##### 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, 2011
 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
(State or other jurisdiction of incorporation or organization)
    
    39-1914727
(I.R.S. Employer Identification No.)1240 Deming Way, Madison, Wisconsin
(Address of principal executive offices)
    
    53717
(Zip Code)
 (608) 824-2800
 Not Applicable
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




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##### 



TomoTherapy Incorporated and Subsidiaries
Index
 PagePart I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Condensed Consolidated Statements of Equity
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    22Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27EXHIBIT INDEX
    
    
    28Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 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 31,2011
    
    
    2010ASSETSCash and cash equivalents (CPAC balances of $68 and $333)
    
    $
    137,362
    
    
    $
    123,905Short-term investments
    
    
    
    
    
    
    28,150Receivables, net of allowances of $827 and $340 (CPAC balances of $0 and $244)
    
    
    29,735
    
    
    
    32,850Inventories, net
    
    
    59,094
    
    
    
    49,270Prepaid expenses and other current assets (CPAC balances of $8 and $74)
    
    
    1,682
    
    
    
    1,816Total current assets
    
    
    227,873
    
    
    
    235,991Property and equipment, net (CPAC balances of $2,752 and $2,941)
    
    
    21,065
    
    
    
    22,026Other non-current assets, net (CPAC balances of $103 and $106)
    
    
    13,326
    
    
    
    11,545TOTAL ASSETS
    
    $
    262,264
    
    
    $
    269,562LIABILITIES AND EQUITYAccounts payable (CPAC balances of $121 and $103)
    
    $
    21,498
    
    
    $
    13,405Notes payable (CPAC balances of $754 and $530)
    
    
    754
    
    
    
    530Accrued expenses (CPAC balances of $601 and $647)
    
    
    27,220
    
    
    
    30,388Accrued warranty
    
    
    4,354
    
    
    
    5,045Deferred revenue
    
    
    32,441
    
    
    
    34,033Customer deposits
    
    
    14,154
    
    
    
    17,483Total current liabilities
    
    
    100,421
    
    
    
    100,884Other non-current liabilities (CPAC balances of $15 and $16)
    
    
    2,049
    
    
    
    2,477TOTAL LIABILITIES
    
    
    102,470
    
    
    
    103,361Preferred stock, authorized 10,000,000 shares of $1 par value; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, authorized 200,000,000 shares of $0.01 par value; 56,320,391 and 56,210,249 shares
issued; 56,186,266 and 56,076,124 shares outstanding
    
    
    532
    
    
    
    531Additional paid-in capital
    
    
    679,135
    
    
    
    677,106Treasury stock, at cost; 134,125 and 134,125 shares
    
    
    (454
    )
    
    
    (454
    )Accumulated other comprehensive loss
    
    
    (759
    )
    
    
    (803
    )Accumulated deficit
    
    
    (520,952
    )
    
    
    (513,787
    )Total shareholders equity
    
    
    157,502
    
    
    
    162,593Noncontrolling interests
    
    
    2,292
    
    
    
    3,608TOTAL EQUITY
    
    
    159,794
    
    
    
    166,201TOTAL LIABILITIES AND EQUITY
    
    $
    262,264
    
    
    $
    269,562
   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 31,2011
    
    
    2010Revenue:Product
    
    $
    31,677
    
    
    $
    29,229Service and other
    
    
    15,496
    
    
    
    12,851Total revenue
    
    
    47,173
    
    
    
    42,080Cost of revenue:Product
    
    
    14,239
    
    
    
    12,785Service and other
    
    
    20,125
    
    
    
    16,691Total cost of revenue
    
    
    34,364
    
    
    
    29,476Gross profit
    
    
    12,809
    
    
    
    12,604Operating expenses:Research and development
    
    
    7,441
    
    
    
    7,540Selling, general and administrative
    
    
    15,032
    
    
    
    11,034Total operating expenses
    
    
    22,473
    
    
    
    18,574Loss from operations
    
    
    (9,664
    )
    
    
    (5,970
    )Other income (expense):Interest income
    
    
    215
    
    
    
    531Interest expense
    
    
    (29
    )
    
    
    (11
    )Other income (expense), net
    
    
    1,741
    
    
    
    (448
    )Total other income
    
    
    1,927
    
    
    
    72Loss before income tax
    
    
    (7,737
    )
    
    
    (5,898
    )Income tax expense (benefit)
    
    
    753
    
    
    
    (44
    )Net loss
    
    
    (8,490
    )
    
    
    (5,854
    )Noncontrolling interests
    
    
    1,325
    
    
    
    1,176Net loss attributable to shareholders
    
    $
    (7,165
    )
    
    $
    (4,678
    )Weighted-average common shares outstanding 
basic and diluted
    
    
    53,125
    
    
    
    51,566Loss per common share  basic and diluted
    
    $
    (0.13
    )
    
    $
    (0.09
    )
   4




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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Three Months Ended March 31,2011
    
    
    2010Cash flows from operating activities:Net loss
    
    $
    (8,490
    )
    
    $
    (5,854
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    2,272
    
    
    
    2,503Share-based compensation
    
    
    1,611
    
    
    
    1,819Deferred income tax expense (benefit)
    
    
    690
    
    
    
    (72
    )Other noncash items
    
    
    (467
    )
    
    
    2Changes in operating assets and liabilities:Receivables, net
    
    
    3,040
    
    
    
    (181
    )Inventories, net
    
    
    (11,215
    )
    
    
    (6,136
    )Other assets
    
    
    142
    
    
    
    (1,109
    )Accounts payable
    
    
    8,066
    
    
    
    5,548Accrued expenses
    
    
    (3,826
    )
    
    
    (2,348
    )Accrued warranty
    
    
    (691
    )
    
    
    (594
    )Deferred revenue
    
    
    (2,008
    )
    
    
    (1,950
    )Customer deposits
    
    
    (3,328
    )
    
    
    (2,699
    )Net cash used in operating activities
    
    
    (14,204
    )
    
    
    (11,071
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (598
    )
    
    
    (1,239
    )Proceeds from sales and maturities of short-term investments
    
    
    28,333
    
    
    
    21,250Other investing activities
    
    
    (180
    )
    
    
    (241
    )Net cash provided by (used in) investing activities
    
    
    27,555
    
    
    
    19,770Cash flows from financing activities:Payments on notes payable
    
    
    (255
    )
    
    
    (34
    )Proceeds from exercises of stock options and warrants
    
    
    428
    
    
    
    573Proceeds from issuance of CPAC notes payable
    
    
    224
    
    
    
    Proceeds from issuance of CPAC common stock
    
    
    
    
    
    
    6,526Net cash provided by financing activities
    
    
    397
    
    
    
    7,065Effect of exchange rate changes on cash and cash equivalents
    
    
    (291
    )
    
    
    199Increase (decrease) in cash and cash equivalents
    
    
    13,457
    
    
    
    15,963Cash and cash equivalents at beginning of year
    
    
    123,905
    
    
    
    76,108Cash and cash equivalents at end of year
    
    $
    137,362
    
    
    $
    92,071
   5




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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(unaudited)
 Shareholders EquityAccumulatedOtherAdditional Paid-
    
    
    
    
    
    
    Comprehensive
    
    
    Accumulated
    
    
    NoncontrollingCommon Stock
    
    
    in Capital
    
    
    Treasury Stock
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Interests
    
    
    Total EquityBalance at December 31, 2009
    
    $
    515
    
    
    $
    667,177
    
    
    $
    (137
    )
    
    $
    (268
    )
    
    $
    (483,863
    )
    
    $
    3,911
    
    
    $
    187,335Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,678
    )
    
    
    (1,176
    )
    
    
    (5,854
    )Other comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (307
    )
    
    
    
    
    
    
    
    
    
    
    (307
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,161
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,526
    
    
    
    6,526Exercise of stock options
    
    
    2
    
    
    
    571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    573Share-based compensation expense
    
    
    
    
    
    
    1,819
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,819Balance at March 31, 2010
    
    $
    517
    
    
    $
    669,567
    
    
    $
    (137
    )
    
    $
    (575
    )
    
    $
    (488,541
    )
    
    $
    9,261
    
    
    $
    190,092Balance at December 31, 2010
    
    $
    531
    
    
    $
    677,106
    
    
    $
    (454
    )
    
    $
    (803
    )
    
    $
    (513,787
    )
    
    $
    3,608
    
    
    $
    166,201Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,165
    )
    
    
    (1,325
    )
    
    
    (8,490
    )Other comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    44Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,446
    )Exercise of stock options
    
    
    1
    
    
    
    418
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    419Issuance of stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Share-based compensation expense
    
    
    
    
    
    
    1,611
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,611Balance at March 31, 2011
    
    $
    532
    
    
    $
    679,135
    
    
    $
    (454
    )
    
    $
    (759
    )
    
    $
    (520,952
    )
    
    $
    2,292
    
    
    $
    159,794
   6




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TOMOTHERAPY INCORPORATED AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE A  BACKGROUND AND BASIS OF PRESENTATION
 Organization
  Principles of Consolidation
  Basis of Presentation
  Use of Estimates
  Fair Value of Financial Instruments
   7




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NOTE B  SUPPLEMENTAL FINANCIAL INFORMATION
 Short-term Investments
  December 31, 2010Cost basis
    
    
    Unrealized gains
    
    
    Unrealized losses
    
    
    Fair valueU.S. government and U.S. governmental agency securities
    
    $
    20,049
    
    
    $
    429
    
    
    $
    
    
    
    $
    20,478Corporate bonds
    
    
    7,568
    
    
    
    104
    
    
    
    
    
    
    
    7,672$
    27,617
    
    
    $
    533
    
    
    $
    
    
    
    $
    28,150
  December 31, 2010Cost basis
    
    
    Fair valueDue in one year or less
    
    $
    18,658
    
    
    $
    18,884Due after one year through five years
    
    
    8,959
    
    
    
    9,266$
    27,617
    
    
    $
    28,150
  
    
    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.
  Inventories, net
  March 31,
    
    
    December 31,2011
    
    
    2010Raw materials
    
    $
    46,224
    
    
    $
    38,479Work-in-process
    
    
    4,946
    
    
    
    4,004Finished goods
    
    
    7,924
    
    
    
    6,787$
    59,094
    
    
    $
    49,270
  8




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Accrued Warranty
   Three Months Ended March 31,2011
    
    
    2010Balance, beginning of period
    
    $
    5,045
    
    
    $
    4,173Charged to cost of revenue
    
    
    1,550
    
    
    
    1,260Adjustments related to change in estimate
    
    
    (970
    )
    
    
    (373
    )Actual product warranty expenditures
    
    
    (1,271
    )
    
    
    (1,481
    )Balance, end of period
    
    $
    4,354
    
    
    $
    3,579
 Deferred Revenue
    Other Comprehensive Income (Loss)
  NOTE C  NET LOSS PER COMMON SHARE
    9




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Three Months Ended March 31,2011
    
    
    2010Stock options
    
    
    4,127
    
    
    
    5,028Restricted stock
    
    
    2,968
    
    
    
    2,4367,095
    
    
    
    7,464
 NOTE D  SEGMENT INFORMATION
   Three Months Ended March 31,2011
    
    
    2010Americas (1)
    
    $
    26,908
    
    
    $
    13,333Europe and Middle East
    
    
    13,924
    
    
    
    19,563Asia-Pacific
    
    
    6,341
    
    
    
    9,184$
    47,173
    
    
    $
    42,080
 (1)
    
    Americas region contains revenue from the United States of $23.7 million and $12.7
million for the three months ended March 31, 2011 and 2010, respectively. NOTE E  INCOME TAXES
   NOTE F  COMMITMENTS AND CONTINGENCIES
  Securities Litigation
 et al.
  10




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##### Table of Contents



Stockholder Derivative Actions
     Litigation Related to the Accuray Merger
 Storch v. TomoTherapy Incorporated, et al. Janz v.
TomoTherapy Incorporated, et al. Haselwander v.
TomoTherapy Incorporated, et al. Reiter v.
TomoTherapy Incorporated, et al. Shuen v.
TomoTherapy Incorporated, et al. Reiter Shuen
  11




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##### Table of Contents



In re TomoTherapy
Incorporated Shareholder Litigation
  Reserve for Contingency
  Operating Leases
   NOTE G  STOCK INCENTIVE PLANS
    12




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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, 2010
    
    
    2,157
    
    
    
    4,315
    
    
    
    5.04
    
    
    
    2,998
    
    
    
    3.89Authorized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    (136
    )
    
    
    3.08
    
    
    
    (3
    )
    
    
    2.95Cancelled
    
    
    32
    
    
    
    (52
    )
    
    
    7.70
    
    
    
    (26
    )
    
    
    3.76Balance at March 31, 2011
    
    
    2,189
    
    
    
    4,127
    
    
    $
    5.07
    
    
    
    2,969
    
    
    $
    3.89Exercisable at March 31, 2011
    
    
    
    
    
    
    3,897
    
    
    $
    4.94
    
    
    
    
    
    
    $
    
  NOTE H  INVESTMENT IN COMPACT PARTICLE ACCELERATION CORPORATION
      NOTE I  PENDING ACQUISITION
   13




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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 audited consolidated financial
statements and the notes to those financial statements, which are included in our Annual Report on
Form 10-K, and our unaudited condensed consolidated financial statements and the notes thereto
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 and Section 21E of 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, those in the section entitled Risk
Factors under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31,
2010 and those in the section entitled Risk Factors under Part II, Item 1A of this report which
may cause our actual results, performance or achievements to differ materially from any future
results, performance or achievements expressed in 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
       14




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Factors Affecting Our Financial Performance
  Incoming orders
    Backlog
   Revenue
 Product revenue
    15




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##### Table of Contents




    
    On average, the Systems are shipped to customers within 12 months
after we receive the order. However, individual orders may take longer
than 12 months to ship. Timing of deliveries can be affected by
factors outside 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 title transfer of the System to the certified
distributor, as the Companys only remaining obligation is its
post-installation warranty services to the 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. We intend to continue to expand our
international selling efforts, although we cannot be
certain about what, if any, impact this will have on
pricing. As of March 31, 2011, we did not have a hedging
program in place to offset foreign exchange risk and,
therefore, cannot be certain how foreign currency exchange
rates will impact our financial results in the future.
    
    Our ability to demonstrate the clinical benefits of the
Systems compared to competing systems is an important
factor in our ability to increase market demand for the
Systems. To compete effectively, we may need to offer
additional features that could require substantial
additional resources to develop.
    
    Our focus on sales to group purchasing organizations (GPOs)
and multi-center customers may result in lower selling
prices, as these customers tend to negotiate quantity
discounts. 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 Systems are major capital equipment items that
represent a significant purchase for most of our customers.
While we believe macroeconomic conditions are improving,
our customers remain cautious and, as a result, 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 Systems. These factors may have a material
adverse effect on our incoming orders and subsequent
revenue recognition.
  Service revenue
   Cost of revenue
   16




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##### Table of Contents




    
    Service and support expenses.We have certain individual
service contracts that produce negative gross profit
margins for which we have recorded a reserve for the
related estimated future losses. We anticipate the number
of contracts producing negative margins will decline as we
further our efforts to reduce the overall average direct
service costs per installed System. We expect to improve
service contract margins by leveraging our service
infrastructure costs over a larger installed base,
implementing remote diagnostic functionalities, outsourcing
certain tasks when cost-effective and feasible, introducing
component design changes aimed at reducing costs,
increasing longevity and improving serviceability of our
components, increasing the price for some of our older
annual service contracts, and training our personnel to
improve their problem-solving capabilities. Additionally,
we invested $2.4 million in our Fast Track program during
2010. This program targeted selected systems in the field
for upgrades of certain technology. While it increased our
cost of revenue in 2010, this program is expected to reduce
the cost to service the targeted systems in future periods.
We believe that achieving success in 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 replacement
rates. We are continuing efforts 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 Systems in order to reduce
costs. We believe that achieving these goals will result
in reduced manufacturing, warranty and service support
costs in the long term.
  Research and development expenses
   Selling, general and administrative expenses
   Other income (expense)
  Interest income
  Income tax expense (benefit)
    17




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##### Table of Contents



Noncontrolling interests
  Results of Operations
  Three Months Ended March 31,2011
    
    
    2010Revenue:Product
    
    
    67.2
    %
    
    
    69.5
    %Service and other
    
    
    32.8
    
    
    
    30.5Total revenue
    
    
    100.0
    
    
    
    100.0Cost of revenue:Product
    
    
    30.2
    
    
    
    30.4Service and other
    
    
    42.6
    
    
    
    39.6Total cost of revenue
    
    
    72.8
    
    
    
    70.0Gross profit
    
    
    27.2
    
    
    
    30.0Operating expenses:Research and development
    
    
    15.8
    
    
    
    17.9Selling, general and administrative
    
    
    31.8
    
    
    
    26.2Total operating expenses
    
    
    47.6
    
    
    
    44.1Loss from operations
    
    
    (20.4
    )
    
    
    (14.1
    )Other income
    
    
    4.1
    
    
    
    0.2Loss before income tax
    
    
    (16.3
    )
    
    
    (13.9
    )Income tax expense (benefit)
    
    
    1.6
    
    
    
    (0.1
    )Net loss
    
    
    (17.9)
    %
    
    
    (13.8)
    %
 Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Revenue
  Three Months Ended March 31,2011
    
    
    2010Product revenue
    
    $
    31,677
    
    
    
    67.2
    %
    
    $
    29,229
    
    
    
    69.5
    %Service and other revenue
    
    
    15,496
    
    
    
    32.8
    
    
    
    12,851
    
    
    
    30.5$
    47,173
    
    
    
    100.0
    %
    
    $
    42,080
    
    
    
    100.0
    %
  Three Months Ended March 31,2011
    
    
    2010Americas (1)
    
    $
    26,908
    
    
    
    57.0
    %
    
    $
    13,333
    
    
    
    31.7
    %Europe and Middle East
    
    
    13,924
    
    
    
    29.5
    
    
    
    19,563
    
    
    
    46.5Asia-Pacific
    
    
    6,341
    
    
    
    13.5
    
    
    
    9,184
    
    
    
    21.8$
    47,173
    
    
    
    100.0
    %
    
    $
    42,080
    
    
    
    100.0
    %
 (1)
    
    Americas region contains revenue from the United States of $23.7 million and $12.7
million for the three months ended March 31, 2011 and 2010, respectively.  18




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##### Table of Contents



Cost of revenue
    Research and development expenses
  Three Months Ended March 31,2011
    
    
    2010
    
    
    $ Change
    
    
    % ChangeSystem R&D
    
    $
    6,346
    
    
    $
    6,643
    
    
    $
    (297
    )
    
    
    (4.5)
    %Proton Project / CPAC R&D
    
    
    1,095
    
    
    
    897
    
    
    
    198
    
    
    
    22.1$
    7,441
    
    
    $
    7,540
    
    
    $
    (99
    )
    
    
    (1.3)
    %
  Selling, general and administrative expenses
   19




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##### Table of Contents



Other income (expense)
  Income tax expense (benefit)
  Liquidity and Capital Resources
  Financial Condition
        20




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##### Table of Contents



Loans and Available Borrowings
  Contractual Obligations and Commitments
  Pending Litigation and Reserve for Contingency
  Operating Capital and Capital Expenditure Requirements
  
    
    revenue generated from sales of Systems and service contracts;
    
    the performance of 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
  Critical Accounting Policies and Estimates
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
   21




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##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
   22




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##### Table of Contents



Part II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  Risks Related to the Merger
  The announcement and pending nature of our agreement to be acquired by Accuray could have a
material adverse effect on our business, financial condition and results of operations.
  The Merger will not be completed if all of the conditions to the Merger are not satisfied or
waived.
  The failure to complete the Merger could have a material adverse effect on our business, financial
condition and results of operations.
   23




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##### Table of Contents



The outcome of legal proceedings that have been instituted or may be instituted in the future
against us in connection with the Merger could have a material adverse effect on our business,
financial condition and results of operations.
   24




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##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 (a) Recent Sales of Unregistered Securities
  (b) Use of Proceeds from Public Offering of Common Stock
    Working capital
    
    $
    89.3Purchases of property and equipment
    
    
    22.3Purchases of test systems
    
    
    5.7Purchases of intangible assets
    
    
    4.9Acquisition of Chengdu Twin Peak Accelerator Technology Inc.
    
    
    2.0Repayment of debt
    
    
    0.7Total net proceeds used
    
    $
    124.9
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
   25




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##### Table of Contents



Item 6.
    
    Exhibits
 Exhibit Number

    
    Description2.1
    
    
    Agreement and Plan of Merger, dated as of March 6, 2011, among Accuray Incorporated, Jaguar
Acquisition, Inc. and the Company  Incorporated by reference to Exhibit 2.1 to the Companys
Current Report on Form 8-K filed with the SEC on March 7, 2011, File No. 001-33452.3.1
    
    
    Amended and Restated Articles of Incorporation of the Company  Incorporated by reference to the
Companys Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
November 7, 2008 (File No. 001-33452).3.2
    *
    
    Amended and Restated Bylaws of the Company  Incorporated by reference to the Companys
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7,
2008 (File No. 001-33452).10.1
    +
    
    Second Amendment to Employment Agreement, dated as of March 6, 2011, by and between the Company
and Brenda S. Furlow  Incorporated by reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K filed with the SEC on March 7, 2011, File No. 001-33452.31.1
    *
    
    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
 
 *
    
    Filed herewith.+
    
    Executive compensation plan or arrangement.  26




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##### Table of Contents



SIGNATURES
  TOMOTHERAPY INCORPORATEDDate: May 10, 2011
    By:
    /s/ Frederick A. RobertsonFrederick A. RobertsonChief Executive Officer and
President
(Duly authorized officer and principal
executive officer)Date: May 10, 2011
    By:
    /s/ Thomas E. PowellThomas E. PowellChief Financial Officer and Treasurer
(Duly authorized officer and principal
financial officer)  27




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number

    
    Description2.1
    
    
    Agreement and Plan of Merger, dated as of March 6, 2011, among Accuray Incorporated, Jaguar
Acquisition, Inc. and the Company  Incorporated by reference to Exhibit 2.1 to the Companys
Current Report on Form 8-K filed with the SEC on March 7, 2011, File No. 001-33452.3.1
    
    
    Amended and Restated Articles of Incorporation of the Company  Incorporated by reference to the
Companys Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
November 7, 2008 (File No. 001-33452).3.2
    *
    
    Amended and Restated Bylaws of the Company  Incorporated by reference to the Companys
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7,
2008 (File No. 001-33452).10.1
    +
    
    Second Amendment to Employment Agreement, dated as of March 6, 2011, by and between the Company
and Brenda S. Furlow  Incorporated by reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K filed with the SEC on March 7, 2011, File No. 001-33452.31.1
    *
    
    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
 
 *
    
    Filed herewith.+
    
    Executive compensation plan or arrangement.  28