##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-33452
 TomoTherapy Incorporated
  Wisconsin
    
    39-1914727(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1240 Deming Way, Madison, Wisconsin
    
    53717(Address of principal executive offices)
    
    (Zip Code)
 (608) 824-2800
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



TomoTherapy Incorporated
Index
 PagePart I  FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to the Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    31EXIBIT INDEX
    
    
    32EX-31.1:EX-31.2:EX-32.1:EX-32.2:
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 (unaudited)
 March 31,
    
    
    December 31,2009
    
    
    2008(As adjusted, Note B)ASSETSCash and equivalents
    
    $
    66,629
    
    
    $
    65,967Short-term investments
    
    
    91,055
    
    
    
    88,825Receivables, net
    
    
    32,599
    
    
    
    41,259Inventories, net
    
    
    64,558
    
    
    
    63,983Deferred tax assets
    
    
    
    
    
    
    496Prepaid expenses and other current assets
    
    
    2,557
    
    
    
    1,890Total current assets
    
    
    257,398
    
    
    
    262,420Property and equipment, net
    
    
    21,894
    
    
    
    22,157Other non-current assets, net
    
    
    11,023
    
    
    
    11,851TOTAL ASSETS
    
    $
    290,315
    
    
    $
    296,428LIABILITIES AND EQUITYAccounts payable
    
    $
    11,060
    
    
    $
    7,804Accrued expenses
    
    
    16,129
    
    
    
    18,324Accrued warranty
    
    
    5,833
    
    
    
    7,431Deferred revenue
    
    
    30,110
    
    
    
    28,139Customer deposits
    
    
    14,742
    
    
    
    15,494Total current liabilities
    
    
    77,874
    
    
    
    77,192Other non-current liabilities
    
    
    2,699
    
    
    
    3,487Total liabilities
    
    
    80,573
    
    
    
    80,679COMMITMENTS AND CONTINGENCIES (Note D)EQUITYPreferred stock, $1 per share par value, 10,000,000 shares authorized at March 31, 2009 and December 31, 2008;
no shares issued and outstanding at March 31, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $.01 per share par value, 200,000,000 shares authorized at March 31, 2009 and December 31, 2008;
52,040,670 and 52,039,038 issued and outstanding at March 31, 2009 and 52,065,400 and 52,063,768
shares issued and outstanding at December 31, 2008
    
    
    506
    
    
    
    506Additional paid-in capital
    
    
    660,871
    
    
    
    659,379Treasury stock, 1,632 shares at cost
    
    
    
    
    
    
    Accumulated other comprehensive income (loss)
    
    
    (226
    )
    
    
    202Accumulated deficit
    
    
    (459,492
    )
    
    
    (446,493
    )Total shareholders equity
    
    
    201,659
    
    
    
    213,594Noncontrolling interests
    
    
    8,083
    
    
    
    2,155Total equity
    
    
    209,742
    
    
    
    215,749TOTAL LIABILITIES AND EQUITY
    
    $
    290,315
    
    
    $
    296,428
  3




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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts) 
(unaudited)
 Three Months Ended March 31,2009
    
    
    2008Revenue
    
    $
    30,623
    
    
    $
    38,900Cost of revenue
    
    
    28,084
    
    
    
    30,682Gross profit
    
    
    2,539
    
    
    
    8,218Operating expenses:Research and development
    
    
    5,849
    
    
    
    9,525Selling, general and administrative
    
    
    10,652
    
    
    
    10,668Total operating expenses
    
    
    16,501
    
    
    
    20,193Loss from operations
    
    
    (13,962
    )
    
    
    (11,975
    )Other income (expense):Interest income
    
    
    697
    
    
    
    1,774Interest expense
    
    
    (14
    )
    
    
    (11
    )Other expense, net
    
    
    (256
    )
    
    
    (74
    )Total other income
    
    
    427
    
    
    
    1,689Loss before income tax and noncontrolling interests
    
    
    (13,535
    )
    
    
    (10,286
    )Income tax benefit
    
    
    (100
    )
    
    
    (4,114
    )Net loss
    
    
    (13,435
    )
    
    
    (6,172
    )Noncontrolling interests
    
    
    436
    
    
    
    Net loss attributable to shareholders
    
    $
    (12,999
    )
    
    $
    (6,172
    )Loss per common share  basic and diluted
    
    $
    (0.26
    )
    
    $
    (0.12
    )
  4




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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands) 
(unaudited)
 Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (13,435
    )
    
    $
    (6,172
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    2,422
    
    
    
    1,958Share-based compensation
    
    
    1,490
    
    
    
    1,009Deferred income tax benefit
    
    
    (172
    )
    
    
    (3,454
    )Other noncash items
    
    
    16
    
    
    
    66Changes in operating assets and liabilities:Receivables
    
    
    8,480
    
    
    
    12,558Inventories
    
    
    (783
    )
    
    
    (14,337
    )Other assets
    
    
    (666
    )
    
    
    (977
    )Accounts payable
    
    
    3,278
    
    
    
    (7,465
    )Accrued expenses
    
    
    (2,063
    )
    
    
    (7,344
    )Accrued warranty
    
    
    (1,598
    )
    
    
    (705
    )Deferred revenue
    
    
    2,158
    
    
    
    301Customer deposits
    
    
    (752
    )
    
    
    422Other liabilities
    
    
    
    
    
    
    67Net cash used in operating activities
    
    
    (1,625
    )
    
    
    (24,073
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,170
    )
    
    
    (2,425
    )Purchases of test systems
    
    
    
    
    
    
    (1,531
    )Purchases of short-term investments*
    
    
    (7,499
    )
    
    
    Proceeds from sales of short-term investments
    
    
    4,876
    
    
    
    Other investing activities
    
    
    (922
    )
    
    
    (36
    )Net cash used in investing activities
    
    
    (4,715
    )
    
    
    (3,992
    )Cash flows from financing activities:Payments on notes payable
    
    
    (35
    )
    
    
    (16
    )Proceeds from exercises of stock options and warrants
    
    
    2
    
    
    
    969Proceeds from issuance of CPAC common stock
    
    
    6,364
    
    
    
    Net cash provided by financing activities
    
    
    6,331
    
    
    
    953Effect of exchange rate changes on cash and equivalents
    
    
    671
    
    
    
    1,159Increase (decrease) in cash and equivalents
    
    
    662
    
    
    
    (25,953
    )Cash and equivalents at beginning of period
    
    
    65,967
    
    
    
    191,780Cash and equivalents at end of period
    
    $
    66,629
    
    
    $
    165,827
 
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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
 (In thousands)
(unaudited)
 Shareholders EquityAccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    
    
    (As adjusted, Note B)Common
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Noncontrolling
    
    
    TotalStock
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Interests
    
    
    EquityBalance at December 31, 2007
    
    $
    497
    
    
    $
    652,688
    
    
    $
    (523
    )
    
    $
    (413,005
    )
    
    $
    
    
    
    $
    239,657Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,488
    )
    
    
    (7,102
    )
    
    
    (40,590
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    (401
    )
    
    
    
    
    
    
    
    
    
    
    (401
    )Net unrealized investment gain, net of tax
    
    
    
    
    
    
    
    
    
    
    1,126
    
    
    
    
    
    
    
    
    
    
    
    1,126Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,865
    )Issuance of common stock
    
    
    3
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    9,257
    
    
    
    9,797Exercise of stock options
    
    
    6
    
    
    
    1,415
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,421Exercise of common stock warrants
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Share-based compensation expense
    
    
    
    
    
    
    4,731
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,731Balance at December 31, 2008
    
    
    506
    
    
    
    659,379
    
    
    
    202
    
    
    
    (446,493
    )
    
    
    2,155
    
    
    
    215,749Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,999
    )
    
    
    (436
    )
    
    
    (13,435
    )Other comprehensive loss:Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    
    
    
    
    
    
    
    
    (150
    )Net unrealized investment loss
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    
    
    
    
    
    
    
    
    (278
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,863
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,364
    
    
    
    6,364Exercise of common stock warrants
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Share-based compensation expense
    
    
    
    
    
    
    1,490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,490Balance at March 31, 2009
    
    $
    506
    
    
    $
    660,871
    
    
    $
    (226
    )
    
    $
    (459,492
    )
    
    $
    8,083
    
    
    $
    209,742
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE A  DESCRIPTION OF BUSINESS
  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
    Principles of Consolidation
 Consolidated Financial Statements
 Use of Estimates
  Cash and Equivalents
  7




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Investments
   March 31, 2009Unrealized
    
    
    UnrealizedCost basis
    
    
    gains
    
    
    losses
    
    
    Fair ValueU.S. Government and Agency securities
    
    $
    70,563
    
    
    $
    1,657
    
    
    $
    
    
    
    $
    72,220Corporate bonds
    
    
    18,954
    
    
    
    126
    
    
    
    (245
    )
    
    
    18,835$
    89,517
    
    
    $
    1,783
    
    
    $
    (245
    )
    
    $
    91,055
  March 31, 2009Cost basis
    
    
    Fair ValueDue in one year or less
    
    $
    33,694
    
    
    $
    33,992Due after one year through five years
    
    
    55,823
    
    
    
    57,063$
    89,517
    
    
    $
    91,055
 Fair Value Measurements Effective Date of FASB Statement No. 157
 
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities, quoted prices in
markets that are not active, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
  8




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Accounts Receivable
   Inventories
   March 31,
    
    
    December 31,2009
    
    
    2008Raw materials
    
    $
    47,880
    
    
    $
    47,721Work-in-process
    
    
    7,260
    
    
    
    5,614Finished goods
    
    
    9,418
    
    
    
    10,648$
    64,558
    
    
    $
    63,983
 Warranty Cost
   March 31,
    
    
    March 31,2009
    
    
    2008Balance, beginning of period
    
    $
    7,431
    
    
    $
    7,973Charged to cost of revenue
    
    
    722
    
    
    
    1,925Adjustments related to change in estimate
    
    
    
    
    
    
    345Actual product warranty expenditures
    
    
    (2,320
    )
    
    
    (2,975
    )Balance, end of period
    
    $
    5,833
    
    
    $
    7,268
 Other Comprehensive Income (Loss)
  Revenue Recognition
 Revenue
Recognition Revenue Arrangements with
Multiple Deliverables
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Software
Revenue Recognition Software Revenue Recognition with
Respect to Certain Agreements.
  Share-Based Compensation
 Share-Based
Payment
  10




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Three Months Ended March 31,2009
    
    
    2008Cost of revenue
    
    $
    304
    
    
    $
    213Research and development
    
    
    371
    
    
    
    306Selling, general and administrative
    
    
    815
    
    
    
    490Income tax benefit
    
    
    
    
    
    
    (142
    )$
    1,490
    
    
    $
    867
 Loss Per Share of Common Stock
 Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities
  Three Months Ended March 31,2009
    
    
    2008Loss per share  basic and diluted:Net loss
attributable to common shareholders
    
    $
    (12,999
    )
    
    $
    (6,172
    )Weighted-average common shares outstanding
    
    
    50,592
    
    
    
    50,024Loss per common share
    
    $
    (0.26
    )
    
    $
    (0.12
    )
  Three Months Ended March 31,2009
    
    
    2008Stock options
    
    
    5,677
    
    
    
    5,982Warrants
    
    
    
    
    
    
    35,677
    
    
    
    5,985
 11




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Segment Information
 Disclosures about Segments of an Enterprise and Related Information,
  Three Months Ended March 31,2009
    
    
    2008Product revenue
    
    $
    21,133
    
    
    $
    32,487Service and other revenue
    
    
    9,490
    
    
    
    6,413$
    30,623
    
    
    $
    38,900
  Three Months Ended March 31,2009
    
    
    2008North America
    
    $
    18,239
    
    
    $
    29,875Europe and Middle East
    
    
    6,275
    
    
    
    4,785Asia-Pacific
    
    
    6,109
    
    
    
    4,240$
    30,623
    
    
    $
    38,900
 Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 Business Combinations Accounting and Reporting of Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
  12




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NOTE C  INCOME TAXES
 Interim Financial Reporting Accounting for Income Taxes
  NOTE D  COMMITMENTS AND CONTINGENCIES
  Pending Litigation
   Operating leases
   13




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NOTE E  WARRANTS
  NOTE F  STOCK INCENTIVE PLANS
   Incentive Stock Options
    
    Tomos Restricted StockWeighted-Shares
    
    Number of
    
    Weighted-
    
    
    
    
    
    AverageAvailable
    
    Options
    
    Average
    
    Number of
    
    Grant Datefor Grant
    
    Outstanding
    
    Exercise Price
    
    Shares
    
    Fair ValueBalance at December 31, 2008
    
    
    266
    
    
    
    5,774
    
    
    $
    5.17
    
    
    
    1,472
    
    
    $
    6.02Granted
    
    
    (28
    )
    
    
    20
    
    
    
    2.70
    
    
    
    8
    
    
    
    2.70Cancelled
    
    
    57
    
    
    
    (117
    )
    
    
    6.70
    
    
    
    (34
    )
    
    
    6.10Balance at March 31, 2009
    
    
    295
    
    
    
    5,677
    
    
    $
    5.13
    
    
    
    1,446
    
    
    $
    6.00Exercisable at March 31, 2009
    
    
    
    
    
    
    3,904
    
    
    $
    4.20
  Accounting for Stock Issued to Employees
 14




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Three Months Ended March 31,2009
    
    2008Expected term (years)
    
    
    4.25
    
    
    
    4.25Risk-free interest rate
    
    
    1.9
    %
    
    
    2.7
    %Expected volatility
    
    
    53
    %
    
    
    46
    %Expected dividend
    
    
    0
    %
    
    
    0
    %Expected forfeiture rate
    
    
    5.5
    %
    
    
    5.5
    %Weighted-average fair value at grant date
    
    $
    2.70
    
    
    $
    17.04
 NOTE G  RELATED PARTY TRANSACTIONS
  NOTE H INVESTMENT IN COMPACT PARTICLE ACCELERATION CORPORATION
   NOTE I OTHER EVENTS
    15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read together with our unaudited condensed 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
(the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act). 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 II, Item 1A of this
Quarterly Report on Form 10-Q , 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
    Factors Affecting Our Financial Performance
  Incoming Orders
  16




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Backlog
   Revenue
    
    
    Shipments of the Hi Art system generally occur 9 to 12 months after we receive the
order. Timing of deliveries can be affected by factors out of our control such as
construction delays at customer project sites and customer credit issues. We generally
recognize revenue from a system sale upon customer acceptance, which usually occurs
three to four weeks after delivery. Each installation represents a significant
percentage of our revenue for the quarter in which it occurs.
 17




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
    
    Our geographic mix of customers may impact our average selling prices. Increased
sales of the Hi Art system outside of North America have tended to favorably impact our
gross margins due to higher average selling prices in these markets. We intend to
continue to expand our international selling efforts, although we cannot be certain that
favorable pricing trends will continue nor can we be certain of how foreign currency
exchange rates will impact our financial results in the future.
    
    Our ability to demonstrate the clinical benefits of the Hi Art system compared to
competing systems is a factor in our ability to increase market demand for the Hi Art
system. To compete effectively, we may need to offer additional features that could
require substantial internal resources to develop.
    
    Our focus on sales to for-profit, multi-center customers in the United States may
require us to lower selling prices, as these customers have negotiated 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 Hi Art system is a major capital equipment item that represents a significant
purchase for most of our customers. If the global economy does not improve, our
customers may choose to delay some of their capital spending, and, as a result, our
incoming orders and subsequent revenue recognition may be materially adversely affected.
  Service revenue.
   Cost of revenue
   Component supply and cost.
 18




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##### Table of Contents



Service and support expenses.
 Warranty.
  Operating expenses
 Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.
  Nonoperating expenses
  Interest income
  Income tax expense (benefit)
  19




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##### Table of Contents



Accounting for Income Taxes
 Noncontrolling interests
  Results of Operations
  Three Months Ended March 31,2009
    
    2008Revenue
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenue
    
    
    91.7
    
    
    
    78.9Gross profit
    
    
    8.3
    
    
    
    21.1Operating expenses:Research and development
    
    
    19.1
    
    
    
    24.5Selling, general and administrative
    
    
    34.8
    
    
    
    27.4Total operating expenses
    
    
    53.9
    
    
    
    51.9Loss from operations
    
    
    (45.6
    )
    
    
    (30.8
    )Other income
    
    
    1.4
    
    
    
    4.4Loss before income tax and noncontrolling interests
    
    
    (44.2
    )
    
    
    (26.4
    )Income tax benefit
    
    
    (0.3
    )
    
    
    (10.6
    )Net loss
    
    
    (43.9
    )
    
    
    (15.8
    )Noncontrolling interests
    
    
    1.4
    
    
    
    0.0Net loss attributable to shareholders
    
    
    (42.5
    )%
    
    
    (15.8
    )%
 20




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##### Table of Contents



Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
 Revenue
  Three Months Ended March 31,2009
    
    2008Product revenue
    
    $
    21,133
    
    
    
    69
    %
    
    $
    32,487
    
    
    
    84
    %Service and other revenue
    
    
    9,490
    
    
    
    31
    
    
    
    6,413
    
    
    
    16$
    30,623
    
    
    
    100
    %
    
    $
    38,900
    
    
    
    100
    %
  Three Months Ended March 31,2009
    
    2008North America
    
    $
    18,239
    
    
    
    60
    %
    
    $
    29,875
    
    
    
    77
    %Europe and Middle East
    
    
    6,275
    
    
    
    20
    
    
    
    4,785
    
    
    
    12Asia-Pacific
    
    
    6,109
    
    
    
    20
    
    
    
    4,240
    
    
    
    11$
    30,623
    
    
    
    100
    %
    
    $
    38,900
    
    
    
    100
    %
   Cost of revenue
    21




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##### Table of Contents



Research and development expenses
  Three Months Ended March 31,2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeHi Art R&D
    
    $
    5,581
    
    
    $
    7,825
    
    
    $
    (2,244
    )
    
    
    (29
    )%Proton Project / CPAC R&D
    
    
    268
    
    
    
    1,700
    
    
    
    (1,432
    )
    
    
    (84
    )$
    5,849
    
    
    $
    9,525
    
    
    $
    (3,676
    )
    
    
    (39
    )%
  Selling, general and administrative expenses
  Other income (expense)
  Income tax expense
  Liquidity and Capital Resources
  Financial Condition
  22




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##### Table of Contents



March 31, 2009Cost basis
    
    
    Unrealized gains
    
    
    Unrealized losses
    
    
    Fair ValueU.S. Government and Agency securities
    
    $
    70,563
    
    
    $
    1,657
    
    
    $
    
    
    
    $
    72,220Corporate bonds
    
    
    18,954
    
    
    
    126
    
    
    
    (245
    )
    
    
    18,835$
    89,517
    
    
    $
    1,783
    
    
    $
    (245
    )
    
    $
    91,055
  Cash Flows
 Cash flows from operating activities
  Cash flows from investing activities
  Cash flows from financing activities
   Loans and Available Borrowings
  23




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##### Table of Contents



Contractual Obligations and Commitments
  Pending Litigation
   Operating Capital and Capital Expenditure Requirements
  
    
    Revenue generated from sales of the Hi Art system and service plans;
    
    Costs associated with our sales and marketing initiatives and manufacturing activities;
    
    The performance of the Hi Art systems operating in the field and cost of maintaining
those systems;
    
    The level of investment needed in our service and support infrastructure;
    
    Costs of our research and development activities; and
    
    Effects of competing technological and market developments.
  Off-Balance Sheet Arrangements
  24




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##### Table of Contents



Critical Accounting Policies and Estimates
   Loss Per Share of Common Stock
 Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities
 Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 Business Combinations Accounting and Reporting of Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133
  25




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Material Weakness in Internal Control Over Financial Reporting
    26




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  27




---



##### Table of Contents



Part II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Our sales and receivables may be adversely impacted if current economic conditions in the United
States or elsewhere persist or worsen and credit becomes more difficult to obtain on reasonable
terms.
  If our backlog, which we believe is an important measure of future revenue, declines further, our
future financial performance will be adversely affected.
  Our success will depend on our ability to attract and retain qualified personnel, while also
effectively managing employee costs.
  28




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a) Sales of Unregistered Securities
  (b) Use of Proceeds from Public Offering of Common Stock
    Working capital
    
    $
    51.7Purchases of property and equipment
    
    
    15.2Purchases of test systems
    
    
    5.7Acquisition of Chengdu Twin Peak Accelerator Technology Inc.
    
    
    1.2Repayment of debt
    
    
    0.2Remaining net proceeds in cash, equivalents and short-term investments
    
    
    110.7Net proceeds from initial public offering
    
    $
    184.7
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  29




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##### Table of Contents



Item 6. Exhibits
 Exhibit Number
    
    Description3.1 (1)
    
    Amended and Restated Articles of Incorporation of the Company3.2 (1)
    
    Amended and Restated Bylaws of the Company10.1 (2)
    
    Manufacture and Supply Agreement dated January 13, 2009 between the Company and Siemens AG
Healthcare Sector10.2 (3)
    
    Employment Agreement dated November 5, 2008 between the Company and Brenda S. Furlow10.3 (3)
    
    Loan Agreement dated December 1, 2007 between the Company and M&I Marshall & Ilsley Bank10.4 (3)
    
    Promissory Note dated December 1, 2008 by the Company in favor of M&I Marshall & Ilsley Bank10.5 (3)
    
    First Amendment to Employment Agreement dated March 12, 2009 between the Company and Stephen C.
Hathaway10.6 (4)
    
    Amendment One to Manufacture and Supply Agreement dated April 10, 2009, effective as of April 1,
2009, between the Company and Siemens AG Healthcare Sector10.7 (5)
    
    Agreement dated April 7, 2009, among the Company, Avalon Capital Group, Inc., Avalon Portfolio,
LLC and Avalon Technology, LLC10.8 (6)
    
    Magnetron Subscription Agreement with e2v Inc. and e2v Technologies (UK) Limited dated April 24,
2009 and effective May 1, 200931.1*
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    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 quarterly report on
Form 10-Q filed with the Securities and Exchange Commission on
November 7, 2008.(2)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on January 16,
2009.(3)
    
    Previously filed as an exhibit to the Companys annual report on Form
10-K filed with the Securities and Exchange Commission on March 12,
2009.(4)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on April 13,
2009.(5)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on April 8,
2009.(6)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on April 29,
2009.*
    
    Filed herewith.
    
    Confidential treatment has been requested for portions of this
exhibit. These portions have been omitted from the referenced Form 8-K
or Form 10-K, as applicable, and submitted separately to the
Securities and Exchange Commission. 30




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##### Table of Contents



SIGNATURES
   TOMOTHERAPY INCORPORATED/s/ Frederick A. Robertson

Frederick A. RobertsonChief Executive Officer and PresidentTOMOTHERAPY INCORPORATED/s/ Stephen C. Hathaway

Stephen C. HathawayChief Financial Officer and Treasurer
 31




---



##### Table of Contents



Exhibit Number
    
    Description3.1 (1)
    
    Amended and Restated Articles of Incorporation of the Company3.2 (1)
    
    Amended and Restated Bylaws of the Company10.1 (2)
    
    Manufacture and Supply Agreement dated January 13, 2009 between the Company and Siemens AG
Healthcare Sector10.2 (3)
    
    Employment Agreement dated November 5, 2008 between the Company and Brenda S. Furlow10.3 (3)
    
    Loan Agreement dated December 1, 2007 between the Company and M&I Marshall & Ilsley Bank10.4 (3)
    
    Promissory Note dated December 1, 2008 by the Company in favor of M&I Marshall & Ilsley Bank10.5 (3)
    
    First Amendment to Employment Agreement dated March 12, 2009 between the Company and Stephen C.
Hathaway10.6 (4)
    
    Amendment One to Manufacture and Supply Agreement dated April 10, 2009, effective as of April 1,
2009, between the Company and Siemens AG Healthcare Sector10.7 (5)
    
    Agreement dated April 7, 2009, among the Company, Avalon Capital Group, Inc., Avalon Portfolio,
LLC and Avalon Technology, LLC10.8 (6)
    
    Magnetron Subscription Agreement with e2v Inc. and e2v Technologies (UK) Limited dated April 24,
2009 and effective May 1, 200931.1*
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    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 quarterly report on
Form 10-Q filed with the Securities and Exchange Commission on
November 7, 2008.(2)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on January 16,
2009.(3)
    
    Previously filed as an exhibit to the Companys annual report on Form
10-K filed with the Securities and Exchange Commission on March 12,
2009.(4)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on April 13,
2009.(5)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on April 8,
2009.(6)
    
    Previously filed as an exhibit to the Companys current report on Form
8-K filed with the Securities and Exchange Commission on April 29,
2009.*
    
    Filed herewith.
    
    Confidential treatment has been requested for portions of this
exhibit. These portions have been omitted from the referenced Form 8-K
or Form 10-K, as applicable, and submitted separately to the
Securities and Exchange Commission. 32