    and Sales
      Years Ended December 31,2009


2008


2007North America(1)

$
90,057



54.9
%

$
135,977



66.5
%

$
129,493



55.6
%Europe and Middle East


35,448



21.6



49,588



24.2



61,337



26.4Asia-Pacific


38,526



23.5



19,024



9.3



41,980



18.0$
164,031



100.0
%

$
204,589



100.0
%

$
232,810



100.0
%     (1)
    
    North America contains revenue from the United States of
    $82.0 million, $134.7 million and $121.3 million
    for the years ended December 31, 2009, 2008 and 2007,
    respectively.      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.
 11




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Customer
    Service and Support
    Site planning and installation.
  Training.
  Standard warranty and support services.
  Tomo Lifecycle Care. on-site
 12




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Online resources. e-mail
  Competition
        Research
    and Development
     13




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Manufacturing
    and Suppliers
  state-of-the-art
   14




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Reimbursement
  United
    States Reimbursement Regulation
       15




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Foreign
    Reimbursement Regulations
  side-by-side.
  Government
    Regulation
  United
    States Medical Device Regulation
    Form 10-K
     16




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United
    States Privacy and Security Laws
    United
    States Fraud and Abuse Laws and Regulations
    State
    Certificate of Need Laws
    Foreign
    Regulation of Medical Devices
       17




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Intellectual
    Property
            Employees
    Information
    Available to Investors
  (608) 824-2800. 1-800-SEC-0330. www.sec.gov
  http://www.tomotherapy.com Form 10-K, Form 10-Q, Form 8-K
 18




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Executive
    Officers of the Registrant
    Name

Age

PositionFrederick A. Robertson


54


Chief Executive Officer, President and DirectorThomas E. Powell


48


Chief Financial Officer and TreasurerThomas Rockwell Mackie


55


Chairman of the Board of Directors and Co-FounderBrenda S. Furlow


51


Vice President, General Counsel and Corporate SecretaryEric A. Schloesser


37


Vice President, Operations and Business DevelopmentRafael L. Vaello


46


Chief Commercial Officer   Frederick A. Robertson, M.D.
  Thomas E. Powell
  Thomas Rockwell Mackie, Ph.D.
  Brenda S. Furlow, J.D.,
 19




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Eric A. Schloesser
  Rafael L. Vaello
  Item 1A.
    Risk
    Factors  Form 10-K
  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 and other radiation therapy systems
    we have recently launched, we may not generate sufficient
    revenue to support our business.
    Because
    the substantial majority of our revenue currently is derived
    from sales of TomoTherapy treatment systems, and because of the
    long sales cycle and high unit price of such systems, 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.
   20




---



##### Table of Contents



Our
    sales and receivables may be adversely impacted if current
    economic conditions persist or worsen, or credit becomes more
    difficult to obtain on reasonable terms.
    If our
    backlog, which is an important measure of future revenue,
    declines further, our future financial performance will be
    adversely affected.
    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.
   21




---



##### Table of Contents



Sales
    of the TomoTherapy treatment systems may be adversely affected
    if clinicians do not widely adopt IGRT and adaptive
    radiotherapy, which is an emerging cancer treatment
    technique.
    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 efficacy of the TomoTherapy
    treatment systems.
   22




---



##### Table of Contents



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
    TomoTherapy treatment systems and to implement enhancements to
    the systems in a timely manner.
      Our
    reliance on single-source suppliers for critical components of
    the TomoTherapy treatment systems could harm our ability to meet
    demand for our products in a timely and cost-effective
    manner.
     23




---



##### Table of Contents



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.
    Our
    ability to increase our profitability also depends in part on
    reducing our warranty and service costs for the TomoTherapy
    treatment systems and improving our economies of scale, which we
    may not be able to achieve.
    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.
   24




---



##### Table of Contents



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 TomoTherapy treatment
    systems 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 TomoTherapy treatment system
    could adversely affect sales of the TomoTherapy treatment
    system.
   25




---



##### Table of Contents



non-U.S. markets
  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 our products in key markets.
   26




---



##### Table of Contents



Technological
    breakthroughs in cancer treatment could render the TomoTherapy
    treatment systems 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 TomoTherapy treatment systems on a timely
    basis or at all;
    availability of, and changes in, reimbursement within prevailing
    foreign health care payment systems;
    compliance with the U.S. Foreign Corrupt Practices Act and
    comparable foreign anti-bribery laws;
    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; 27




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##### Table of Contents




    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
    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 a
    TomoTherapy treatment system or for the misuse of our products.
    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 substantial costs and penalties, and cause adverse
    publicity.
     28




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##### Table of Contents



Our
    success will depend on our ability to effectively manage
    employee costs while also attracting and retaining qualified
    personnel.
    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.
   29




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##### Table of Contents



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.
    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 TomoTherapy treatment
    systems.
    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 30




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##### Table of Contents




    others will not independently develop similar or competing
    products or methods or design around any patents that may be
    issued to us.      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.
   31




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##### Table of Contents



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 TomoTherapy
    treatment systems may require new FDA premarket approvals or
    510(k) clearances, and such modifications or new products may
    also require us to recall or cease marketing one or more
    existing products until approvals or clearances are
    obtained.
      The
    FDA and equivalent agencies in other countries may change
    regulations or policies governing 510(k) clearances, premarket
    approvals or other regulatory requirements in a way that
    adversely affects our existing products and
    business.
   32




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##### Table of Contents



Our
    products are 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 our products in that country.
    We
    must manufacture our products 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.
   33




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##### Table of Contents



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.
      We are
    subject to environmental laws and regulations in the United
    States and other countries that, if violated, could subject us
    to penalties and fines, which could increase our liabilities and
    harm our reputation or our business.
   34




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##### Table of Contents



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 our products;
    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;
    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 35




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##### Table of Contents




    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 1B.
    Unresolved
    Staff Comments    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.    Item 3.
    Legal
    Proceedings  Form 10-K.
  Item 4.
    [Reserved] 36




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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 2008First Quarter

$
20.16


$
12.56Second Quarter

$
15.00


$
6.79Third Quarter

$
10.00


$
4.45Fourth Quarter

$
5.00


$
1.81Fiscal Year 2009First Quarter

$
3.26


$
1.97Second Quarter

$
3.40


$
2.08Third Quarter

$
4.67


$
2.43Fourth Quarter

$
4.50


$
2.89   Holders
    Dividends
    Securities
    Authorized for Issuance under Equity Compensation
    Plans
  Form 10-K
 37




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##### Table of Contents



Performance
    Graph
      COMPARISON
    OF CUMULATIVE TOTAL RETURN*
    Among TomoTherapy Incorporated, the NASDAQ Composite Index
    and
 the S&P Healthcare Index
  
  *
    
    $100 invested on May 9, 2007 in stock or in index,
    including reinvestment of dividends.  Recent
    Sales of Unregistered Securities
  Form 10-K,
       38




---



##### Table of Contents



and/or and/or and/or
    Use of
    Proceeds from Public Offering of Common Stock
  Form S-1 No. 333-140600),
      Working capital

$
59.4Purchases of property and equipment


16.0Purchases of test systems


5.7Acquisition of Chengdu Twin Peak Accelerator Technology
    Inc.


1.5Repayment of debt


0.3Total net proceeds used

$
82.9  39




---



##### Table of Contents



Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
    Total Numberof Shares


Maximum NumberPurchased as


of SharesTotal Number


Average


Part of Publicly


that May Yet Beof Shares


Price Paid


Announced


Purchased Under thePeriod

Purchased(1)


per Share


Plans or Programs


Plans or Programs(2)October 1, 2009  October 31, 2009





$








November 1, 2009  November 30, 2009





$








December 1, 2009  December 31, 2009


3,501


$
3.90







Total


3,501


$
3.90







     (1)
    
    Consists of shares surrendered to us from employees to satisfy
    income tax withholding obligations that arose upon the vesting
    of restricted stock awards.(2)
    
    Pursuant to the our 2007 Equity Incentive Plan, as amended (the
    Plan), we may occasionally repurchase shares of our common stock
    from recipients of restricted stock awards under the Plan in
    order to permit such participants to satisfy income tax
    obligations arising upon the vesting of such restricted stock
    awards. The amount of such future share repurchases, if any, is
    unascertainable as of the date of this Annual Report on
    Form 10-K. 40




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K. Form 10-K.
  Consolidated
    Balance Sheet data (in thousands):
  As of December 31,2009


2008


2007


2006


2005Cash and equivalents

$
76,108


$
65,967


$
191,780


$
20,137


$
30,396Short-term investments


78,225



88,825











Receivables, net


33,559



41,259



44,108



19,050



14,235Inventories, net


47,669



63,983



53,171



40,026



28,283Working capital


161,753



189,834



211,449



7,446



7,792Total assets


270,251



296,428



325,142



109,314



82,303Deferred revenue and customer deposits


47,411



39,027



35,338



43,307



49,281Long-term debt (including current maturities)


593



727



841



875



214Redeemable convertible preferred stock














212,663



166,402Total shareholders equity (deficit)


183,424



213,594



239,657



(184,117
)


(151,406
)   Consolidated
    Statement of Operations data (in thousands except per share
    data):
  Years Ended December 31,2009


2008


2007


2006


2005Revenue

$
164,031


$
204,589


$
232,810


$
156,102


$
75,754Income (loss) before income tax and cumulative effect of change
    in accounting principle


(42,765
)


(33,659
)


16,450



7,731



317Income tax expense (benefit)


(288
)


6,931



5,788



(7,184
)


78Cumulative effect of change in accounting principle(1)














(2,140
)


Net income (loss)


(42,477
)


(40,590
)


10,662



12,775



239Noncontrolling interests


5,107



7,102











Accretion of redeemable convertible preferred stock(2)










(237,582
)


(46,253
)


(68,075
)Net loss attributable to shareholders

$
(37,370
)

$
(33,488
)

$
(226,920
)

$
(33,478
)

$
(67,836
)Basic and diluted net loss per share attributable to shareholders

$
(0.74
)

$
(0.67
)

$
(6.35
)

$
(3.78
)

$
(8.48
)Weighted average common shares used in computing basic and
    diluted net loss per share attributable to shareholders


50,777



50,199



35,731



8,856



7,996  41




---



##### Table of Contents



(1)
    
    Represents the impact of the adoption of new accounting guidance
    on the accounting for freestanding warrants and other similar
    instruments on shares that are redeemable. Pursuant to the new
    accounting guidance, 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 we adopted the new accounting
    guidance, 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 our
    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 sell
    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 sell 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. 42




---



##### 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.
  Overview
    state-of-the-art
     43




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##### Table of Contents



Factors
    Affecting Our Financial Performance
    Incoming
    Orders
          Backlog
   44




---



##### Table of Contents



Revenue
  Product revenue.
      
    On average, the System is shipped to our customer within
    12 months after we receive the order. However, on occasion,
    individual orders may become delayed and take longer than
    12 months to ship. Timing of deliveries can be affected by
    factors out of our control such as construction delays at
    customer project sites and customer credit issues. For direct
    and non-certified distributor sales, we recognize revenue upon
    end customer acceptance of the System, which usually occurs
    three to four weeks after its delivery. For certified
    distributor sales, we recognize revenue upon shipment of the
    System to the certified distributor. Each System installation
    represents a significant percentage of our revenue for the
    period in which it occurs.
    Our geographic mix of customers may impact our average selling
    prices. Increased sales of the 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 System
    compared to competing systems is a factor in our ability to
    increase market demand for the System. To compete effectively,
    we may need to offer additional features that could require
    substantial additional resources to develop.
    Our strategy to target customers in the United States with
    single- or dual-linear accelerator centers will depend on that
    market segments interest in our recently introduced
    TomoDirect software and TomoHD treatment system, which both
    offer versatility in treatment modality. To generate interest
    and penetrate this market, we may need to further develop these
    product offerings or offer additional features that could
    require considerable additional investment.
    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 negotiate quantity discounts. 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 System is a major capital equipment item that represents a
    significant purchase for most of our customers. If the
    macroeconomic conditions do not improve, our customers may
    choose to delay some of their capital spending or may not have
    or be able to obtain the funds necessary to purchase equipment
    such as the System. As a result, our incoming orders and
    subsequent revenue recognition may be materially adversely
    affected. 45




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##### Table of Contents



Service revenue.
    Cost
    of revenue
      
    Service and support expenses.  We have a
    declining number of individual service contracts that produce
    negative gross profit margins for which we have recorded a
    reserve for the related estimated future losses. The decline is
    due in part to our success in reducing the overall average
    direct service costs per installed System. We expect to continue
    to improve service contract margins by leveraging our service
    infrastructure costs over a larger installed base, increasing
    the price for some of our older annual service contracts,
    training our personnel to improve their problem-solving
    capabilities, implementing remote diagnostic functionalities,
    outsourcing certain tasks when cost-effective and feasible and
    introducing component design changes aimed at reducing costs,
    increasing longevity and improving serviceability of our spare
    parts. In addition, we believe that achieving certain of these
    initiatives should also lead to reduced warranty costs and
    improved System performance.
    Component supply and cost.  Our cost of revenue
    continues to be impacted by high component costs and high, but
    declining, replacement rates. We continue to develop alternate
    components and implement enhancements to increase the
    performance of components used in the System. We are also
    seeking to identify lower-priced components of comparable or
    improved performance and quality, as well as making engineering
    improvements to the System in order to reduce costs. We believe
    that achieving these goals should result in reduced
    manufacturing, warranty and service support costs in the long
    term.    Research
    and development expenses
   46




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##### Table of Contents



Selling,
    general and administrative expenses
      Nonoperating
    expenses
    Interest
    income
    Income
    tax expense (benefit)
      Noncontrolling
    interests
   47




---



##### Table of Contents



Results
    of Operations
    Years Ended December 31,2009





2008


2007Revenue:Product


73.5
%






85.5
%


91.9
%Service and other


26.5







14.5



8.1Total revenue


100.0







100.0



100.0Cost of revenue:Product


38.3







40.2



39.4Service and other


42.8







35.6



23.4Total cost of revenue


81.1







75.8



62.8Gross profit


18.9







24.2



37.2Operating expenses:Research and development


16.9







20.8



14.7Selling, general and administrative


29.4







22.7



18.2Total operating expenses


46.3







43.5



32.9Income (loss) from operations


(27.4
)






(19.3
)


4.3Other income


1.3







2.8



2.8Income (loss) before income tax


(26.1
)






(16.5
)


7.1Income tax expense (benefit)


(0.2
)






3.4



2.5Net income (loss)


(25.9
)%






(19.9
)%


4.6
%   Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
  Revenue
    Years Ended December 31,2009


2008Product revenue

$
120,571



73.5
%

$
174,929



85.5
%Service and other revenue


43,460



26.5



29,660



14.5$
164,031



100.0
%

$
204,589



100.0
%     Years Ended December 31,2009


2008North America(1)

$
90,057



54.9
%

$
135,977



66.5
%Europe and Middle East


35,448



21.6



49,588



24.2Asia-Pacific


38,526



23.5



19,024



9.3$
164,031



100.0
%

$
204,589



100.0
%     (1)
    
    North America contains revenue from the United States of
    $82.0 million and $134.7 million for the years ended
    December 31, 2009 and 2008, respectively. 48




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##### Table of Contents



Cost of
    revenue
           49




---



##### Table of Contents



Research
    and development expenses
    Years Ended December 31,2009


2008


$ Change


% ChangeSystem R&D

$
23,018


$
33,616


$
(10,598
)


(31.5
)%Proton Project/CPAC R&D


4,621



8,941



(4,320
)


(48.3
)$
27,639


$
42,557


$
(14,918
)


(35.1
)%     Selling,
    general and administrative expenses
    Other
    income (expense)
    Income
    tax expense (benefit)
   50




---



##### Table of Contents



Year
    Ended December 31, 2008 Compared to Year Ended
    December 31, 2007
  Revenue
    Years Ended December 31,2008


2007Product revenue

$
174,929



85.5
%

$
213,900



91.9
%Service and other revenue


29,660



14.5



18,910



8.1$
204,589



100.0
%

$
232,810



100.0
%     Years Ended December 31,2008


2007North America(1)

$
135,977



66.5
%

$
129,493



55.6
%Europe and Middle East


49,588



24.2



61,337



26.4Asia-Pacific


19,024



9.3



41,980



18.0$
204,589



100.0
%

$
232,810



100.0
%     (1)
    
    North America contains revenue from the United States of
    $134.7 million and $121.3 million for the years ended
    December 31, 2008 and 2007, respectively.        Cost of
    revenue
       51




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##### Table of Contents



Research
    and development expenses
    Years Ended December 31,2008


2007


$ Change


% ChangeSystem R&D

$
33,616


$
30,304


$
3,312



10.9
%Proton Project/CPAC R&D


8,941



4,000



4,941



123.5$
42,557


$
34,304


$
8,253



24.1
%     Selling,
    general and administrative expenses
    Other
    income (expense)
   52




---



##### Table of Contents



Income
    tax expense
    Liquidity
    and Capital Resources
    Financial
    Condition
    December 31, 2009Unrealized


UnrealizedCost basis


gains


losses


Fair ValueU.S. Government and Agency securities

$
60,531


$
1,043


$



$
61,574Corporate bonds


16,334



317







16,651$
76,865


$
1,360


$



$
78,225       Cash
    Flows
  Cash
    flows from operating activities
   53




---



##### Table of Contents



Cash
    flows from investing activities
     54




---



##### Table of Contents



Cash
    flows from financing activities
          Loans
    and Available Borrowings
       55




---



##### 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

$
20,331


$
4,097


$
7,878


$
5,119


$
3,237Notes payable (including interest)


616



152



440



24



Twin Peak acquisition payments


1,905



555



1,350







Minimum purchase agreement(1)


10,692



4,682



5,447



563



$
33,544


$
9,486


$
15,115


$
5,706


$
3,237     (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
     56




---



##### Table of Contents



Reserve
    for Contingency
        Operating
    Capital and Capital Expenditure Requirements
    
    Revenue generated from sales of the System and service contracts;
    The performance of the Systems operating in the field and
    corresponding service costs;
    The level of investment required by our service and support
    organization;
    The level of investment required for research and development
    activities;
    Costs associated with our manufacturing, sales and marketing and
    general and administrative activities; and
    Effects of competing technological and market developments.    Off-Balance
    Sheet Arrangements
  Regulation S-K.
  Critical
    Accounting Policies and Estimates
   57




---



##### Table of Contents



Revenue
    Recognition
               58




---



##### Table of Contents



Inventories
  first-in,
  Warranty
    Obligations
    Income
    Taxes
        Investment
    in CPAC
   59




---



##### Table of Contents



Share-Based
    Compensation
    Capitalized
    Software Development Costs
    Recent
    Accounting Pronouncements
           60




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk    Interest
    Rate Risk
      Foreign
    Currency Exchange Rate Risk
    Inflation
    Risk
   61




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  TomoTherapy
    Incorporated and Subsidiaries
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReports of Independent Registered Public
    Accounting Firms


63Consolidated Balance Sheets


65Consolidated Statements of Operations


66Consolidated Statements of Cash Flows


67Consolidated Statements of Temporary Equity and
    Shareholders Equity (Deficit)


68Notes to Consolidated Financial Statements


69  62




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   TomoTherapy Incorporated:
          PricewaterhouseCoopers
    LLP
    63




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
               64




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
    (In thousands, except share amounts)
  December 31,


December 31,2009


2008(As adjusted, Note B)ASSETSCash and cash equivalents

$
76,108


$
65,967Short-term investments


78,225



88,825Receivables, net


33,559



41,259Inventories, net


47,669



63,983Deferred tax assets


410



496Prepaid expenses and other current assets


3,223



1,890Total current assets


239,194



262,420Property and equipment, net


18,628



22,157Other non-current assets, net


12,429



11,851TOTAL ASSETS

$
270,251


$
296,428LIABILITIES AND EQUITYAccounts payable

$
6,269


$
7,804Accrued expenses


19,588



18,324Accrued warranty


4,173



7,431Deferred revenue


34,145



23,533Customer deposits


13,266



15,494Total current liabilities


77,441



72,586Other non-current liabilities


5,475



8,093TOTAL LIABILITIES


82,916



80,679COMMITMENTS AND CONTINGENCIES (Note H)Preferred stock, $1 per share par value, 10,000,000 shares
    authorized at December 31, 2009 and December 31, 2008;
    no shares issued and outstanding at December 31, 2009 and
    December 31, 2008






Common stock, $0.01 per share par value, 200,000,000 shares
    authorized at December 31, 2009 and December 31, 2008;
    53,980,728 and 53,938,955 shares issued and outstanding at
    December 31, 2009 and 52,065,400 and 52,063,768 shares
    issued and outstanding at December 31, 2008


515



506Additional paid-in capital


667,177



659,379Treasury stock, 41,773 and 1,632 shares at cost at
    December 31, 2009 and December 31, 2008, respectively


(137
)


Accumulated other comprehensive income


(268
)


202Accumulated deficit


(483,863
)


(446,493
)Total shareholders equity


183,424



213,594Noncontrolling interests


3,911



2,155TOTAL EQUITY


187,335



215,749TOTAL LIABILITIES AND EQUITY

$
270,251


$
296,428    65




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands, except per share amounts)
  Years Ended December 31,2009


2008


2007(As adjusted,Note B)Revenue:Product

$
120,571


$
174,929


$
213,900Service and other


43,460



29,660



18,910Total revenue


164,031



204,589



232,810Cost of revenue:Product


62,801



82,224



91,588Service and other


70,284



72,859



54,549Total cost of revenue


133,085



155,083



146,137Gross profit


30,946



49,506



86,673Operating expenses:Research and development


27,639



42,557



34,304Selling, general and administrative


48,180



46,336



42,307Total operating expenses


75,819



88,893



76,611Income (loss) from operations


(44,873
)


(39,387
)


10,062Other income (expense):Interest income


2,586



4,754



6,056Interest expense


(58
)


(49
)


(221
)Other income (expense), net


(420
)


1,023



553Total other income


2,108



5,728



6,388Income (loss) before income tax


(42,765
)


(33,659
)


16,450Income tax expense (benefit)


(288
)


6,931



5,788Net income (loss)


(42,477
)


(40,590
)


10,662Noncontrolling interests


5,107



7,102



Accretion of redeemable convertible preferred stock










(237,582
)Net loss attributable to shareholders

$
(37,370
)

$
(33,488
)

$
(226,920
)Weighted-average common shares outstanding-basic and diluted


50,777



50,199



35,731Loss per common share-basic and diluted

$
(0.74
)

$
(0.67
)

$
(6.35
)    66




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands)
   Years Ended December 31,2009


2008


2007(As adjusted,Note B)Cash flows from operating activities:Net income (loss)

$
(42,477
)

$
(40,590
)

$
10,662Adjustments to reconcile net income (loss) to net cash used in
    operating activities:Depreciation and amortization


10,664



8,682



6,503Share-based compensation


6,271



4,731



3,318Excess tax benefit from share-based compensation










(4,763
)Deferred income tax expense (benefit)


(402
)


7,269



3,544Other noncash items


175



167



877Changes in operating assets and liabilities:Receivables, net


8,782



1,868



(25,058
)Inventories, net


14,492



(10,269
)


(13,145
)Other assets


(1,214
)


(416
)


(608
)Accounts payable


(1,536
)


(9,836
)


3,695Accrued expenses


1,137



(4,718
)


10,222Accrued warranty


(3,258
)


(542
)


2,666Deferred revenue


8,580



12,466



(4,687
)Customer deposits


(2,228
)


(4,815
)


(3,282
)Other liabilities


54



295



Net cash used in operating activities


(960
)


(35,708
)


(10,056
)Cash flows from investing activities:Purchases of property and equipment


(1,987
)


(7,596
)


(8,320
)Purchases of test systems






(2,777
)


(2,963
)Purchases of short-term investments


(7,499
)


(131,881
)


Proceeds from sales and maturities of short-term investments


17,376



44,416



Other investing activities


(4,222
)


(2,217
)


(487
)Net cash provided by (used in) investing activities


3,668



(100,055
)


(11,770
)Cash flows from financing activities:Payments on notes payable


(135
)


(114
)


(34
)Proceeds from initial public offering, net of issuance costs










184,681Proceeds from employee stock purchase plan


560



540



869Repurchases of common stock


(137
)






Proceeds from exercises of stock options and warrants


423



1,429



3,713Proceeds from issuance of CPAC common stock


6,863



9,257



Excess tax benefit from share-based compensation










4,763Net cash provided by financing activities


7,574



11,112



193,992Effect of exchange rate changes on cash and cash
    equivalents


(141
)


(1,162
)


(523
)Increase (decrease) in cash and cash equivalents


10,141



(125,813
)


171,643Cash and cash equivalents at beginning of year


65,967



191,780



20,137Cash and cash equivalents at end of year

$
76,108


$
65,967


$
191,780Supplemental disclosure of cash flow information:Interest paid

$
56


$
70


$
233Income taxes paid


296



386



1,165Supplemental disclosure of noncash investing activities and
    financing activities:Leasehold improvements funded by landlord

$
228


$
143


$
524Reclassification of preferred stock warrants to equity










3,630    67




---



##### Table of Contents



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


Shareholders Equity (Deficit)Redeemable

















AccumulatedConvertible








Additional








OtherPreferred Stock


Common Stock


Paid-in


Treasury Stock


Comprehensive


Accumulated


Noncontrolling


TotalShares


Amount


Shares


Amount


Capital


Shares


Amount


Income (loss)


Deficit


Interests


Equity(As adjusted,Note B)Balance at December 31, 2006


25,221


$
212,663



9,264


$
93


$
1,771



2


$



$



$
(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










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



2







(523
)


(413,005
)






239,657Net loss


































(33,488
)


(7,102
)


(40,590
)Other comprehensive income






























725











725Comprehensive loss










































(39,865
)Issuance of common stock










270



3



537



















9,257



9,797Issuance of restricted stock










1,494































Exercise of stock options and common stock warrants










559



6



1,423























1,429Share-based compensation expense


















4,731























4,731Balance at December 31, 2008










52,064



506



659,379



2







202



(446,493
)


2,155



215,749Net loss


































(37,370
)


(5,107
)


(42,477
)Other comprehensive loss






























(470
)










(470
)Comprehensive loss










































(42,947
)Issuance of common stock










262



3



557



















6,863



7,423Repurchases of common stock










(40
)










40



(137
)














(137
)Issuance of restricted stock










1,493



4



( 4
)






















Exercise of stock options and common stock warrants










160



2



421























423Share-based compensation expense


















6,271























6,271Income tax benefit related to stock options


















553























553Balance at December 31, 2009





$




53,939


$
515


$
667,177



42


$
(137
)

$
(268
)

$
(483,863
)

$
3,911


$
187,335    68




---



##### 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
  30-day
  NOTE B 
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Principles
    of Consolidation
    Reclassification
   69




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Use of
    Estimates
    Fair
    Value of Financial Instruments
    Revenue
    Recognition
             70




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Shipping
    and Handling Costs
    Capitalized
    Software Development Costs
    Share-Based
    Compensation
    Income
    Taxes
   71




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Concentration
    of Credit Risk and Other Risks and Uncertainties
        Recent
    Accounting Pronouncements
       72




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          NOTE C 
    SUPPLEMENTAL
    FINANCIAL INFORMATION  Cash
    and Cash Equivalents
    Short-term
    Investments
      December 31, 2009Unrealized


UnrealizedCost Basis


Gains


Losses


Fair ValueU.S. Government and Agency securities

$
60,531


$
1,043


$



$
61,574Corporate bonds


16,334



317







16,651$
76,865


$
1,360


$



$
78,225   73




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  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, 2009


December 31, 2008Cost Basis


Fair Value


Cost Basis


Fair ValueDue in one year or less

$
48,345


$
48,809


$
16,676


$
16,815Due after one year through five years


28,520



29,416



70,333



72,010$
76,865


$
78,225


$
87,009


$
88,825     
    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.    Receivables,
    net
      Inventories,
    net
  work-in-process first-in,
 74




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      December 31,2009


2008Raw materials

$
40,091


$
47,721Work-in-process


1,847



5,614Finished goods


5,731



10,648$
47,669


$
63,983   Property
    and Equipment, net
    December 31,2009


2008Furniture and equipment

$
12,497


$
11,019Computer equipment


6,290



6,292Computer software


8,460



5,140Leasehold improvements


9,785



9,784In process


14



2,70437,046



34,939Less: Accumulated depreciation and amortization


(18,418
)


(12,782
)$
18,628


$
22,157     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
     75




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accrued
    Expenses
    December 31,2009


2008Commissions, severance and payroll-related

$
6,164


$
6,290Bonuses


1,705



108Accrued distributor relation costs


5,188



1,463Other


6,531



10,463$
19,588


$
18,324   Accrued
    Warranty
      December 31,2009


2008


2007Balance, beginning of period

$
7,431


$
7,973


$
5,307Charged to cost of revenue


7,801



11,049



12,600Charged to selling, general and administrative


282







Adjustments related to change in estimate


(3,112
)


1,180



(86
)Actual product warranty expenditures


(8,229
)


(12,771
)


(9,848
)Balance, end of period

$
4,173


$
7,431


$
7,973   Deferred
    Revenue
       76




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Research
    and Development Expenses
        Advertising
    Expenses
    Foreign
    Currency
    Other
    Comprehensive Income (Loss)
   77




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2009


2008


2007Foreign currency translation adjustments

$
(14
)

$
(401
)

$
(523
)Net unrealized investment gain (loss), net of tax


(456
)


1,126



$
(470
)

$
725


$
(523
)   NOTE D 
    LOSS PER
    COMMON SHARE        Years Ended December 31,2009


2008


2007Stock options and warrants


5,347



5,776



6,338Restricted stock


2,488



1,472



7,835



7,248



6,338   NOTE E 
    SEGMENT
    INFORMATION      Years Ended December 31,2009


2008


2007Product

$
120,571


$
174,929


$
213,900Service and other


43,460



29,660



18,910$
164,031


$
204,589


$
232,810  78




---



##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2009


2008


2007North America(1)

$
90,057


$
135,977


$
129,493Europe and Middle East


35,448



49,588



61,337Asia-Pacific


38,526



19,024



41,980$
164,031


$
204,589


$
232,810     (1)
    
    North America contains revenue from the United States of
    $82.0 million, $134.7 million and $121.3 million
    for the years ended December 31, 2009, 2008 and 2007,
    respectively.  NOTE F 
    LONG-TERM
    DEBT AND NOTES PAYABLE        Years Ended December 31,2010

$
1372011


3302012


1022013


24$
593    79




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE G 
    INCOME
    TAXES    Years Ended December 31,2009


2008


2007Current:Federal

$
(90
)

$
12


$
1,269State


103



(396
)


841Foreign


101



46



134Total current


114



(338
)


2,244Deferred


(402
)


7,269



3,544Total provision (benefit) for income tax

$
(288
)

$
6,931


$
5,788     Years Ended December 31,2009


2008(1)


2007(1)Provision at statutory rate


(35.0
)%


(35.0
)%


35.0
%State income taxes, net of federal effect


0.1



0.3



3.3Valuation allowance


28.9



57.8



0.0Share-based compensation


1.5



1.9



4.3Foreign rate differential


2.5



(1.6
)


(1.3
)Federal research and development credits


0.1



(2.0
)


(4.8
)Other


1.2



(0.8
)


(1.3
)Effective income tax rate


(0.7
)%


20.6
%


35.2
%     (1)
    
    Prior year data has been modified to conform to current year
    presentation and to include CPAC items consistent with the
    current year. 80




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Years Ended December 31,,

2009


2008Deferred tax assets:Federal and state operating loss carryforwards

$
24,392


$
11,942Tax credit carryforwards


1,841



1,768Warranty and bad debt reserves


1,907



3,537Inventory


3,533



4,815Employee benefits


2,337



2,232Accrued expenses


1,972



62Other


1,498



650Total deferred tax assets


37,480



25,006Deferred tax liabilities:Tax depreciation in excess of book depreciation


260



694Unrealized gains on available for sale securities


517



690Patents


488



418Software


1,479



178Other


397



860Total deferred tax liabilities


3,141



2,840Net deferred tax asset


34,339



22,166Valuation allowance


(34,443
)


(22,672
)$
(104
)

$
(506
)        81




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Years Ended December 31,2009


2008


2007Balance, beginning of period

$
4,062


$
3,009


$
1,765Additions based on tax positions related to the period


254



1,053



1,244Balance, end of period

$
4,316


$
4,062


$
3,009   and/or
  NOTE H 
    COMMITMENTS
    AND CONTINGENCIES   82




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Pending
    Litigation
      Reserve
    for Contingency
        Operating
    Leases
   83




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Years Ended December 31,2010

$
4,0972011


4,0872012


3,7912013


3,0922014


2,027Thereafter


3,237$
20,331   NOTE I 
    TEMPORARY
    EQUITY AND SHAREHOLDERS EQUITY (DEFICIT)  Redeemable
    Convertible Preferred Stock
    Warrants
    NOTE J 
    STOCK
    INCENTIVE PLANS   84




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Incentive Stock Options


Restricted StockWeighted-Shares


Number of


Weighted-





AverageAvailable


Options


Average


Number of


Fair Valuefor Grant


Outstanding


Exercise Price


Shares


at Grant DateBalance 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






(555
)


2.56



(21
)


2.56Cancelled


49



(342
)


6.95



(27
)


6.10Balance at December 31, 2008


266



5,774



5.17



1,472



6.02Authorized


5,033















Granted


(1,861
)


204



2.62



1,657



4.50Exercised






(160
)


2.64



(467
)


6.03Cancelled


229



(471
)


6.65



(174
)


5.95Balance at December 31, 2009


3,667



5,347


$
5.02



2,488


$
5.01Exercisable at December 31, 2009






4,525


$
4.54






$
  85




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Incentive Stock Options


Restricted StockWeighted-





Weighted-Average





AverageNumber of


Fair Value


Number of


Fair ValueShares


at Grant Date


Shares


at Grant DateBalance 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



6.02Granted


204



2.62



1,657



4.50Vested


(1,497
)


4.90



(467
)


6.03Forfeited


(222
)


7.91



(174
)


5.95Balance at December 31, 2009


822


$
7.67



2,488


$
5.01     Number of


Remaining


Number of


Weighted-Options


Contractual Life


Options


AverageRange of Exercise Price

Outstanding


(Years)


Exercisable


Exercise Price$0.10 - $2.38


223



4.06



223


$
0.91$2.56 - $2.70


203



5.38



33



2.56$2.82


1,458



5.04



1,458



2.82$3.46


1,264



2.35



1,264



3.46$4.50 - $6.10


247



3.31



175



5.48$6.75


1,630



2.92



1,233



6.75$9.76 - $27.20


322



3.98



139



17.895,347



3.59



4,525



4.54Aggregate intrinsic value (in thousands)

$
3,064






$
2,848        86




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2009


2008


2007Expected term (years)


4.25



4.25



4.25Risk-free interest rate


1.9-2.8
%


1.6-3.1
%


3.4-4.6
%Expected volatility


53-55
%


46-53
%


45-46
%Expected dividend


0
%


0
%


0
%Expected forfeiture rate


5.5
%


5.5
%


5.5
%Weighted-average fair value at grant date

$
2.62


$
8.26


$
20.65     Years Ended December 31,2009


2008


2007Cost of revenue

$
1,242


$
820


$
634Research and development


1,658



1,464



1,049Selling, general and administrative


3,371



2,447



1,635Income tax benefit










(449
)$
6,271


$
4,731


$
2,869   NOTE K 
    RETIREMENT
    PLAN    NOTE L 
    EMPLOYEE
    STOCK PURCHASE PLAN      NOTE M 
    RELATED
    PARTY TRANSACTIONS   87




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE N 
    INVESTMENT
    IN COMPACT PARTICLE ACCELERATION CORPORATION      NOTE O 
    ACQUISITION   88




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    FinalPurchase PriceAllocationTangible assets

$
883Intangible assets


1,315Total assets acquired


2,198Liabilities


(980
)Net assets acquired

$
1,218     NOTE P 
    RESTRUCTURING      NOTE Q 
    QUARTERLY
    FINANCIAL DATA (unaudited)  (In thousands, except per share amounts)

Fiscal Year 2009First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


TotalRevenue

$
30,623


$
41,080


$
34,378


$
57,950


$
164,031Gross profit


2,539



8,515



3,558



16,334



30,946Loss from operations


(13,962
)


(9,729
)


(16,130
)


(5,052
)


(44,873
)Net loss attributable to shareholders


(12,999
)


(7,123
)


(13,880
)


(3,368
)


(37,370
)Loss per common share

$
(0.26
)

$
(0.14
)

$
(0.27
)

$
(0.07
)

$
(0.74
)Weighted-average common shares outstanding


50,592



50,592



50,748



51,170



50,777   89




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##### Table of Contents



TOMOTHERAPY
    INCORPORATED AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fiscal Year 2008First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(1)


TotalRevenue

$
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 attributable to shareholders


(6,172
)


(6,861
)


(12,953
)


(7,502
)


(33,488
)Loss per common share

$
(0.12
)

$
(0.14
)

$
(0.26
)

$
(0.15
)

$
(0.67
)Weighted-average common shares outstanding


50,024



50,173



50,244



50,352



50,199     (1)
    
    During the quarter ended December 31, 2008, the Company
    established a 100% valuation allowance reserve against its net
    deferred tax assets of $21.1 million. 90




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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
    Rules 13a-15(e) 15d-15(e)
  Managements Report on Internal Control over
    Financial Reporting
  Rule 13a-15(f).
    Internal Control 
    Integrated Framework Internal
    Control  Integrated Framework,
    Remediation Steps to Address the 2008 Material
    Weakness
  Form 10-K/A
 91




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##### Table of Contents



Form 10-K/A
  1.
    The Company engaged a nationally recognized independent
    registered public accounting firm with expertise in accounting
    for income taxes to assist it in preparing its quarterly and
    annual income tax provision and disclosures in conformity with
    accounting principles generally accepted in the United States of
    America (U.S. GAAP), and to advise it on technical tax
    matters exceeding its internal expertise, including a review of
    the Companys accounting procedures and reconciliations
    related to deferred income taxes.2.
    The Company revised and enhanced the procedures and internal
    controls surrounding the accounting in its quarterly and annual
    income tax provision process, to ensure that the accounting for
    the income tax provision and related income tax balances is in
    accordance with U.S. GAAP. These specific enhancements
    included the following:  
    The Company instituted regular periodic meetings with its
    external tax advisors both prior to and following its quarterly
    reporting periods to enhance communication of key issues
    affecting the income tax provision, effective income tax rate
    reconciliation and related income tax disclosure requirements.
    The Company formalized a process for documenting decisions and
    journal entries made based upon the preparation and review of
    supporting documentation and schedules provided by its tax
    analyst and external tax advisors.
    The Company instituted a process to ensure the completeness and
    accuracy of financial statement income tax disclosures by using
    a standard U.S. GAAP disclosure checklist and documenting
    the supporting analysis.
    The Company expanded and intensified the Controllers
    review of amounts associated with the reporting of income taxes
    by completing additional detailed analytical procedures of each
    entitys quarterly balance sheet and income tax provision
    reconciliation, federal and state tax accruals and receivables,
    deferred tax assets and liabilities, corresponding valuation
    allowances and unrecognized tax benefits on a quarterly basis.
    The Company implemented procedures whereby the Controller
    reviews and approves all significant estimates and judgments
    related to the income tax provision, income tax accounts and
    financial statement disclosures, including judgments concerning
    the accounting for uncertain tax positions and valuation
    allowances.  Form 10-K.
  Changes in Internal Control over Financial
    Reporting
  Remediation Steps to Address the 2008 Material
    Weakness,
  Item 9B.
    Other
    Information     92




---



##### Table of Contents



93




---



##### Table of Contents



PART III Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K
  http://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


5,347,448


$
5.02



3,667,232security holdersEquity compensation plans not approved by security holders










5,347,448


$
5.02



3,667,232    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 (in thousands)  SCHEDULE IIValuation and Qualifying AccountsBalance at








Balance atbeginning of








end ofDescription

year


Increases


Deductions


yearYear Ended December 31, 2009Valuation allowance for deferred tax assets

$
22,672


$
11,771


$



$
34,443Reserve for excess and obsolete inventory

$
8,353


$
750


$
4,047


$
5,056Allowance for doubtful accounts receivable

$
928


$
97


$
289


$
736Year Ended December 31, 2008Valuation allowance for deferred tax assets

$
1,526


$
21,194


$
48


$
22,672Reserve for excess and obsolete inventory

$
9,243


$
1,549


$
2,439


$
8,353Allowance for doubtful accounts receivable

$



$
928


$



$
928Year Ended December 31, 2007Valuation allowance for deferred tax assets

$
1,253


$
297


$
24


$
1,526Reserve for excess and obsolete inventory

$
5,261


$
5,973


$
1,991


$
9,243Allowance for doubtful accounts receivable

$



$



$



$
     3.
    Exhibits  Form 10-K Form 10-K
 96




---



##### Table of Contents



SIGNATURES  Form 10-K
  TomoTherapy Incorporated
  By:
    /s/  Frederick
    A. Robertson       POWER OF
    ATTORNEY
  Form 10-K,
  Form 10-K
  Name

Position/s/  Frederick
    A. RobertsonFrederick
    A. Robertson, M.D.

Chief Executive Officer, President and Director (principal
    executive officer)/s/  Thomas
    E. PowellThomas
    E. Powell

Chief Financial Officer and Treasurer (principal financial and
    accounting officer)/s/  T.
    Rockwell MackieT.
    Rockwell Mackie, Ph.D.

Chairman of the Board, Director/s/  Sam
    R. LenoSam
    R. Leno

Director/s/  H.
    Jonathan McCloskeyH.
    Jonathan McCloskey

Director/s/  John
    J. McDonoughJohn
    J. McDonough

Director/s/  Cary
    J. NolanCary
    J. Nolan

Director 97




---



##### Table of Contents



Name

Position/s/  Carlos
    A. PerezCarlos
    A. Perez, M.D.

Director/s/  Roy
    T. TanakaRoy
    T. Tanaka

Director/s/  Frances
    S. TaylorFrances
    S. Taylor

Director  98




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description3
.1(7)

Amended and Restated Articles of Incorporation of the Company3
.2(7)

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(2)

Development and OEM Supply Agreement, dated January 27,
    2003, between the Company and Analogic Corporation10
.10(2)+

2007 Equity Incentive Plan10
.11(15)

First Amendment to 2007 Equity Incentive Plan, dated May 1,
    200910
.12(2)+

2007 Employee Stock Purchase Plan, as amended10
.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)

Amendment to License Agreement
    98-0228,
    dated April 16, 2007, between the Company and Wisconsin
    Alumni Research Foundation10
.18(9)

Amendment to License Agreement
    98-0228,
    dated December 23, 2008, between the Company and Wisconsin
    Alumni Research Foundation10
.19(5)

Stock Purchase Agreement, dated April 25, 2008, between
    Compact Particle Acceleration Corporation and its investors10
.20(5)

Shareholder Agreement, dated April 25, 2008, between
    Compact Particle Acceleration Corporation and its investors10
.21(5)

Investors Rights Agreement, dated April 25, 2008,
    between Compact Particle Acceleration Corporation and its
    investors10
.22(5)

Limited Exclusive License Agreement, dated February 23,
    2007, between the Company and Regents of the University of
    California10
.23(5)

Amendment One to Limited Exclusive License Agreement, dated
    April 8, 2008, between the Company and Lawrence Livermore
    National Security, LLC10
.24(5)

Limited Exclusive Sublicense Agreement, dated April 25,
    2008, between the Company and Compact Particle Acceleration
    Corporation10
.25(6)

Supply Agreement, dated June 25, 2008, between the Company
    and Hitachi Medical Corporation10
.26(7)

Form of Indemnification Agreement for Directors, Executive
    Officers, and Controller10
.27(7)+

Employment Agreement, dated November 5, 2008, between the
    Company and Steven G. Books10
.28(8)+

Amendment to Noncompetition Agreement, dated December 16,
    2008, between the Company and Paul J. Reckwerdt10
.29(9)

Long-term Purchase Agreement, dated December 22, 2008,
    among the Company, e2v, Inc. and e2v Technologies (UK) Limited 99




---



##### Table of Contents



ExhibitNumber

Description10
.30(10)

Manufacture and Supply Agreement, dated January 13, 2009
    and effective October 8, 2008, between the Company and
    Siemens AG Healthcare Sector, Components & Vacuum
    Technology10
.31(13)

Amendment One to Manufacture and Supply Agreement, dated
    April 13, 2009, between the Company and Siemens AG
    Healthcare Sector, Components & Vacuum Technology10
.32(11)+

Form of Employment Agreement, dated November 5, 2008,
    between the Company and Brenda S. Furlow and Rafael L. Vaello10
.33+*

Form of First Amendment to Employment Agreement, dated
    July 1, 2009, between the Company and Brenda S. Furlow and
    Eric A. Schloesser10
.34(12)

Settlement Agreement, dated April 7, 2009, between the
    Company and Avalon Capital Group, Inc., Avalon Technology, LLC
    and Avalon Portfolio, LLC10
.35(14)

Magnetron Subscription Agreement, dated April 24, 2009 and
    effective May 1, 2009, between the Company and e2v, Inc.
    and e2v Technologies (UK) Limited10
.36(16)+

Employment Agreement, dated June 10, 2009 and effective
    June 22, 2009, between the Company and Thomas E. Powell10
.37(17)+

Form of First Amendment to Employment Agreement, dated
    July 1, 2009, between the Company and Steven G. Books,
    Thomas E. Powell and T. Rockwell Mackie10
.38+*

First Amendment to Employment Agreement, dated July 1,
    2009, between the Company and Rafael L. Vaello10
.39(18)

Letter Agreement not requiring 11th director, dated
    October 12, 2009, between the Company and Avalon Capital
    Group, Inc., Avalon Technology, LLC and Avalon Portfolio, LLC10
.40(19)

Magnetron Subscription Agreement (revised redaction), dated
    April 24, 2009 and effective May 1, 2009, between the
    Company and e2v, Inc. and e2v Technologies (UK) Limited10
.41(20)

Amended and Restated Equity Interest Transfer Agreement, dated
    November 18, 2009, between the Company and Chengdu
    Twin-Peak Accelerator Technology Inc., Sichuan Nanguang Vacuum
    Technology Incorporated Ltd. and Yao Chongguo10
.42(21)

Separation and Release Agreement, dated November 25, 2009,
    between the Company and Steven G. Books10
.43(22)

Amended and Restated Loan Agreement, dated December 1,
    2009, between the Company and M&I Marshall &
    Ilsley Bank10
.44(22)

Amended and Restated Promissory Note, dated December 1,
    2009, between the Company and M&I Marshall &
    Ilsley Bank10
.45*

Amended and Restated Employment Agreement, dated March 9,
    2010, between the Company and Frederick A. Robertson23
.1*

Consent of PricewaterhouseCoopers LLP, independent registered
    public accounting firm23
.2*

Consent of Grant Thornton LLP, independent registered public
    accounting firm31
.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 the Companys
    registration statement on
    Form S-1
    filed with the SEC on September 21, 2007 (File
    No. 333-146219). 100




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##### Table of Contents



(5)
    
    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).(6)
    
    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).(7)
    
    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).(8)
    
    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).(9)
    
    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).(10)
    
    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).(11)
    
    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).(12)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on April 8, 2009 (File
    No. 001-33452).(13)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on April 13, 2009 (File
    No. 001-33452).(14)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on April 29, 2009 (File
    No. 001-33452).(15)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on May 5, 2009 (File
    No. 001-33452).(16)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on June 11, 2009 (File
    No. 001-33452).(17)
    
    Previously filed as an exhibit to the Companys quarterly
    report on
    Form 10-Q
    filed with the SEC on August 6, 2009 (File No.
    001-33452).(18)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on October 16, 2009 (File No.
    001-33452).(19)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on October 28, 2009 (File No.
    001-33452).(20)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on November 23, 2009 (File No.
    001-33452).(21)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on November 25, 2009 (File No.
    001-33452).(22)
    
    Previously filed as an exhibit to the Companys current
    report on
    Form 8-K
    filed with the SEC on December 2, 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. 101