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 ~~September~~March 3031, ~~2010~~2011


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33452

TomoTherapy Incorporated

(Exact name of registrant as specified in its charter)


Wisconsin (State 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
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of common stock outstanding as of ~~October~~April 29, ~~2010~~2011: 5556,~~911~~188,~~666~~986 shares.

TomoTherapy Incorporated and Subsidiaries
Index

	Page
Part I. FINANCIAL INFORMATION		3
Item 1. Financial Statements (unaudited)		3
Condensed Consolidated Balance Sheets		3
Condensed Consolidated Statements of Operations		4
Condensed Consolidated Statements of Cash Flows		5
Condensed Consolidated Statements of Equity		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures about Market Risk		2321
Item 4. Controls and Procedures		2322
Part II. OTHER INFORMATION		24
Item 1. Legal Proceedings		2423
Item 1A. Risk Factors		2423
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 6. Exhibits		2526
SIGNATURES		2627
EXHIBIT INDEX		2728
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I. FINANCIAL INFORMATION


Item 1.		Financial Statements

TOMOTHERAPY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share ~~data~~amounts) (unaudited)

	September 30,			December 31,
	March 31,			December 31,
	2010			2009
	2011			2010
ASSETS
Cash and cash equivalents (CPAC balances of $2,499 and $1,590)	$	110,424		$	76,108
Cash and cash equivalents (CPAC balances of $68 and $333)	$	137,362		$	123,905
Short-term investments		~~29,612~~—			7828,~~225~~150
Receivables, net of allowances of $1,216 and $737		34,047			33,559
Receivables, net of allowances of $827 and $340 (CPAC balances of $0 and $244)		29,735			32,850
Inventories, net		5359,~~014~~094			4749,~~669~~270
Prepaid expenses and other current assets (CPAC balances of $312 and $494)		3,352			3,633
Prepaid expenses and other current assets (CPAC balances of $8 and $74)		1,682			1,816
Total current assets		~~230~~227,~~449~~873			~~239~~235,~~194~~991
Property and equipment, net (CPAC balances of $2,008 and $555)		21,305			18,628
Property and equipment, net (CPAC balances of $2,752 and $2,941)		21,065			22,026
Other non-current assets, net (CPAC balances of $109 and $30)		11,168			12,429
Other non-current assets, net (CPAC balances of $103 and $106)		13,326			11,545
TOTAL ASSETS	$	262,~~922~~264		$	~~270~~269,~~251~~562
LIABILITIES AND EQUITY
Accounts payable (CPAC balances of $450 and $24)	$	14,095		$	6,269
Accounts payable (CPAC balances of $121 and $103)	$	21,498		$	13,405
Accrued expenses (CPAC balances of $326 and $20)		24,056			19,588
Notes payable (CPAC balances of $754 and $530)		754			530
Accrued warranty		4,115			4,173
Accrued expenses (CPAC balances of $601 and $647)		27,220			30,388
Deferred revenue		30,877			34,145
Accrued warranty		4,354			5,045
Customer deposits		14,801			13,266
Deferred revenue		32,441			34,033
Total current liabilities		87,944			77,441
Customer deposits		14,154			17,483
Other non-current liabilities (CPAC balances of $18 and $18)		3,213			5,475
Total current liabilities		100,421			100,884
TOTAL LIABILITIES		91,157			82,916
Other non-current liabilities (CPAC balances of $15 and $16)		2,049			2,477
Preferred stock: authorized 10,000,000 shares of $1 par value; no shares issued and outstanding		—			—
TOTAL LIABILITIES		102,470			103,361
Common stock: authorized 200,000,000 shares of $0.01 par value; 55,961,847 and 53,980,728 shares issued; 55,829,706 and 53,938,955 shares outstanding		528			515
Preferred stock, authorized 10,000,000 shares of $1 par value; no shares issued and outstanding		—			—
Additional paid-in capital		674,182			667,177
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			531
Treasury stock, at cost: 132,141 and 41,773 shares		(447	)		(137	)
Additional paid-in capital		679,135			677,106
Accumulated other comprehensive loss		(904	)		(268	)
Treasury stock, at cost; 134,125 and 134,125 shares		(454	)		(454	)
Accumulated deficit		(507,400	)		(483,863	)
Accumulated other comprehensive loss		(759	)		(803	)
Total shareholders’ equity		165,959			183,424
Accumulated deficit		(520,952	)		(513,787	)
Noncontrolling interests		5,806			3,911
Total shareholders’ equity		157,502			162,593
TOTAL EQUITY		171,765			187,335
Noncontrolling interests		2,292			3,608
TOTAL LIABILITIES AND EQUITY	$	262,922		$	270,251
TOTAL EQUITY		159,794			166,201
TOTAL LIABILITIES AND EQUITY	$	262,264		$	269,562

The accompanying notes are an integral part of these condensed consolidated financial statements.

TOMOTHERAPY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share ~~data~~amounts) (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2010			2009			2010			2009
	2011			2010
Revenue:
Product	$	2931,~~759~~677		$	2429,~~252~~229		$	~~93,230~~		$	~~75,937~~
Service and other		1315,~~823~~496			1012,~~126~~851			~~40,062~~			~~30,144~~
Total revenue		4347,~~582~~173			3442,~~378~~080			~~133,292~~			~~106,081~~
Cost of revenue:
Product		1614,~~233~~239			1312,~~782~~785			~~46,372~~			~~39,779~~
Service and other		20,~~339~~125			1716,~~038~~691			~~54,848~~			~~51,690~~
Total cost of revenue		3634,~~572~~364			3029,~~820~~476			~~101,220~~			~~91,469~~
Gross profit		712,~~010~~809			312,~~558~~604			~~32,072~~			~~14,612~~
Operating expenses:
Research and development		87,~~228~~441			7,~~218~~540			~~24,728~~			~~20,086~~
Selling, general and administrative		1415,~~390~~032			1211,~~470~~034			~~37,334~~			~~34,347~~
Total operating expenses		22,~~618~~473			1918,~~688~~574			~~62,062~~			~~54,433~~
Loss from operations		(159,~~608~~664	)		(165,~~130~~970	)		~~(29,990~~	)		~~(39,821~~	)
Other income (expense):
Interest income		~~342~~215			~~617~~531			~~1,289~~			~~2,009~~
Interest expense		(429	)		(1811	)		~~(27~~	)		~~(47~~	)
Other income (expense), net		1,~~539~~741			~~105~~(448	)		~~513~~			~~(258~~	)
Total other income (expense)		1,877			704			1,775			1,704
Total other income		1,927			72
Loss before income taxes		(13,731	)		(15,426	)		(28,215	)		(38,117	)
Loss before income tax		(7,737	)		(5,898	)
Income tax expense (benefit)		47753			~~256~~(44	)		13			~~(162~~	)
Net loss		(138,~~778~~490	)		(155,~~682~~854	)		~~(28,228~~	)		~~(37,955~~	)
Noncontrolling interests		1,~~842~~325			1,~~802~~176			~~4,691~~			~~3,953~~
Net loss attributable to shareholders	$	(117,~~936~~165	)	$	(134,~~880~~678	)	$	~~(23,537~~	)	$	~~(34,002~~	)
Weighted-average common shares outstanding - basic and diluted		51,934			50,748			51,739			50,645
Weighted-average common shares outstanding — basic and diluted		53,125			51,566
Net loss per common share — basic and diluted	$	(0.23	)	$	(0.27	)	$	(0.45	)	$	(0.67	)
Loss per common share — basic and diluted	$	(0.13	)	$	(0.09	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TOMOTHERAPY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2010			2009
	2011			2010
Cash flows from operating activities:
Net loss	$	(288,~~228~~490	)	$	(375,~~955~~854	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		72,~~552~~272			82,~~147~~503
Share-based compensation		51,~~940~~611			41,~~406~~819
Deferred income tax benefit		(45	)		(360	)
Deferred income tax expense (benefit)		690			(72	)
Other noncash items		(8467	)		~~167~~2
Changes in operating assets and liabilities:
Receivables, net		23,040			~~19,849~~(181	)
Inventories, net		(611,~~313~~215	)		2(6,~~234~~136	)
Prepaid expenses and other current assets		(2,111	)		(1,252	)
Other assets		142			(1,109	)
Accounts payable		78,~~818~~066			515,548
Accrued expenses		(3,~~200~~826	)		(~~576~~2,348	)
Accrued warranty		(58691	)		(~~3,634~~594	)
Deferred revenue		(42,~~758~~008	)		(1,~~308~~950	)
Customer deposits		1(3,~~535~~328	)		(12,~~700~~699	)
Net cash used in operating activities		(1514,~~474~~204	)		(911,~~315~~071	)
Cash flows from investing activities:
Purchases of property and equipment		(~~3,619~~598	)		(1,~~685~~239	)
Purchases of short-term investments		—			(7,499	)
Proceeds from sales and maturities of short-term investments		28,333			21,250
Proceeds from sales and maturities of short-term investments		47,750			17,376
Other investing activities		(180	)		(241	)
Other investing activities		(850	)		(3,130	)
Net cash provided by (used in) investing activities		27,555			19,770
Net cash provided by investing activities		43,281			5,062
Cash flows from financing activities:
Payments on notes payable		(~~102~~255	)		(~~101~~34	)
Repurchases of common stock		(310	)		(123	)
Proceeds from exercises of stock options and warrants		428			573
Proceeds from exercises of stock options and warrants		1,078			130
Proceeds from issuance of CPAC notes payable		224			—
Proceeds from issuance of CPAC common stock		~~6,586~~—			6,~~863~~526
Net cash provided by financing activities		~~7,252~~397			67,~~769~~065
Effect of exchange rate changes on cash and cash equivalents		(~~743~~291	)		44199
Increase in cash and cash equivalents		34,316			2,560
Increase (decrease) in cash and cash equivalents		13,457			15,963
Cash and cash equivalents at beginning of period		76,108			65,967
Cash and cash equivalents at beginning of year		123,905			76,108
Cash and cash equivalents at end of period	$	110,424		$	68,527
Cash and cash equivalents at end of year	$	137,362		$	92,071

The accompanying notes are an integral part of these condensed consolidated financial statements.

TOMOTHERAPY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(unaudited)

	Shareholders’ Equity
										Accumulated
				Additional						Other
										Other
	Common			Paid-in			Treasury			Comprehensive			Accumulated			Noncontrolling
				Additional Paid-						Comprehensive			Accumulated			Noncontrolling
	Stock			Capital			Stock			Income (Loss)			Deficit			Interests			Total Equity
	Common Stock			in Capital			Treasury Stock			Income (Loss)			Deficit			Interests			Total Equity
Balance at December 31, 2008	$	506		$	659,379		$	—		$	202		$	(446,493	)	$	2,155		$	215,749
Net loss		—			—			—			—			(34,002	)		(3,953	)		(37,955	)
Other comprehensive loss		—			—			—			108			—			—			108
Comprehensive loss																				(37,847	)
Issuance of common stock		—			—			—			—			—			6,863			6,863
Exercise of common stock warrants		4			126			—			—			—			—			130
Repurchases of common stock		—			—			(123	)		—			—			—			(123	)
Share-based compensation expense		—			4,406			—			—			—			—			4,406
Balance at September 30, 2009	$	510		$	663,911		$	(123	)	$	310		$	(480,495	)	$	5,065		$	189,178
Balance at December 31, 2009	$	515		$	667,177		$	(137	)	$	(268	)	$	(483,863	)	$	3,911		$	187,335
Net loss		—			—			—			—			(234,~~537~~678	)		(41,~~691~~176	)		(285,~~228~~854	)
Other comprehensive loss		—			—			—			(636	)		—			—			(636	)
Other comprehensive income (loss)		—			—			—			(307	)		—			—			(307	)
Comprehensive loss																				(286,~~864~~161	)
Issuance of common stock		—			—			—			—			—			6,~~586~~526			6,~~586~~526
Issuance of restricted stock		10			(10	)		—			—			—			—			—
Exercise of stock options		2			571			—			—			—			—			573
Exercise of stock options		4			1,074			—			—			—			—			1,078
Share-based compensation expense		—			1,819			—			—			—			—			1,819
Repurchases of common stock		(1	)		1			(310	)		—			—			—			(310	)
Balance at March 31, 2010	$	517		$	669,567		$	(137	)	$	(575	)	$	(488,541	)	$	9,261		$	190,092
Share-based compensation expense		—			5,940			—			—			—			—			5,940
Balance at December 31, 2010	$	531		$	677,106		$	(454	)	$	(803	)	$	(513,787	)	$	3,608		$	166,201
Balance at September 30, 2010	$	528		$	674,182		$	(447	)	$	(904	)	$	(507,400	)	$	5,806		$	171,765
Net loss		—			—			—			—			(7,165	)		(1,325	)		(8,490	)
Other comprehensive income (loss)		—			—			—			44			—			—			44
Comprehensive loss																				(8,446	)
Exercise of stock options		1			418			—			—			—			—			419
Issuance of stock warrants		—			—			—			—			—			9			9
Share-based compensation expense		—			1,611			—			—			—			—			1,611
Balance at March 31, 2011	$	532		$	679,135		$	(454	)	$	(759	)	$	(520,952	)	$	2,292		$	159,794

The accompanying notes are an integral part of these condensed consolidated financial statements.

TOMOTHERAPY INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE A — BACKGROUND AND BASIS OF PRESENTATION

Organization

The organization is comprised of TomoTherapy Incorporated, a Wisconsin corporation (Tomo), its wholly-owned subsidiaries and its minority-owned affiliate (collectively, together with Tomo, the Company). Tomo and its wholly-owned subsidiaries (TomoTherapy) develop, manufacture, market and sell advanced radiation therapy solutions to treat a wide range of cancer types. The treatment systems in ~~the Company~~TomoTherapy’s ~~product~~platform ~~offering~~ (collectively, the System or Systems) include: (1) the ~~flagship~~ Hi Art treatment system, which delivers CT-guided, helical intensity-modulated radiation therapy (IMRT) treatment fractions;, (2) the TomoHD treatment system, which includes both the TomoHelical and TomoDirect treatment modalities;, and (3) the TomoMobile treatment system, which is a relocatable radiation therapy solution. TomoTherapy markets and sells its ~~Systems~~products to hospitals and cancer treatment centers in the Americas, Europe, the Middle East and Asia-Pacific. Compact ~~Particle~~ Particle Acceleration Corporation (CPAC), Tomo’s controlled, minority-owned affiliate, is an ~~enterprise~~ enterprise focused on the development of a proton therapy system.

Principles of Consolidation

The Company’s condensed consolidated financial statements include the accounts of CPAC. Although Tomo’s ownership in CPAC is less than 50%, it has consolidated CPAC, as Tomo is the primary beneficiary of CPAC, due to its overall control of CPAC’s activities and Tomo’s ownership interest in CPAC. CPAC’s outside stockholders’ interests are shown in the Company’s condensed consolidated financial statements as “Noncontrolling interests.” Intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the accounting and disclosure rules and regulations of the United States Securities and Exchange Commission (SEC) for interim financial information. Certain ~~information~~ information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010 as filed with the SEC. In the opinion of management, all adjustments, consisting of a normal recurring nature, considered necessary for a fair presentation have been included in the condensed consolidated financial statements. Interim results are not necessarily indicative of results for the full year ending December 31, ~~2010~~2011.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, at the date of the ~~condensed consolidated~~ financial statements and the reported amount of revenues, ~~expenses~~ and ~~cash~~expenses ~~flows~~ during the ~~periods~~ years presented. Actual results could differ from those estimates ~~and assumptions~~.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and long-term debt. The carrying ~~value~~values of cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximate their respective fair values ~~as of September 30, 2010 and December 31, 2009~~. The fair value of short-term investments is based on quoted prices for similar items in active markets.

NOTE B — RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the Financial Accounting Standards Board (FASB) issued revised guidance for the accounting of variable interest entities. This revised guidance replaces the quantitative-based risks and rewards approach with a qualitative approach that focuses on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and has the obligation to absorb losses or the right to receive benefits from the entity that could be potentially significant to the variable interest entity. The accounting guidance also requires an ongoing reassessment of whether an enterprise is the primary beneficiary and requires additional disclosures about an enterprise’s involvement in variable interest entities. The adoption of this accounting guidance, which became effective for the Company beginning in the first quarter of fiscal 2010, did not have a material impact on the Company’s condensed consolidated financial statements.

InNOTE ~~September 2009,~~B ~~the~~— ~~FASB~~SUPPLEMENTAL ~~amended~~FINANCIAL ~~the accounting guidance on revenue recognition (“new~~INFORMATION revenue guidance”). Under the new revenue guidance, consideration in a multiple element arrangement may now be allocated in a manner that more closely reflects the structure of the transaction. Also, under the new revenue guidance, tangible products that contain software components essential to the functionality of the tangible product will no longer be subject to software revenue recognition guidance and will now be subject to other revenue guidance.

The Company elected to early adopt this new revenue guidance at the beginning of its first quarter of fiscal 2010 on a prospective basis for applicable arrangements originating or materially modified on or after January 1, 2010. For the first nine months of 2010, adoption of the new revenue guidance did not have a material impact on the Company’s condensed consolidated financial statements, and the Company does not expect the new revenue guidance will have a material impact on its consolidated financial statements in future periods.

NOTE C — SUPPLEMENTAL FINANCIAL INFORMATION

Short-term Investments

Investments consisted of the following (in thousands):

September 30, 2010

December 31, 2010

Cost basis

Unrealized gains

Unrealized losses

Fair value

U.S. government and U.S. governmental agency securities

20,~~101~~049

~~543~~429

—

20,~~644~~478

Corporate bonds

87,~~794~~568

~~174~~104

—

87,~~968~~672

2827,~~895~~617

~~717~~533

—

2928,~~612~~150

	December 31, 2009
	Cost basis		Unrealized gains		Unrealized losses		Fair value
U.S. government and U.S. governmental agency securities	$	60,531	$	1,043	$	—	$	61,574
Corporate bonds		16,334		317		—		16,651
	$	76,865	$	1,360	$	—	$	78,225

The remaining maturities of debt securities were as follows (in thousands):

September 30, 2010

December 31, 2009

December 31, 2010

Cost basis

Fair value

~~Cost basis~~

~~Fair value~~

Due in one year or less

1718,~~718~~658

18,~~041~~884

~~48,345~~

~~48,809~~

Due after one year through five years

118,~~177~~959

119,~~571~~266

~~28,520~~

~~29,416~~

2827,~~895~~617

2928,~~612~~150

~~76,865~~

~~78,225~~

The Company determines the fair value of its investments using a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

	•		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.

As of ~~September~~March 3031, ~~2010~~2011, the Company’s ~~financial~~had ~~assets,~~no ~~which~~short-term ~~consist of its~~ investments~~, were measured at fair value employing Level 2 inputs~~.

Inventories, net

Net inventories consisted of the following (in thousands):

	September 30,		December 31,
	March 31,		December 31,
	2010		2009
	2011		2010
Raw materials	$	4146,~~023~~224	$	4038,~~091~~479
Work-in-process		54,~~516~~946		14,~~847~~004
Finished goods		67,~~475~~924		56,~~731~~787
	$	5359,~~014~~094	$	4749,~~669~~270

Accrued Warranty

The Company’s sales terms include a warranty that typically covers the first year of System operation and is based on terms that are generally accepted in the marketplace. The Company records a current liability for the expected cost of warranty-related claims at the time of sale.

The following table presents changes in the Company’s product warranty accrual (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2010			2009			2010			2009
	2011			2010
Balance, beginning of period	$	35,~~776~~045		$	4,~~907~~173		$	~~4,173~~		$	~~7,431~~
Charged to cost of revenue		1,~~430~~550			1,~~772~~260			~~4,640~~			~~5,313~~
Charged to selling, general and administrative		—			—			—			282
Adjustments related to change in estimate		(970	)		(373	)
Adjustments related to change in estimate		—			(960	)		(940	)		(2,933	)
Actual product warranty expenditures		(1,271	)		(1,481	)
Actual product warranty expenditures		(1,091	)		(1,922	)		(3,758	)		(6,296	)
Balance, end of period	$	4,354		$	3,579
Balance, end of period	$	4,115		$	3,797		$	4,115		$	3,797

Deferred Revenue

Deferred revenue is recorded on a gross basis ~~until~~with the corresponding costs of revenue residing in inventory until such revenue is recognized. Deferred revenue includes amounts primarily related to services and, to a lesser extent, amounts related to product sales, including in-transit Systems that have shipped to the Company’s ~~direct~~ customers, ~~or non-certified distributors~~ but are not yet installed and accepted by the ~~end~~ customer. The Company ultimately expects to recognize these amounts as revenue upon performance of the services or ~~when~~ once the Company’s product has been delivered and accepted by the customer.

The costs of revenue associated with services primarily relate to spare parts inventory ~~along~~ along with the direct labor charges corresponding to post-warranty maintenance, which are recognized as incurred over the term of the service contract. The costs of revenue associated with product sales are comprised primarily of finished goods inventory, along with the corresponding ~~installation~~ installation costs, which are recognized as incurred once the product has been accepted by the customer.

Deferred revenue with expected recognition dates ~~that~~of ~~exceed~~greater than one year isare classified in the condensed consolidated financial statements as “Other non-current liabilities.” As of ~~September~~March 3031, ~~2010~~2011 and December 31, ~~2009~~2010, the Company’s non-current deferred revenue was $10.4 million and $20.78 million, respectively.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) refers to revenue, expenses, gains and losses that, under U.S. GAAP, are included in other comprehensive income (loss), but are excluded from net income (loss), as these amounts are recorded as a direct adjustment to shareholders’ equity, net of tax, when applicable. The Company generated other comprehensive income of $0.204 million ~~for the three month periods ended September 30, 2010~~ and ~~2009. The Company had~~ other comprehensive loss of $0.~~6 million and other comprehensive income of $0.1~~3 million for the ~~nine~~three ~~months~~month periods ended ~~September~~March 3031, ~~2010~~ 2011 and ~~2009~~2010, respectively.

NOTE DC — NET LOSS PER COMMON SHARE

The Company calculates its loss per common share using the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Under that method, ~~income from continuing operations (or~~ net ~~income)~~loss is ~~reduced~~adjusted by the amount of dividends declared in the current period for each class of stock and by the contractual amount of dividends ~~(or interest on participating income bonds)~~ that must be paid for the current period. The remaining earnings are allocated to common stock and participating securities to the extent that each security may share in earnings as if all of the earnings for the period had been distributed. The total earnings allocated to each ~~security~~ security are determined by adding together the amount allocated for dividends and the amount allocated for a participation feature. The total earnings allocated to each security are divided by the number of outstanding shares of the security to which the earnings are allocated to determine the earnings per share for the security.

For the three months ended March 31, 2011 and 2010, diluted net loss per share was the same as basic net loss per share because the effects of potentially dilutive securities are anti-dilutive.

~~For~~Outstanding ~~the~~anti-dilutive ~~three~~securities ~~and~~not ~~nine~~included ~~months~~in ~~ended~~the ~~September 30, 2010 and 2009,~~ diluted net loss per share ~~was~~calculation ~~the~~are ~~same~~ as ~~basic~~follows ~~net~~(in ~~loss per share since the effects of potentially dilutive securities are~~thousands): ~~anti-dilutive.~~

Historical outstanding anti-dilutive securities not included in net loss per share calculation are as follows (in thousands):


	Three Months Ended March 31,
	2011		2010
Stock options		4,127		5,028
Restricted stock		2,968		2,436

		7,095		7,464

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Stock options		4,528		5,667		4,528		5,667
Restricted stock		3,058		2,606		3,058		1,517
		7,586		8,273		7,586		7,184

NOTE D — SEGMENT INFORMATION

NOTE E — SEGMENT INFORMATION

The Company has determined that it operates in only one segment, as it only reports profit and loss information on an aggregate basis to its chief operating decision maker.

The Company categorizes revenue by geographic region. Revenues are attributed to geographic region based on country location of the customer site. The following table summarizes revenue by geographic region (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

2010

2009

2010

2009

2011

2010

Americas (1)

1626,~~627~~908

2413,~~567~~333

~~56,283~~

~~68,171~~

Europe and Middle East

1513,~~607~~924

119,~~670~~563

~~51,171~~

~~20,258~~

Asia-Pacific

116,~~348~~341

89,~~141~~184

~~25,838~~

~~17,652~~

4347,~~582~~173

3442,~~378~~080

~~133,292~~

~~106,081~~

(1) Americas region contains revenue from the United States of $1623.27 million and $2412.37 million for the three months ended ~~September~~March 3031, ~~2010~~2011 and ~~2009, respectively. For the nine months ended September 30,~~ 2010 ~~and 2009~~, ~~Americas region contains revenue from the United States of $55.1 million and $65.0 million,~~ respectively.

NOTE FE — INCOME TAXES

The estimated annual effective tax rate is adjusted quarterly, and items discrete to a specific quarter are reflected in tax expense for that interim period. The estimated annual effective income tax rate includes the effect of a valuation allowance expected to be necessary at the end of the year for deferred tax assets related to originating deductible temporary differences and carryforwards during the year. A valuation allowance is established when necessary to reduce deferred tax assets to an amount more-likely-than-not to be realized.

For the three months ended ~~September~~March 3031, ~~2010~~2011, the Company recorded income tax expense ~~resulting~~ resulting in an effective income tax rate of (09.37)%,. ~~and~~The ~~for~~effective ~~the~~tax ~~nine~~rate ~~months~~differed ~~ended~~significantly ~~September 30, 2010,~~from the statutory ~~Company~~rate ~~recorded~~primarily andue ~~income~~to maintaining a valuation allowance for deferred tax ~~expense~~assets ~~resulting~~that inare not anmore-likely-than-not ~~effective~~to be realized and recording disproportionate tax ~~rate~~expense of ($0.~~05)%.~~7 million ~~The~~that, ~~effective~~as ~~tax~~of ~~rate~~the ~~for~~end of the ~~period~~prior ~~differed~~year, ~~significantly~~related ~~from~~to the ~~statutory~~available ~~tax~~for ~~rate~~sale ~~primarily~~component of accumulated ~~due~~other tocomprehensive ~~maintaining~~income. aThe ~~valuation~~disproportionate ~~allowance~~tax ~~for~~expense ~~deferred~~was ~~tax~~not ~~assets~~recognized in ~~domestic~~income ~~and~~prior ~~certain foreign~~to ~~taxing~~the ~~jurisdictions~~current ~~that~~period doas ~~not~~a ~~attain~~result of the ~~more-likely-than-not~~Company’s ~~realization~~policy ~~threshold.~~of ~~For~~clearing ~~the~~disproportionate tax effects ~~three~~from ~~months~~accumulated ~~ended~~other ~~September 30,~~comprehensive ~~2009,~~income when the ~~Company~~related ~~recorded~~component anceases ~~income~~to ~~tax~~exist. ~~expense~~Due ~~resulting~~to a complete liquidation of its short-term investment portfolio in ~~an effective~~the ~~income~~current period, the related disproportionate tax ~~rate~~effect ofwas ~~(1.7)%,~~recognized ~~and~~in ~~for~~income. For the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010, the Company recorded an income tax benefit resulting in an effective income tax rate of 0.47%. There were no material changes in unrecognized tax benefits during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2010~~2011, nor does the Company anticipate a material change in total unrecognized tax benefits within the next 12 months.

NOTE GF — COMMITMENTS AND CONTINGENCIES

On occasion, the Company is subject to proceedings, lawsuits and other claims related to patents, products and other matters. The Company assesses the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, the Company considers other relevant factors that could impact its ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. The Company’s reserves may change in the future due to new developments or changes in ~~the~~ strategy ofin handling these matters.

Securities Litigation

On May 30, 2008 and June 10, 2008, two separate complaints were filed by certain shareholders of Tomo in the U.S. District Court for the Western District of Wisconsin (the Court) against Tomo and certain of its officers and all of its independent directors during the period in question. The complaints were consolidated on October 23, 2008. In the consolidated action (the 2008 Securities Litigation), the plaintiffs allege that the defendants violated the Securities Act of 1933 (the Securities Act) with respect to statements made in connection with the initial and secondary public offerings of the Company’s common stock and the Securities Exchange Act of 1934 (Exchange Act) by misrepresenting the Company’s projected financial outlook during the period May 9, 2007 through April 17, 2008. The named plaintiffs, Michael Schultz, John Scala, et al., seek to represent persons who purchased Tomo’s securities between those dates and who were damaged as a result of the decline in the price of Tomo’s stock between those dates, allegedly attributable to the financial misrepresentations, and seek compensatory damages in an unspecified amount.

Tomo moved to dismiss the consolidated complaint on December 8, 2008. On July 9, 2009, the Court ruled on the motion to dismiss the consolidated complaint by dismissing without prejudice all claims under the Exchange Act and all but one claim under the Securities ~~Litigation~~Act for failure to state a claim upon which relief could be granted. On August 3, 2009, the plaintiffs amended the consolidated complaint by filing their Second Amended Consolidated Complaint (the Amended Complaint). Tomo moved to dismiss the Amended Complaint on September 3, 2009, and on December 15, 2009, the Court granted this second motion to dismiss in part and denied it in part. The plaintiffs have moved for class certification.

~~On May 30~~However, ~~2008~~on ~~and June~~July 1028, ~~2008~~2010, ~~two~~Tomo ~~separate~~entered ~~complaints~~into ~~were~~an ~~filed~~agreement byto ~~certain~~settle ~~shareholders of~~ the ~~Company~~2008 inSecurities Litigation, ~~the~~which ~~U.S.~~was ~~District~~approved ~~Court~~by ~~for~~ the ~~Western District of Wisconsin (the~~ Court) ~~against the Company and certain of its officers and all of its independent directors during the period in question. The complaints were consolidated~~ on ~~October~~March 2318, ~~2008.~~2011 Inafter ~~the~~notification ~~consolidated~~to ~~action~~purported ~~(the~~class ~~2008~~members. ~~Securities~~Under ~~Litigation)~~the settlement, the ~~plaintiffs~~claims ~~allege~~against ~~that~~Tomo ~~the~~and ~~defendants~~its ~~violated~~officers ~~the~~and ~~Securities~~directors ~~Act~~were ofdismissed ~~1933 (the Securities Act)~~ with ~~respect~~prejudice toand ~~statements~~released ~~made~~ in ~~connection~~exchange ~~with~~for ~~the~~a ~~initial~~cash ~~and secondary~~payment ~~public offerings~~ of ~~the Company’s common stock and the Securities Exchange Act of 1934 (Exchange Act) by misrepresenting the Company’s projected financial outlook during the period May 9, 2007 through April~~$5.0 17million, ~~2008.~~which ~~The~~has been ~~named~~placed ~~plaintiffs,~~in ~~Michael Schultz~~escrow, ~~John~~funded ~~Scala,~~by ~~et al., seek to represent persons who purchased the Company~~Tomo’s ~~securities~~insurance ~~between~~carrier, ~~those dates and who were damaged as~~ a ~~result~~portion of ~~the~~which ~~decline~~was in the ~~price~~fee ~~of the Company’s stock between those dates, allegedly~~awarded ~~attributable~~ to ~~the~~class ~~financial~~counsel ~~misrepresentations,~~by ~~and~~the ~~seek compensatory damages in an unspecified amount~~Court.

The Company moved to dismiss the consolidated complaint on December 8, 2008. On July 9, 2009, the Court ruled on the motion to dismiss the consolidated complaint by dismissing without prejudice all claims under the Exchange Act and all but one claim under the Securities Act for failure to state a claim upon which relief could be granted. On August 3, 2009, the plaintiffs amended the consolidated complaint by filing their Second Amended Consolidated Complaint (the Amended Complaint). The Company moved to dismiss the Amended Complaint on September 3, 2009, and on December 15, 2009, the Court granted this second motion to dismiss in part and denied it in part. The plaintiffs have moved for class certification.

However, on July 28, 2010, the Company entered into an agreement to settle the 2008 Securities Litigation. Under the proposed settlement, the claims against the Company and its officers and directors would be dismissed with prejudice and released in exchange for a cash payment of $5.0 million to be funded by the Company’s insurance carrier. The proposed settlement remains subject to the satisfaction of various conditions, including negotiation and execution of a final stipulation of settlement and approval by the Court following notice to members of the purported class. On September 20, 2010, the Court preliminarily approved the terms for distribution of the settlement fund to purported class members, less fees awarded by the Court to class counsel, and other terms of the settlement. Final approval of the settlement will follow notification to class members.

The Company continues to believe that it has substantial legal and factual defenses to the allegations contained in the Amended Complaint, and it intends to pursue these defenses vigorously if the proposed settlement is not finalized and approved by the Court. If the settlement is not finalized and the 2008 Securities Litigation instead continues, although the Company carries insurance for these types of claims and related defense costs, a judgment significantly in excess of the Company’s insurance coverage could materially and adversely affect the Company’s financial condition, results of operations and cash flows. As of September 30, 2010, the Company estimated that its potential loss from these claims and related defense costs will not exceed its insurance deductible of $0.5 million, whether or not the proposed settlement is finalized and approved by the Court.

Stockholder Derivative Actions

On May 28, 2010 and July 9, 2010, two separate derivative lawsuits were filed in the Circuit Court of Dane County in Madison, Wisconsin by certain shareholders of ~~the~~Tomo ~~Company~~ against (a) certain officers and all of the persons who have served as directors of ~~the~~Tomo ~~Company~~ since May 9, ~~2007~~ 2007 (collectively, the Individual Defendants) and (b) ~~the Company~~Tomo, as nominal defendant. In their ~~respective~~ respective complaints (together, the Complaints), each of the named plaintiffs, The Dixon Family Living Trust and David Huh, allege that all of the Individual Defendants breached their fiduciary duties and engaged in abuse of control, gross mismanagement and waste of corporate assets, and that ~~certain~~ certain Individual Defendants were unjustly enriched. The Complaints were consolidated on October 11, 2010. The allegations are substantially similar to those claims made in the 2008 Securities Litigation. The Complaints seek damages, equitable relief, restitution and disgorgement of profits, costs and disbursements of the action, and other relief the court deems proper.

~~The~~In ~~Company and the Individual Defendants believe that there are substantial legal and factual defenses to the allegations contained in the Complaints. Moreover~~March 2010, ~~the~~Tomo ~~Company~~received ~~and~~two ~~the~~shareholder ~~Individual Defendants~~demand ~~carry~~letters ~~insurance~~from ~~for~~attorneys ~~these~~representing ~~types of claims and related defense costs. As of September~~other ~~30,~~shareholders ~~2010~~(together, the ~~Company~~Demand ~~estimated~~Letters) ~~that~~containing itallegations ~~would~~substantially ~~not~~similar ~~incur~~to ~~any material costs in connection with these~~those ~~claims~~made ~~or the defense thereof, given that the Company has already paid the applicable $0.5 million insurance deductible~~ in ~~connection with~~ the ~~2008 Securities Litigation~~Complaints.

InHowever, ~~March~~on February ~~2010~~9, ~~the~~2011, ~~Company~~Tomo ~~received~~entered ~~two~~into ~~shareholder~~an ~~demand~~agreement ~~letters~~to ~~from~~settle ~~attorneys~~the ~~representing~~Complaints and the ~~other~~Demand ~~shareholders~~Letters. ~~(together~~Under the proposed settlement, the ~~Demand~~claims ~~Letters)~~against ~~containing~~Tomo ~~allegations~~and ~~substantially~~its ~~similar~~officers toand ~~those~~directors ~~made~~would be dismissed with prejudice and released in ~~the~~exchange ~~Complaints.~~for Toimplementation of a number of governance changes and the ~~Company’s~~payment ~~knowledge~~of $275,000 asfor ofattorneys ~~the~~fees, ~~date~~$250,000 of ~~this~~which ~~Quarterly~~would ~~Report~~be onfunded ~~Form~~by ~~10-Q~~Tomo’s insurance carrier. On March 4, no2011, ~~lawsuits~~the ~~have~~Court ~~been~~preliminarily ~~filed~~approved ~~against~~the terms of the ~~Company~~settlement, orsubject ~~any~~to ~~Individual~~notice ~~Defendants~~to ~~in connection~~shareholders. ~~with~~Final ~~the~~approval ~~Demand~~is ~~Letters~~expected in May 2011.

Tomo and the Individual Defendants believe that there are substantial legal and factual defenses to the allegations contained in the Complaints. Moreover, Tomo and the Individual Defendants carry insurance for these types of claims and related defense costs. As of March 31, 2011, Tomo estimated that it would not incur any material costs in connection with these claims or the defense thereof, given that Tomo has already paid the applicable $0.5 million insurance deductible in connection with the 2008 Securities Litigation.

Litigation Related to the Accuray Merger

On or about March 11, 2011, an alleged Tomo shareholder, Andrew M. Storch, filed a purported class action complaint on behalf of himself and all other similarly situated Tomo shareholders in the Circuit Court of Dane County, Wisconsin, captioned Storch v. TomoTherapy Incorporated, et al., Case No. 11 CV 1183. The lawsuit relates to the Agreement and Plan of Merger, dated as of March 6, 2011, among Tomo, Accuray Incorporated, a Delaware corporation (Accuray), and Jaguar Acquisition, Inc., a Wisconsin corporation (Merger Sub), and names as defendants Tomo and certain directors and officers of Tomo (which, together with Tomo, we refer to as the TomoTherapy defendants). Thereafter, four more alleged Tomo shareholders filed complaints in the same court on behalf of the same purported class and against the same defendants, under the following captions: Janz v. TomoTherapy Incorporated, et al., Case No. 11 CV 1184 (filed on March 11, 2011); Haselwander v. TomoTherapy Incorporated, et al., Case No. 11 CV 1189 (filed on March 14, 2011); Reiter v. TomoTherapy Incorporated, et al., Case No. 11 CV 1203 (filed on March 15, 2011); and Shuen v. TomoTherapy Incorporated, et al., Case No. 11 CV 1208 (filed on March 15, 2011). The Reiter and the Shuen complaints also named Accuray and Merger Sub as defendants (collectively, the Accuray defendants).

On April 4, 2011, all five actions were consolidated under the caption In re TomoTherapy Incorporated Shareholder Litigation, Lead Case No. 11 CV 1183. Plaintiffs have moved to dismiss Accuray as a defendant from the consolidated action. On April 18, 2011, plaintiffs filed a consolidated complaint, which alleges, among other things, that Tomo’s directors breached their fiduciary duties in connection with the negotiation, consideration and approval of the merger agreement between Tomo and Accuray by, among other things, conducting a flawed sales process and agreeing to sell Tomo for inadequate consideration and on otherwise inappropriate terms. The complaint also alleges that the defendants filed with the SEC a Form S-4 Registration Statement that misstates or omits material information regarding the proposed transaction. The complaint further alleges that Tomo aided and abetted the alleged breaches of fiduciary duty by Tomo’s directors. Based on these allegations, the consolidated complaint seeks equitable relief, including an injunction of the merger, and costs and expenses of the litigation, including attorneys’ fees.

The TomoTherapy defendants filed a motion to dismiss the consolidated complaint on April 25, 2011. A hearing on the motion to dismiss is scheduled to be held on May 12, 2011. Based on the facts known to date, the TomoTherapy defendants consider the claims asserted to be without merit and intend to vigorously defend against them.

Reserve for Contingency

On July 17, 2009, Hi-Art Co., Ltd. (Hi-Art), the Company’s former distributor in Japan, filed a complaint against the Company in the Tokyo District Court seeking compensation it claims is owed by the Company. Although the Company believes it has substantial legal and factual defenses to Hi-Art’s allegations and intends to pursue these defenses vigorously, there can be no assurance that the Company will prevail. Accordingly, the Company maintains a reserve with respect to this matter.

Operating Leases

The Company leases six facilities under separate operating leases with various expiration dates through 2018. The Company also leases automobiles under separate operating leases with various expiration dates through ~~2013~~2014. Rent expense was $1.~~1 million and $1.~~2 million during ~~the three~~each ~~months~~of ~~ended September 30, 2010 and 2009, respectively, and $3.4 million and $3.6 million during~~ the ~~nine~~ three months ended ~~September~~March 3031, ~~2010~~2011 and ~~2009, respectively~~2010.

Initial terms for facility leases are up to 13 years, with renewal options at various intervals, and may include rent escalation clauses. The total amount of the minimum rent ~~payments~~ is expensed on a straight-line basis over the initial term of the lease unless external economic factors exist such that renewals are reasonably assured, in which case the Company ~~includes~~would ~~the~~include the renewal period in its amortization period. Most of the leases provide that the Company pay taxes, maintenance, insurance and certain other expenses applicable to the leased premises. The ~~Company~~ Company expects that, in the normal course of business, leases that expire will be renewed or replaced by other leases.

NOTE HG — STOCK INCENTIVE PLANS

The Company sponsors ~~two~~three stock incentive plans (the Plans), which allow for the grant of incentive stock options, nonqualified stock options and restricted stock. Each option grant entitles the holder to purchase a specified number of shares of Tomo common stock at a specified price that may not be less than the fair market value on the grant date. Although the option ~~grants~~ grants under the Plans ~~may~~ have a maximum life of ~~up to~~ ten years, the majority of the grants made to date have lives of six years and vest at various intervals. Each restricted stock grant entitles the holder to receive a specified number of ~~Tomo~~ shares of Tomo common stock ~~and~~that ~~vests~~vest at various intervals. Vesting schedules are determined at the grant date by the Compensation Committee of Tomo’s Board of Directors.

~~The~~Under ~~Company’s Board of Directors and shareholders approved~~ the 2007 Equity Incentive Plan ~~and approved~~(as anamended ~~amendment thereto~~ in March 2009 ~~(as~~and ~~amended, the 2007 Plan~~December 2010)~~. Under the 2007 Plan~~, ~~the Company~~Tomo’s Board of Directors is authorized to grant stock-based awards to employees, directors, and consultants for up to 7,335,822 shares in the aggregate. As of ~~September~~March 3031, ~~2010~~2011, ~~the~~two ~~Plans~~other ~~remained~~plans remained in effect along with the 2007 Plan; however, ~~new~~ equity-based awards may only be granted under the 2007 Plan.

The following table summarizes the activity under the Plans (in thousands, except for weighted-average exercise price and weighted-average fair value at grant date):

				Incentive Stock Options					Restricted Stock
												Weighted-
	Shares			Number of			Weighted-					Average
	Available			Options			Average		Number of			Fair Value
	for Grant			Outstanding			Exercise Price		Shares			at Grant Date
Balance at December 31, 2009		3,667			5,347		$	5.02		2,488		$	5.01
Granted		(1,744	)		—			—		1,744			3.17
Exercised or vested		—			(386	)		2.80		(1,025	)		5.18
Cancelled		185			(433	)		6.46		(149	)		4.88
Balance at September 30, 2010		2,108			4,528		$	5.07		3,058		$	3.91
Exercisable at September 30, 2010					3,929		$	4.73

At September 30, 2010, the Company’s weighted-average remaining contractual term was 2.8 years for all outstanding stock options, 2.8 years for outstanding vested stock options and 2.3 years for restricted stock. In addition, the Company’s aggregate intrinsic value was $1.6 million for all outstanding stock options and $1.5 million for vested stock options that were outstanding at September 30, 2010.

~~NOTE~~The Ifollowing —table ~~INVESTMENT~~summarizes INthe ~~COMPACT~~activity ~~PARTICLE~~under ~~ACCELERATION~~the ~~CORPORATION~~Plans (in thousands, except for weighted-average exercise price and weighted-average fair value at grant date):

During April 2008, Tomo established a new affiliate, CPAC, to develop a compact proton therapy system for the treatment of cancer. CPAC’s investors include Tomo, private investors and potential customers.


			Stock Options					Restricted Stock
											Weighted-
	Shares		Number of			Weighted-					Average
	Available		Options			Average		Number of			Fair Value
	for Grant		Outstanding			Exercise Price		Shares			at Grant Date
Balance at December 31, 2010		2,157		4,315			5.04		2,998			3.89
Authorized		—		—			—		—			—
Granted		—		—			—		—			—
Exercised		—		(136	)		3.08		(3	)		2.95
Cancelled		32		(52	)		7.70		(26	)		3.76

Balance at March 31, 2011		2,189		4,127		$	5.07		2,969		$	3.89

Exercisable at March 31, 2011				3,897		$	4.94		—		$	—

~~Although~~At ~~Tomo’s~~March 31, ~~ownership in CPAC is less than 50%~~2011, itthe ~~has~~Company’s ~~consolidated~~weighted-average ~~CPAC,~~remaining ascontractual ~~Tomo~~term iswas ~~the~~2.4 ~~primary~~years ~~beneficiary~~for ofall ~~CPAC,~~outstanding ~~due~~stock tooptions, ~~its~~2.3 years ~~overall~~for ~~control~~outstanding ofvested ~~CPAC’s~~stock ~~activities~~options and ~~Tomo’s ownership~~1.9 ~~interest~~years infor ~~CPAC~~restricted stock. ~~Therefore~~In addition, ~~CPAC’s outside shareholders’ interests are shown in~~ the Company’s ~~condensed~~ ~~consolidated~~aggregate ~~financial~~intrinsic ~~statements as “Noncontrolling interests”. Tomo contributed intellectual property with a fair market~~ value ofwas ~~approximately~~ $14.90 million ~~as its investment in~~ ~~CPAC.~~for ~~CPAC~~all ~~raised~~outstanding ~~additional~~stock ~~capital~~options ~~from~~and ~~third-party investors of~~ $63.68 million ~~during~~for ~~the~~vested ~~nine months~~stock ~~ended~~options ~~September 30,~~that ~~2010.~~were Asoutstanding at ~~of September~~March ~~30, 2010 and December~~ 31, ~~2009, Tomo’s ownership interest in CPAC was 5~~2011.~~3% and 7.3%, respectively.~~

~~Other~~NOTE ~~than~~H a— ~~previous~~INVESTMENT ~~contractual~~IN ~~agreement~~COMPACT toPARTICLE ~~provide~~ACCELERATION ~~certain support and management~~CORPORATION services, Tomo has not provided financial or other support to CPAC, and although Tomo may provide additional financial support to CPAC in the future, Tomo currently has no contractual obligation to provide future financial support beyond the aforementioned services. Settlement of CPAC’s obligations are restricted to the assets of CPAC. The creditors and beneficial interest holders of CPAC have no recourse to TomoTherapy.

~~NOTE~~During JApril 2008, —TomoTherapy ~~RESTRUCTURING~~established a new affiliate, CPAC, to develop a compact proton therapy system for the treatment of cancer. CPAC’s investors include Tomo, private investors and potential customers.

InTomo ~~October 2009,~~contributed ~~Tomo’s~~intellectual ~~management~~property ~~approved~~with a ~~restructuring~~fair ~~program~~market tovalue ~~downsize certain customer service and administrative functions and to terminate the employment~~ of 61approximately ~~employees~~$1.9 ~~during~~million ~~the~~as ~~period~~its ~~from~~investment ~~October 14~~in ~~through December 31, 2009~~CPAC. AsCPAC araised ~~result~~additional capital of ~~the~~$6.6 million ~~restructuring program,~~and ~~the Company recognized a total restructuring charge of~~ $16.9 million during in2010 ~~the~~and ~~fourth quarter of~~ 2009, respectively. AAs ~~summary~~ of ~~activity~~March 31, ~~for~~2011 ~~this~~and ~~liability~~December 31, is2010, asTomo’s ~~follows~~ownership interest (in ~~thousands):~~CPAC was 5.3%.

Balance at December 31, 2009	$	998
Additions		—
Payments		(995	)
Balance at September 30, 2010	$	3

In the fourth quarter of 2010, Tomo and certain other CPAC investors purchased convertible promissory notes from CPAC. Under the terms of the notes, Tomo paid for 50% of the notes it purchased prior to December 31, 2010 and paid the remaining 50% in the first quarter of 2011 and received 1,386,983 of CPAC’s warrants. Total consideration for the notes Tomo purchased was $0.8 million. Outside investors purchased $0.8 million of the convertible promissory notes and received 1,386,981 of CPAC’s warrants. The notes are due on June 3, 2011 at 12% and are convertible into CPAC’s common stock at a per share conversion price as defined in the notes. The CPAC warrants are exercisable through November 2020 at an exercise price of $0.57 per CPAC common share. At March 31, 2011, no notes had been converted and no warrants had been exercised.

On March 9, 2011, Tomo entered into a revolving promissory note with CPAC under which there were no borrowings as of March 31, 2011. The ~~remaining~~available ~~liability~~amount of the revolving promissory note is $0.5 million until May 15, 2011 after which time no additional borrowings are allowed. The note bears interest at 12% per annum compounded quarterly. The note expires and all amounts become due on the earlier of September 301, ~~2010~~2011, isa ~~expected~~transaction toinvolving bea ~~paid~~change inof ~~the~~control, ~~fourth~~or ~~quarter~~an event of ~~2010~~default.

Tomo also has a contractual agreement to provide certain support and management services to CPAC. Tomo may provide additional financial support to CPAC in the future. Settlements of CPAC’s obligations are restricted to the assets of CPAC. The creditors and beneficial interest holders of CPAC have no recourse to TomoTherapy.

NOTE I — PENDING ACQUISITION

Tomo entered into an Agreement and Plan of Merger, dated as of March 6, 2011, with Accuray and Merger Sub, which contemplates the merger of Merger Sub with and into Tomo, with Tomo surviving the merger as a wholly owned subsidiary of Accuray. The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the approval of our shareholders and the receipt of certain third-party consents and regulatory approvals. Accordingly, there can be no assurance that the Merger will be consummated.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with our ~~unaudited~~audited ~~condensed~~ consolidated ~~financial~~ financial statements and the notes to those financial statements, which are included in ~~this~~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 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 III, Item 1A. of ~~this Quarterly~~our Annual Report on Form 10-QK for the year ended December 31, 2010 ~~which~~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 be differ materially ~~different~~ 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

We develop, manufacture, market and sell advanced radiation therapy solutions to treat a wide range of cancer types. We market and sell our products to hospitals and cancer treatment centers in the Americas, Europe, the Middle East and Asia-Pacific and offer customer support services in each region either directly or through distributors.

The treatment systems in our TomoTherapy product offering (collectively, the System or Systems) operate on a ring gantry and combine integrated CT imaging with conformal radiation therapy to deliver sophisticated radiation treatments with speed and precision while reducing radiation exposure to surrounding healthy tissue. Our Systems include: (1) the Hi Art treatment system; (2) the TomoHD treatment system; and (3) the TomoMobile relocatable radiation therapy solution. The Hi Art treatment system ~~is our flagship product and~~ has been used since 2003 to deliver CT-guided, helical intensity-modulated radiation therapy (IMRT) treatment fractions. The TomoHD treatment system was announced in October 2009, iswas ~~targeted~~first ~~for~~shipped ~~shipment~~ in the fourth quarter of 2010, and includes both our TomoHelical and TomoDirect treatment modalities to enable cancer centers to treat a broader patient population with a single device. The TomoMobile relocatable radiation therapy solution, ~~was~~ first shipped in late 2009, consists of a standard TomoTherapy treatment system housed in a movable coach, and is designed to improve the access and availability of state-of-the-art cancer care.

~~For~~We ~~the~~have ~~nine~~entered ~~months~~into ~~ended~~an ~~September 30,~~Agreement ~~2010~~ and ~~2009,~~Plan ~~our~~of ~~revenue was $133.3 million and $106.1 million~~Merger, ~~respectively,~~dated anas ~~increase~~ of ~~26%~~March 6, ~~and~~2011 ~~our~~(the ~~net loss attributable to shareholders was~~Merger ~~$23.5 million~~Agreement), ~~and~~with ~~$34.0 million,~~Accuray ~~respectively~~Incorporated, a ~~decrease~~Delaware ofcorporation ~~31%.~~(Accuray), ~~Our~~and ~~results~~Jaguar ~~of operations for~~Acquisition, ~~the~~Inc., ~~nine~~a ~~months~~Wisconsin ~~ended~~corporation ~~September 30,~~and ~~2010~~a ~~improved~~wholly-owned ~~over~~subsidiary ~~the~~of ~~comparable~~Accuray ~~2009~~(Merger ~~period~~Sub), ~~despite~~which contemplates the ~~continued~~ ~~impact~~merger of ~~the~~Merger ~~global~~Sub ~~economic~~with ~~downturn,~~and ~~limited~~into ~~credit~~TomoTherapy, ~~availability~~with ~~and~~TomoTherapy ~~enhanced~~surviving the ~~competitive~~Merger ~~pressure.~~as ~~Although~~a wewholly ~~experienced~~owned asubsidiary ~~net~~of ~~loss~~Accuray in (the ~~first~~Merger). ~~nine~~The ~~months~~consummation of ~~2010,~~the weMerger ~~had~~is asubject ~~working~~to ~~capital~~the ~~balance~~satisfaction or waiver of ~~$142.5 million~~various conditions, including ~~$140.0 million~~the approval of ~~cash,~~our shareholders ~~cash equivalents~~ and ~~short-term~~ ~~investments,~~the asreceipt of ~~September 30,~~certain ~~2010.~~third-party ~~Thus,~~consents weand ~~believe~~regulatory ~~we will be able to fund ongoing~~approvals. ~~operations~~Accordingly, ~~and~~there tocan ~~invest~~be inno ~~future~~assurance ~~product~~that ~~offerings~~the ~~for~~Merger atwill ~~least~~be ~~the next 12 months~~consummated.

~~Despite~~For ~~continued~~the ~~economic~~three ~~uncertainty~~months inended March 31, 2011 and 2010, weour ~~are~~revenue ~~encouraged~~was by$47.2 million ~~the~~and ~~improvements~~$42.1 million, inrespectively, an increase of 12%, and our net loss attributable to shareholders was $7.2 ~~financial~~million and $4.7 million, respectively, an increase of 53%. Included in our results for the three months ended March 31, ~~and~~2011 are $2.1 million of expenses related to the proposed Merger. Although we ~~remain~~experienced ~~confident~~a net loss in the ~~future~~first ~~commercial~~three ~~demand~~months ~~for~~of 2011, we had a working capital balance, which is calculated by subtracting our ~~technology~~current ~~and~~liabilities from our current assets, of $127.5 ~~product~~million, ~~offerings~~including ~~due~~$137.4 million toof ~~planned~~cash ~~new~~and ~~products~~cash equivalents, ~~product~~as ~~enhancements~~of March 31, 2011. Thus, we believe we will be able to fund ongoing operations and ~~anticipated~~to ~~growth~~invest in ~~global~~ ~~demand~~future ~~for~~product CTofferings ~~image-guided~~for ~~radiation~~at least ~~therapy~~the ~~equipment~~next 12 months.

Despite continued economic uncertainty in 2011, we are encouraged by our financial results and we remain confident in the future commercial demand for our technology and product offerings due to planned new products, product enhancements and anticipated growth in global demand for CT image-guided radiation therapy equipment.

Factors Affecting Our Financial Performance

Our financial performance is significantly affected by the following factors:

Incoming orders

~~Since~~Because we sell high-priced capital equipment with a transaction cycle that can take many ~~months~~ months between customer order and delivery, an important measure of our future financial performance is the dollar value of incoming orders for equipment. ~~During~~Although ~~the~~incoming ~~first~~orders decreased ~~nine~~during the three months ofended ~~2010~~March 31, ~~we experienced~~2011 ~~an increase in incoming orders~~ as compared to the ~~first~~three ~~nine~~ months ofended ~~2009~~March 31, ~~despite the continued impact of the global economic downturn~~2010, ~~limited~~we ~~credit~~remain ~~availability~~confident ~~and increased competitive pressure. We believe this increase~~ in ~~orders is~~ the ~~result~~future ofcommercial ~~improvements~~demand ~~generated by~~for ~~the~~our ~~transition~~technology inand ~~sales~~product offerings ~~leadership~~due weto ~~implemented~~planned ~~during~~new ~~2009~~products, ~~recent~~ product ~~introductions~~enhancements and ~~the~~ ~~successful~~anticipated ~~execution~~growth ofin ~~our~~ global ~~sales~~demand for ~~and~~CT ~~marketing~~image-guided ~~efforts~~radiation therapy equipment.

14We still face a number of risks that could negatively impact incoming orders in the future. Since the Systems represent a major capital expenditure, our customers may require funding through a credit facility or lease arrangement. In the economic environment as of the date of this report, some customers may have difficulty obtaining the necessary credit or may be subject to increased constraints on their use of available cash. In addition, this economic environment may cause potential new customers to delay placing capital equipment orders or to purchase equipment that is less costly than our Systems.

~~Table~~We continued to experience heightened competition in the marketplace during the three months ended March 31, 2011. To counter this competitive pressure, we continue our efforts to improve the quality and effectiveness of ~~Contents~~our sales force, maintain our focus on group purchasing organizations and national accounts, continue our emphasis on regional user meetings and expand our product features. Furthermore, we believe continued innovation and expansion of our clinical capabilities will extend our technology leadership position, increase our prospects for greater market share and generate revenue growth.

Since the System is a major capital expenditure, our customers may require funding through a credit facility or lease arrangement. In the current economic environment, some customers may have difficulty obtaining the necessary credit or are subject to increased constraints on their use of available cash. In addition, the current economic environment may cause potential new customers to delay placing capital equipment orders or to purchase equipment that is less costly.

We are still experiencing heightened competition in the marketplace; see Item 1A. Risk Factors in Part II of the Quarterly Report on Form 10-Q for the period ending June 30, 2010 for further information. To counter this competitive pressure, we continue our efforts to improve the quality and effectiveness of our sales force, increase our focus on group purchasing organizations and national accounts, increase our emphasis on regional user meetings and expand our product features. We have also extended our product portfolio from one to three market offerings. Furthermore, we believe continued innovation and expansion of our clinical capabilities will extend our technology leadership position, increase our prospects for greater market share and generate revenue growth.

Backlog

As of ~~September~~March 3031, ~~2010~~2011, we had a backlog of $~~146~~130.48 million, the majority of which we believe should convert to revenue within the next 12 months. We define backlog as the total contractual value of all firm orders received for ~~the~~Systems ~~System~~ and related options that we believe are likely to ship within 24 months, ~~and~~plus the minimum payments that are contractually ~~obligated~~required under system ~~rental~~ rental agreements. To be included in backlog, orders must be evidenced by a signed quotation or ~~purchase~~a purchase order from the customer or distributor. Backlog does not include any revenue from service contracts, which represents a growing portion of our overall revenue.

On a regular basis, we review our open orders to determine if they meet our backlog definition by evaluating various factors including site identification, requested delivery date and customer or distributor history. If they no longer meet our backlog definition, we remove the orders from our backlog.

Revenue

Product revenue~~. The majority of our product revenue is generated from sales of the System.~~ ~~We negotiate the actual purchase price with each customer or distributor and, historically, the purchase price has varied across geographic regions.~~

WeThe ~~are~~majority ~~starting~~of ~~to see some improvement in the market, most notably in the Americas which has historically been~~ our ~~largest~~product ~~market,~~revenue ~~including~~is angenerated ~~increase~~from insales ~~new orders for the first nine months~~ of ~~2010 as compared to~~ the ~~first nine months of 2009~~Systems. ~~In addition, we expect our 2010 revenue to improve in comparison to 2009 revenue.~~ We ~~continue~~negotiate ~~to be confident in~~ the ~~future commercial demand~~ ~~for~~actual ~~our~~purchase ~~technology~~price ~~and~~with ~~product~~each ~~offerings~~customer ~~due~~or todistributor ~~our~~and, ~~new products~~historically, ~~new~~the ~~features~~purchase ~~and~~price ~~anticipated~~has ~~growth~~varied inacross ~~demand~~geographic ~~for CT image-guided radiation therapy equipment~~regions.

~~Our~~We ~~revenue~~are ~~projections~~starting ~~can~~to besee ~~impacted~~modest byimprovement ain ~~number~~the ofmarket, ~~factors~~most notably in the Americas, ~~including~~which has historically been our largest market. We continue to be confident in the ~~following:~~future commercial demand for our technology and product offerings due to our new products, new features and anticipated growth in demand for CT image-guided radiation therapy equipment.

• On average, the System is shipped to our customer 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. 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 that favorable pricing trends will continue. As of September 30, 2010, we did not have a hedging program in place to offset foreign exchange risk and, therefore, cannot 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 focus on sales to group purchasing organizations (GPOs) and multi-center customers may result in us lowering 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.

•Our ~~The~~revenue ~~System~~projections iscan abe ~~major~~impacted ~~capital~~by ~~equipment item that represents~~ a ~~significant~~number ~~purchase for most~~ of ~~our customers. While we believe macroeconomic conditions are improving~~factors, ~~our~~including ~~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 System. These factors may have a material adverse effect on our incoming orders and subsequent revenue recognition.~~following:

~~Also~~• ~~included~~On inaverage, 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 ~~product~~control, ~~revenue~~such ~~are~~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 ~~optional~~the ~~equipment~~System, ~~and~~which ~~software enhancements~~usually occurs three to four weeks after its delivery. ~~Because~~For certified distributor sales, we ~~plan~~recognize revenue upon title transfer of the System to ~~further~~the ~~develop~~certified distributor, as the Company’s only remaining obligation is its post-installation warranty services to the distributor. Each System byinstallation ~~adding~~represents ~~upgraded~~a ~~features~~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 ~~expect continued~~cannot ~~revenue~~be ~~growth~~certain ~~from~~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 ~~optional~~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, ~~software~~as ~~enhancements~~a result, may choose to ~~new~~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 ~~existing~~ ~~customers~~subsequent revenue recognition.

~~Service~~Also ~~revenue.~~included ~~Our~~in ~~service~~our product revenue isare ~~generated~~sales ~~primarily from post-warranty service contracts and the sale~~ of ~~service~~optional ~~spare~~equipment ~~parts. Our service contracts may be purchased with one- or multiple-year terms~~ and ~~for a variety of service levels, giving our customers the option to~~software ~~contract for the level of support they desire~~enhancements. AsBecause ofwe ~~September 30, 2010, our most popular service~~ plan ~~continued~~ to befurther ~~our~~develop ~~Total~~the ~~TLC~~Systems ~~Service~~by ~~Package~~adding ~~(Total~~upgraded ~~TLC). Under Total TLC~~features, we ~~provide~~ ~~customers~~expect ~~with~~continued ~~full spare parts coverage, including installation service by our field service engineers, full scheduled maintenance and unplanned repair service. We recognize service contract~~ revenue ~~ratably~~growth ~~over~~from ~~the~~sales ~~term~~ of ~~the~~optional ~~contract.~~equipment Weand ~~generally~~software ~~recognize~~enhancements ~~revenue from spare parts, which are primarily sold~~ to ~~our distributors, upon delivery. As the number of installed Systems~~new ~~continues~~and toexisting ~~grow, we expect growth in our revenue from post-warranty service contracts~~customers.

Service revenue

Our service revenue is generated primarily from post-warranty service contracts and the sale of service spare parts. Our service contracts may be purchased with one- or multiple-year terms and for a variety of service levels, giving our customers the option to contract for the level of support they desire. As of March 31, 2011, our most popular service plan continued to be our Total TLC Service Package (Total TLC). Under Total TLC, we provide customers with full spare parts coverage, including installation service by our field service engineers, full scheduled maintenance and unplanned repair service. We recognize service contract revenue ratably over the term of the contract. We generally recognize revenue from spare parts, which are primarily sold to our distributors, upon delivery. As the number of installed Systems continues to grow, we expect growth in our revenue from post-warranty service contracts.

Our ability to execute our strategies to increase incoming orders, expand backlog with high quality orders, raise sales of optional equipment and software enhancements and grow our service revenue will have a direct impact on our ability to increase overall revenue in the future. If we are unable to execute these strategies successfully, we may generate revenue at levels that are lower than those we have generated in the past.

Cost of revenue

Cost of revenue includes all of our manufacturing and service costs. It consists of material, labor and overhead costs incurred in manufacturing the ~~System~~Systems. It also includes the cost of shipping the ~~System~~Systems to the customer site, installation costs, warranty provisions and royalty payments to Wisconsin Alumni Research Foundation (WARF), one of our shareholders. Finally, cost of revenue includes the customer support expenses required to service and repair the System during both the warranty and service contract periods.

In future periods, we expect to improve our gross margins through the following initiatives:

	•		Service and support expenses. We have acertain ~~number of~~ 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 ~~continue 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 ~~expect~~invested ~~to invest~~ $~~3 to $~~2.4 million in our “Fast Track” program during ~~the fourth quarter of~~ 2010. This program ~~targets~~targeted selected ~~older~~ systems in the field for upgrades of certain technology. While it ~~will~~increased ~~have~~our acost ~~negative~~of ~~impact~~revenue in ~~the fourth quarter of~~ 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 ~~continue~~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 ~~System~~Systems in order to reduce costs. We believe that achieving these goals ~~should~~will result in reduced manufacturing, warranty and service support costs in the long term.

Our ability to execute on these strategies to reduce customer service and support expenses, as well as component costs and failure rates, will have a direct impact on our ability to improve profitability in the future. If we are unable to successfully execute these strategies, we may experience margins that are similar to or lower than our past margins.

Research and development expenses

Research and development expenses consist primarily of salary and benefits for research and development personnel who design and develop future products and product enhancements. Research and development expenses also ~~includes~~include expenses associated with product design and development, the ~~Compact~~ Compact Particle Acceleration Corporation (CPAC) proton therapy research project, customer research collaborations and fees to third parties who furnish services related to these activities.

16We expect research and development expenses to decrease during 2011 as compared to 2010, primarily due to a decrease in CPAC spending. Additionally, we expect to capitalize more software development costs related to ongoing product development projects in 2011 as compared to 2010.

We expect research and development expenses to increase during 2010 as compared to 2009 as we intend to increase our spending to support our ongoing product development initiatives. In addition, we expect to capitalize fewer software development costs related to ongoing product development projects in 2010 as compared to 2009.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of salary and benefits for executive management, sales, marketing and other corporate functions. Also included in these expenses are travel, sales commissions, trade shows and marketing materials and expenses related to accounting, legal, tax and other consulting fees.

We expect ~~2010~~2011 selling, general and administrative expenses to increase as compared to ~~2009~~2010 as we intend to increase our selling and marketing expenses to further promote our products ~~to our~~in targeted markets. In addition, we expect to incur additional costs related to the proposed merger with Accuray.

Other income (expense)

Because we conduct business in numerous foreign jurisdictions, we are exposed to changes in foreign currency exchange rates. Foreign currency exchange rate fluctuations could materially adversely affect our business, financial condition and results of operations. Our primary exposures are related to foreign currency denominated sales and expenses in Europe. As of March ~~September 30~~31, ~~2010~~2011, we did not have a hedging program in place to offset these risks.

Interest income

We expect interest income to decline in ~~2010~~2011 as compared to ~~2009~~2010, due to ~~both~~ lower levels of investable cash ~~and reduced interest rates~~.

Income tax expense (benefit)

We are subject to taxation in the United States and in numerous foreign jurisdictions. Significant judgments and estimates are required when evaluating our tax positions and determining our worldwide provision for income taxes. As a result, our effective tax rate may fluctuate based on a number of factors, including variations in projected taxable income, ~~and~~ tax positions taken on tax returns filed in the numerous geographic locations in which we operate, changes in the valuation of our deferred tax assets, introduction of new accounting standards and changes in tax liabilities to address potential tax exposures related to business and income tax positions we have taken that could be challenged by taxing authorities.

When deemed necessary, we establish valuation allowances ~~are established~~ to reduce deferred tax assets to amounts more-likely-than-not to be realized. This requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets will be realized. Evidence considered during the first ~~nine~~three months of ~~2010~~2011 included the existence of cumulative three-year losses, changes in backlog, ~~projected~~ current year ~~losses~~loss and the negative impact of ~~current~~ economic conditions, which resulted in ~~the~~our ~~Company~~continuing ~~maintaining~~to ~~its~~record a valuation allowance to offset net deferred tax assets in domestic and certain foreign taxing jurisdictions.

Noncontrolling interests

Our condensed consolidated financial statements include the accounts of CPAC. Although Tomo’s ownership in CPAC is less than 50%, Tomo has consolidated CPAC, as Tomo is the primary beneficiary of CPAC, due to its overall control of CPAC’s activities and Tomo’s ownership interest in CPAC. Therefore, CPAC’s outside stockholders’ interests are shown in our condensed consolidated financial statements as “Noncontrolling interests.” If CPAC obtains additional third-party funding, we expect our ownership percentage to continue to decline.

Noncontrolling interests

Our condensed consolidated financial statements include the accounts of CPAC. Although our ownership in CPAC is less than 50%, we are the primary beneficiary of CPAC and have consolidated CPAC, due to our overall control of CPAC’s activities and our ownership interest in CPAC. Therefore, CPAC’s outside stockholders’ interests are shown in our consolidated financial statements as “Noncontrolling interests.” If CPAC obtains additional third-party funding, we expect our ownership percentage to decline.

Results of Operations

The following table sets forth certain elements from our condensed consolidated statements of operations as a percentage of revenue for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2010			2009			2010			2009
	2011			2010
Revenue:
Product		6867.32	%		7069.5	%		~~69.9~~	%		~~71.6~~	%
Service and other		3132.78			2930.5			~~30.1~~			~~28.4~~
Total revenue		100.0			100.0			~~100.0~~			~~100.0~~
Cost of revenue:
Product		3730.2			4030.14			~~34.8~~			~~37.5~~
Service and other		4642.76			4939.6			~~41.1~~			~~48.7~~
Total cost of revenue		8372.98			8970.70			~~75.9~~			~~86.2~~
Gross profit		1627.12			1030.30			~~24.1~~			~~13.8~~
Operating expenses:
Research and development		1815.98			2117.09			~~18.6~~			~~18.9~~
Selling, general and administrative		3331.08			3626.32			~~28.0~~			~~32.4~~
Total operating expenses		5147.96			5744.31			~~46.6~~			~~51.3~~
Loss from operations		(3520.84	)		(4614.91	)		~~(22.5~~	)		~~(37.5~~	)
Other income (expense)		4.3			2.0			1.3			1.6
Other income		4.1			0.2
Loss before income tax		(3116.53	)		(4413.9	)		~~(21.2~~	)		~~(35.9~~	)
Income tax expense (benefit)		0.1.6			(0.71	)		~~0.0~~			~~(0.1~~	)
Net loss		(3117.69)	%		(4513.68)	)%		~~(21.2)~~	%		~~(35.8~~	)%

Three Months Ended ~~September~~March 3031, ~~2010~~2011 Compared to Three Months Ended ~~September~~March 3031, ~~2009~~2010

Revenue

Revenue by major type for the three months ended March 31, 2011 and 2010 was as follows (in thousands):

	Three Months Ended September 30,
	Three Months Ended March 31,
	2010				2009
	2011				2010
Product revenue	$	2931,~~759~~677	6867.32	%	$	2429,~~252~~229	7069.5	%
Service and other revenue		1315,~~823~~496	3132.78			1012,~~126~~851	2930.5
	$	4347,~~582~~173	100.0	%	$	3442,~~378~~080	100.0	%

Revenue by geographic region for the three months ended March 31, 2011 and 2010 was as follows (in thousands):

	Three Months Ended September 30,
	Three Months Ended March 31,
	2010				2009
	2011				2010
Americas (1)	$	1626,~~627~~908	3857.20	%	$	2413,~~567~~333	7131.57	%
Europe and Middle East		1513,~~607~~924	3529.85			119,~~670~~563	446.95
Asia-Pacific		116,~~348~~341	2613.05			89,~~141~~184	2321.78
	$	4347,~~582~~173	100.0	%	$	3442,~~378~~080	100.0	%

(1) Americas region contains revenue from the United States of $1623.27 million and $2412.37 million for the three months ended ~~September~~March 3031, ~~2010~~2011 and ~~2009~~2010, respectively.

Product revenue increased $5.5 million, or 23%, between periods. This increase was primarily due to a higher average selling price of Systems installed and accepted and an increase in options revenue during the three months ended September 30, 2010 versus the three months ended September 30, 2009.

Service and other revenue increased $3.7 million, or 37%, between periods. This increase was primarily attributable to an increase in service contract revenue, as Systems moved from warranty to service contract coverage. There were 30% more units covered by service contracts at September 30, 2010 as compared to September 30, 2009.

Product revenue increased $2.4 million, or 8%, between periods. This increase was attributable to more Systems being installed and accepted as well as additional rental revenue related to TomoMobile during the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Partially offsetting this increase, average System selling prices during the three months ended March 31, 2011 were 9% lower than average System selling prices during the three months ended March 31, 2010. Additionally, we sold $1.0 million fewer optional equipment and software enhancements during the three months ended March 31, 2011 as compared to the three months ended March 31, 2010.

Service and other revenue increased $2.6 million, or 21%, between periods. This increase was primarily attributable to an increase in service contract revenue, as we had 17% more Systems that were covered under service contracts at March 31, 2011 as compared to March 31, 2010. The increase also reflected an increase in revenue related to the construction of a bunker for one of our customers.

Cost of revenue

Cost of revenue increased to $3634.64 million for the three months ended ~~September~~March 3031, ~~2010~~2011 from $3029.85 million for the three months ended ~~September~~March 3031, ~~2009~~2010, an increase of $54.89 million, or 1917%. The ~~Overall~~increase in cost of revenue was primarily due to higher product costs related to more Systems being installed and accepted and higher service and other costs to support the increase in our installed base. In addition, we recognized costs related to the construction of a bunker for one of our customers. Our gross profit was 1627.12% for the three months ended ~~September~~March 3031, ~~2010~~2011 compared to 1030.30% for the three months ended ~~September~~March 3031, ~~2009~~2010. The decrease in our gross profit percentage for the three months ended March 31, 2011 was the result of a 1.2% reduction in product margin as a result of a decrease in average selling price partially offset by increased System volume, and a shift in the mix of revenue to service, which generates lower margins than product sales.

~~Total~~Product ~~product~~ costs increased by $21.5 million, or 1811%, for the three months ended ~~September 30~~March 31, ~~2010~~ 2011 compared to the three months ended ~~September~~March 3031, ~~2009~~2010. ~~The~~This increase iswas primarily due to higher System ansales ~~increase~~volume inas ~~options~~well ~~sold~~as ~~and~~higher afreight ~~TomoMobile~~and ~~system~~field ~~sale,~~action ~~which~~costs. ~~had~~Partially aoffsetting ~~higher~~this ~~cost~~increase was ~~due~~a toreduction ~~the inclusion~~in ofaverage ~~the~~warranty ~~relocatable~~costs ~~coach~~per System.

Total service and other costs increased by $3.34 million, ~~or 19%,~~ for the three months ended ~~September~~ March 3031, 2011 ~~2010~~ compared to the three months ended ~~September~~March 3031, ~~2009~~2010. The increase was due to a ~~30%~~ $1.1 million increase in ~~the~~employee ~~number of units under service. In addition~~costs, ~~we experienced~~ a ~~higher~~$0.3 million ~~rate~~increase ~~of component part failures~~ in ~~the~~logistic ~~three~~costs ~~months~~and ~~ended~~a ~~September~~$0.2 ~~30,~~million ~~2010~~increase in astravel ~~compared~~ to support the ~~three months~~installed ~~ended September 30, 2009~~base. ~~Service~~In ~~margins~~addition, ~~have~~we ~~improved~~recognized ~~year~~costs ~~over~~related ~~year due~~ to ~~a reduction~~the inconstruction ~~employee~~of ~~and~~a ~~other~~bunker ~~service~~for ~~support~~one ~~costs~~of ~~per~~our ~~contract~~customers.

Warranty expenses increased $0.6 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 due to an increase in the amount of warranty services provided under warranty agreements.

Research and development expenses

Research and development expenses by category for the three months ended ~~September~~March 3031, ~~2010~~ 2011 and 2010 ~~2009~~ were as follows (in thousands):

	Three Months Ended September 30,
	Three Months Ended March 31,
	2010		2009		$ Change			% Change
	2011		2010		$ Change			% Change
System R&D	$	6,~~855~~346	$	56,~~473~~643	$	~~1,382~~(297	)		25(4.35)	%
Proton Project / CPAC R&D		1,~~373~~095		~~1,745~~897		~~(372~~198	)		~~(21~~22.31	)
	$	87,~~228~~441	$	7,~~218~~540	$	~~1,010~~(99	)		14(1.03)	%

Total research and development expenses ~~increased~~decreased $1.0.1 million, or 141%, between periods. System research and development ~~expenses~~activities ~~increased~~decreased by $10.43 million, ~~between periods~~ primarily due to a $10.3 million decrease in test system amortization and a $0.1 million decrease in ~~capitalized~~employee ~~internal~~costs partially ~~development~~offset ~~costs~~by a $0.2 million increase in consulting expense for the three months ended March ~~September 30~~31, ~~2010~~2011 as compared to the three months ended ~~September~~March 3031, ~~2009, and also due to an increase in consulting costs~~2010. The proton therapy research project spending ~~decreased~~increased by $0.4 2 million, ~~during~~primarily due to an increase in employee costs for the three months ended ~~September~~March 3031, ~~2010,~~2011 ~~due~~when ~~mainly~~compared to athe ~~decrease~~three inmonths ~~consulting costs~~ended March 31, 2010.

Selling, general and administrative expenses

Selling, general and administrative expenses increased to $1415.40 million for the three months ended ~~September~~March 3031, ~~2010~~2011 from $1211.50 million for the three months ended ~~September~~March 3031, ~~2009~~2010, ~~representing~~ an increase of $14.90 million, or 1536%. The increase was ~~due~~ primarily due to a $02.71 million of costs related to the ~~increase~~proposed inMerger ~~outside~~with ~~services~~Accuray. In addition, there was a $0.76 million increase in employee costs, a $0.64 million increase in ~~the~~ ~~allowance~~bad ~~for~~debt ~~doubtful~~expense, ~~accounts and~~ a $0.53 million increase in ~~CPAC~~trade ~~spending~~show inexpenses, ~~the~~and ~~third quarter of 2010. These increases were partially offset by~~ a $1.0.2 million ~~decrease~~increase in ~~commissions in~~consulting for the ~~third~~three ~~quarter~~months ofended ~~2010~~March 31, as2011 compared to the ~~third~~three months ~~quarter~~ended ofMarch 31, ~~2009~~2010.

Other income (expense)

We had other income of $1.9 million and $0.7 million for the three months ended September 30, 2010 and 2009, respectively. The increase of approximately $1.2 million was attributable to a $1.4 million increase in other income (expense) in the third quarter of 2010 compared with the three months ended September 30, 2009, due primarily to the impact of foreign currency exchange rates. Partially offsetting this increase was a $0.3 million decrease in interest income, as our average investment balances and interest rates were lower during the third quarter of 2010 as compared to the third quarter of 2009.

Income tax expense (benefit)

For the three months ended September 30, 2010, we recorded income tax expense of $0.05 million resulting in an effective income tax rate of (0.3)%. Our effective tax rate for the third quarter differed significantly from the statutory tax rate primarily due to maintaining a valuation allowance for deferred tax assets in domestic and certain foreign taxing jurisdictions that do not satisfy the more-likely-than-not realization threshold. For the three months ended September 30, 2009, we recorded an income tax expense of $0.3 million resulting in an effective income tax rate of (1.7)%.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

Revenue

Revenue by major type was as follows (in thousands):

	Nine Months Ended September 30,
	2010				2009
Product revenue	$	93,230	69.9	%	$	75,937	71.6	%
Service and other revenue		40,062	30.1			30,144	28.4
	$	133,292	100.0	%	$	106,081	100.0	%

Revenue by geographic region was as follows (in thousands):

	Nine Months Ended September 30,
	2010				2009
Americas (1)	$	56,283	42.2	%	$	68,171	64.3	%
Europe and Middle East		51,171	38.4			20,258	19.1
Asia-Pacific		25,838	19.4			17,652	16.6
	$	133,292	100.0	%	$	106,081	100.0	%

(1) Americas region contains revenue from the United States of $55.1 million and $65.0 million for the periods ended September 30, 2010 and 2009, respectively.

Product revenue increased $17.3 million, or 23%, between periods. This increase was attributable to 19% more Systems installed and accepted during the nine months ended September 30, 2010 versus the nine months ended September 30, 2009. Additionally, average System selling prices during the first nine months of 2010 increased 1% from selling prices during the first nine months of 2009.

Service and other revenue increased $9.9 million, or 33%, between periods. This increase was primarily attributable to an increase in service contract revenue, as more Systems moved from warranty to service contract coverage. There were 30% more units covered by service contracts at September 30, 2010 as compared to September 30, 2009.

Cost of revenue

Cost of revenue increased to $101.2 million for the nine months ended September 30, 2010 from $91.5 million for the nine months ended September 30, 2009, an increase of $9.8 million, or 11%. The increase in cost of revenue was primarily due to higher product costs related to more Systems being installed and accepted. Overall, our gross profit was 24.1% for the nine months ended September 30, 2010 compared to 13.8% for the nine months ended September 30, 2009. The increase in our gross profit percentage for the first nine months of 2010 was the result of higher System volume and improved service margin.

Product costs increased by $6.6 million, or 17%, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This increase was primarily due to higher System volume. While total product costs increased, margins improved due to better leverage of fixed costs.

Total service and other costs increased by $3.2 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. The increase was due to a 30% increase in the number of units under service contract at September 30, 2010 as compared to September 30, 2009. Service margins have improved year over year due to a reduction in employee and other service support costs per contract.

Warranty expenses increased $1.0 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 due an increase in the amount of warranty services provided under warranty agreements.

Research and development expenses

Research and development expenses by category were as follows (in thousands):

	Nine Months Ended September 30,
	2010		2009		$ Change			% Change
System R&D	$	21,059	$	16,406	$	4,653			28.4	%
Proton Project / CPAC R&D		3,669		3,680		(11	)		(0.3	)
	$	24,728	$	20,086	$	4,642			23.1	%

Total research and development expenses increased $4.6 million, or 23%, between periods. System research and development activities increased by $4.7 million primarily due to a $2.8 million decrease in capitalized internal development costs, a $0.9 million increase in employee costs and a $1.2 million increase in consulting expense for the nine months ended September 30, 2010 as compared to the same period in 2009. The proton therapy research project spending remained flat during the first nine months of 2010.

Selling, general and administrative expenses

Selling, general and administrative expenses increased to $37.3 million for the nine months ended September 30, 2010 from $34.3 million for the nine months ended September 30, 2009, an increase of $3.0 million, or 9%. The increase was primarily due to a $1.5 million increase in employee costs, a $0.8 million increase in trade show expenses, a $0.7 million increase in CPAC spending, a $0.7 million increase in the allowance for doubtful accounts and a $0.4 million increase in legal fees. These increases were partially offset by a $0.5 million decrease in commissions and a $1.1 million decrease in sales concessions in the first nine months of 2010 compared to the first nine months of 2009.

Other income (expense)

We had other income of $1.89 million and $10.71 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~ 2011 and ~~2009~~2010, respectively. The $0.1.9 million increase was primarily due to ~~the~~a ~~impact~~$1.7 million ~~from~~favorable impact of foreign currency exchange rates, as well as a $0.5 million gain realized from the sale of our short term investment portfolio. These increases were partially offset by a $0.73 million decrease in interest income, as our investment balances and interest rates were lower during the three ~~first nine~~ months ofended ~~2010~~March 31, 2011 than during the ~~same~~three ~~period~~months inended ~~2009~~March 31, 2010.

Income tax expense (benefit)

For the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011, we recorded an income tax expense of $0.01 8 million , resulting in an effective income tax rate of (09.057)%. The effective tax rate ~~for the nine months ended September 30, 2010~~ differed significantly from the statutory ~~tax~~ rate primarily due to maintaining a valuation allowance for deferred tax assets that inare ~~domestic~~not more-likely-than-not to be realized and ~~certain~~recording ~~foreign~~disproportionate ~~taxing~~tax expense of $0.7 ~~jurisdictions~~million that, doas of the end of the prior year, related to the available for sale component of accumulated other comprehensive income. The disproportionate tax expense was not ~~satisfy~~recognized in income prior to the ~~more~~current period as a result of our policy of clearing disproportionate tax effects from accumulated other comprehensive income when the related component ceases to exist. Due to a complete liquidation of its short-~~likely-than-not~~term ~~realization~~investment ~~threshold~~portfolio in the current period, the related disproportionate tax effect was recognized in income. For the ~~nine~~ three months ended ~~September~~March 3031, ~~2009~~ 2010, we recorded an income tax benefit of $0.204 million, resulting in an effective income tax rate of 0.47%.

Liquidity and Capital Resources

To date, we have funded our working capital and capital expenditure requirements using cash generated from sales of equity securities and, to a lesser extent, borrowings. From our inception through ~~September~~March 3031, ~~2010~~2011, we obtained financing of $~~236~~260.08 million primarily through public and private placements of equity securities and the exercise of stock options.

Financial Condition

Our cash and cash equivalents and short-term investments were $~~140~~137.04 million at ~~September~~March 3031, ~~2010~~ 2011 compared to $~~154~~152.31 million at December 31, ~~2009~~2010, a decrease of $14.37 million, or 9.7%. ~~Information regarding short-term investments, which totaled $29.6 million at September 30, 2010, is set forth in Note C to the condensed consolidated financial statements.~~

WeOur ~~entered~~working ~~into~~capital, awhich ~~revolving~~is ~~credit~~calculated ~~facility~~by ~~during~~subtracting ~~2009,~~our ~~under~~current ~~which~~liabilities ~~there~~from ~~were no borrowings~~our ascurrent ~~of September 30~~assets, ~~2010~~was $127.5 million ~~This~~at ~~line of credit expires on November~~March 3031, ~~2010.~~2011 ~~The~~compared ~~facility requires us~~ to ~~maintain~~$135.1 million aat ~~minimum tangible net worth~~December 31, ~~a specified ratio of total liabilities to tangible net~~ ~~worth~~2010, ~~and~~ a ~~minimum~~decrease ~~level~~ of ~~cash and short-term investments~~$7. ~~We were in compliance with these covenants at September~~7 30million, ~~2010~~or 5.7%. InOur ~~addition,~~shareholders’ ~~the~~equity ~~facility~~was ~~provides~~$157.5 million ~~for~~at ~~an adjusted credit limit~~March ~~based on a certain level of tangible net worth and earnings before interest~~31, ~~taxes,~~2011 ~~depreciation and~~compared ~~amortization~~to $162.6 million ~~Based~~at ~~on our levels as of September~~December 3031, 2010, ~~the~~a ~~adjusted~~decrease ~~credit~~of ~~limit is~~ $~~30 million~~5. ~~Under the terms of the credit facility~~1 million, weor ~~may~~3.1%. ~~be considered in default upon a material~~The ~~adverse~~decreases ~~change~~ in our ~~financial~~working ~~condition~~capital orand ifshareholders’ ~~the~~equity ~~bank~~were ~~believes~~primarily ~~the~~related ~~prospect~~to ofour ~~payment or~~operating ~~performance~~loss ofduring the ~~facility~~three ismonths ~~impaired~~ended March 31, 2011.

21In 2009, we instituted a working capital management program that focused on improving cash flow related to current assets and liabilities. This program is a significant driver behind our ability to minimize cash used in operations. While this program has been successful, our ability to continue to generate cash from working capital in future periods is uncertain.

Net cash used in operating activities was $14.2 million for the three months ended March 31, 2011. This included a net loss of $8.5 million, which was partially offset by the following noncash items: $2.3 million of depreciation and amortization and $1.6 million of share-based compensation. The net use of cash was further increased by changes in operating assets and liabilities, which resulted in a use of cash of $9.8 million for the three months ended March 31, 2011, largely driven by increased inventory to meet demand for expected manufacturing activity levels, offset by increased accounts payable. Accrued expenses were lower, primarily due to the payment of the 2010 annual bonus to employees. Additionally, customer deposits decreased during the three months ended March 31, 2011 due to the timing of advance System payments received from customers.

Net cash provided by investing activities was $27.6 million for the three months ended March 31, 2011. Net cash proceeds from the sales, maturities and purchases of short-term investments were $28.3 million. Cash expended for additions of property and equipment was $0.6 million and for other investing activities was $0.2 million.

Net cash provided by financing activities was $0.4 million for the three months ended March 31, 2011. Cash provided by financing activities primarily consisted of $0.4 million in proceeds from the issuance of our common stock through our Employee Stock Purchase Plan and the exercise of stock options and $0.2 million in proceeds from the issuance of CPAC notes payable, partially offset by $0.3 million in payments on notes payable.

Our working capital, which is calculated by subtracting our current liabilities from our current assets, was $142.5 million at September 30, 2010 compared to $161.8 million at December 31, 2009, a decrease of approximately $19.2 million, or 12%. Our shareholders’ equity was $166.0 million at September 30, 2010 compared to $183.4 million at December 31, 2009, a decrease of approximately $17.5 million, or 10%. The decrease in both our working capital and shareholders’ equity was primarily due to our operating loss during the first nine months of 2010.

Net cash used in operating activities was $15.5 million and $9.3 million for the nine months ended September 30, 2010 and 2009, respectively. Driving cash flows from operations were net losses in the nine months ended September 30, 2010 of $28.2 million, partially offset by the effect of non-cash expenses such as depreciation, amortization and share-based compensation expense of $13.4 million. Also contributing to the net use of cash were changes in operating assets and liabilities, which resulted in a net use of cash of $0.7 million for the first nine months of 2010. For the nine months ended September 30, 2009, the cash impact of our net loss of $38.0 million was reduced by non-cash items that totaled $12.4 million and changes in operating assets and liabilities of $16.3 million.

Net cash provided by investing activities was $43.3 million and $5.1 million for the nine months ended September 30, 2010 and 2009, respectively. Cash expended for additions of property and equipment was $3.6 million in the first nine months of 2010 versus $1.7 million in the first nine months of 2009. Net cash proceeds from the purchases and sales and maturities of short-term investments were $47.8 million in the first nine months of 2010 versus $9.9 million in the first nine months of 2009.

Net cash provided by financing activities was $7.3 million and $6.8 million for the nine months ended September 30, 2010 and 2009, respectively. The increase in cash provided by financing activities for the nine months ended September 30, 2010 was due primarily to proceeds from the exercises of stock options and warrants.

Loans and Available Borrowings

There have been no significant changes to the loans and available borrowings we reported in our Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010.

Contractual Obligations and Commitments

There have been no significant changes to the contractual obligations and commitments we reported in our Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010.

Pending Litigation and Reserve for Contingency

See Note GF to the condensed consolidated financial statements.

Operating Capital and Capital Expenditure Requirements

Our future capital requirements depend on numerous factors. These factors include, but are not limited to, the following:

• ~~Revenue~~revenue generated from sales of ~~the~~Systems ~~System~~ and service contracts; • ~~The~~the performance of ~~the~~Systems ~~System~~ operating in the field and corresponding service costs; • ~~The~~the level of investment required by our service and support organization; • ~~The~~the level of investment required for research and development activities; • ~~Costs~~costs associated with our manufacturing, sales and marketing and general and administrative activities; and • ~~Effects~~effects of competing technological and market developments.

The global economy remains volatile and could have potentially negative effects on our near-term liquidity and capital resources, including slower collection of receivables, delays in the delivery of existing orders and postponements of incoming orders. However, we believe that our cash and ~~short-term~~cash ~~investments~~equivalents as of ~~September~~March 3031, ~~2010,~~2011 will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. As of ~~September 30~~March 31, ~~2010~~2011, we had $~~140~~137.04 million of cash and ~~short-term~~cash ~~investments~~equivalents. We do not expect to draw on our $30 million line of credit, and we believe our financial position will remain strong through the remainder of ~~2010 and~~ 2011. Moreover, we continue to manage our cash resources and are carefully monitoring our ongoing expenditures.

Off-Balance Sheet Arrangements

We have no off balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, please refer to the “Critical Accounting Policies and Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010.


Item 3.		Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk is currently confined to changes in ~~short-term investments,~~ foreign currency exchange and interest rates. Our exposure to market risk was discussed in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010. There have been no material changes since December 31, ~~2009~~2010.


Item 4.		Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Securities and Exchange Commission Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September~~March 3031, ~~2010~~2011.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September~~March 3031, ~~2010~~2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2322

Part II. OTHER INFORMATION


Item 1.		Legal Proceedings

We are subject to various claims and legal proceedings arising in the ordinary course of our business. The description of the developments with respect to the pending securities litigation, ~~and~~ the two pending derivative suits (and similar demand letters), the Hi-Art claim and the litigation related to the proposed merger with Accuray is incorporated herein by reference to Note GF to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. We believe that the ultimate resolution of the various claims and legal proceedings to which we are subject will not have a material adverse effect on our business, financial condition or results of operations.


Item 1A.		Risk Factors

In addition to the risk factors set forth below and the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in our ~~2009~~2010 Annual Report on Form 10-K ~~and in “Part II~~, ~~Item 1A. Risk factors” in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2010 and June 30, 2010,~~ which could materially affect our business, financial condition or results of operations. 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 statements in this Quarterly Report on Form 10-Q include, but are not limited to, the risk factors discussed below orand in “Part I, Item 1A. Risk Factors” in our 2010 ~~2009~~ Annual Report on Form 10-K ~~or in Part II, Item IA~~. ~~Risk factors” in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2010 and June 30, 2010.~~ If any of the events discussed in such risk factors ~~occur~~occurs, our business, financial condition and results of operations could be materially adversely affected, and the market value of our common stock could decline.

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

~~Our~~We ~~overall~~have ~~service~~entered ~~operations~~into ~~currently~~an ~~are~~Agreement ~~not~~and ~~profitable.~~Plan ~~Moreover,~~of ~~our gross margins may decline in a given period due in part to significant replacement rates for components~~Merger, ~~resulting~~dated ~~in increased~~as ~~warranty~~of ~~expense~~March 6, ~~negative~~2011 ~~profit~~(the ~~margins on service contracts and customer~~Merger ~~dissatisfaction.~~Agreement), Wewith ~~are~~Accuray ~~implementing~~Incorporated, a ~~number~~Delaware ofcorporation ~~improvements~~(Accuray), toand ~~our~~Jaguar ~~service processes~~Acquisition, ~~which might~~ ~~reduce costs~~Inc., Wea ~~also~~Wisconsin ~~are~~corporation ~~developing alternate components~~ and ~~identifying~~a ~~lower~~wholly-owned ~~priced~~subsidiary ~~components~~ of ~~comparable~~Accuray or(Merger ~~improved performance and quality. However~~Sub), ~~there is no assurance that these~~which ~~initiatives~~contemplates ~~will~~the bemerger ~~successful.~~of IfMerger weSub ~~are~~with ~~unable to reduce our expenses~~ and ~~improve~~into ~~quality and reliability through these initiatives~~TomoTherapy, ~~our~~with ~~profitability~~TomoTherapy ~~may~~surviving ~~not improve or may be materially~~the ~~adversely~~merger ~~affected,~~as ~~particularly~~a ~~given~~wholly ~~the~~owned ~~increased~~subsidiary ~~percentage~~ of ~~our~~Accuray ~~revenue~~(the ~~attributable to service contracts~~Merger). ~~Our~~In ~~distributors~~relation ~~that provide warranty and service support on Systems they have sold in their geographic region may also experience an adverse impact on their profitability, which may increase our cost~~ to ~~service~~the ~~Systems in those regions. Additionally~~Merger, we ~~may face increased claims of compensation from customers who~~ are ~~not satisfied with the quality and reliability of our~~ ~~products,~~subject ~~which could increase our service costs and negatively affect future product sales. Even if we are able~~ to ~~implement~~certain ~~these~~risks, ~~cost reduction and quality improvement efforts successfully~~including, ~~our service~~without ~~operations may remain unprofitable given the relatively small size and geographic dispersion of our installed base~~limitation, ~~which~~those ~~prevents~~set usforth ~~from achieving significant economies of scale for the provision of services~~below.

InThe ~~April 2008,~~announcement weand ~~invested~~pending innature ~~the~~of ~~continued~~our ~~development~~agreement ofto abe ~~new~~acquired ~~compact~~by ~~proton~~Accuray ~~therapy~~could ~~system through~~have a material ~~separate~~adverse ~~entity,~~effect ~~Compact~~on ~~Particle~~our ~~Acceleration Corporation (CPAC). Our~~ business, ~~results of operations and~~ financial condition ~~will be adversely affected if CPAC is unable to obtain additional funding or if CPAC otherwise fails to successfully develop~~ and ~~commercialize~~results ~~this technology~~of operations.

InThe ~~April 2008,~~announcement ~~we announced our participation in CPAC, to continue development of our research initiative for a compact proton therapy system for the treatment of cancer. CPAC has~~ and ~~is continuing~~pending tonature ~~seek investments from third parties to support development~~ of ~~this technology. We retain~~ the ~~option~~Merger toAgreement ~~purchase~~could acause ~~portion~~disruptions ~~of the CPAC stock held by CPAC investors~~ in ~~exchange for~~our ~~the~~business, ~~right~~including toby ~~commercialize~~adversely ~~the~~affecting ~~technology~~our inrelationships ~~the~~with ~~medical field~~customers, ~~with~~suppliers ~~the~~and employees ~~right~~and ~~first~~diverting ~~exercisable at~~ the ~~end~~attention of ~~April 2010~~our ~~and at any time thereafter through 2015~~management. ~~CPAC~~For ~~needs~~example, ~~additional~~our ~~funding~~employees ~~to continue~~may ~~its development efforts. We cannot be certain that CPAC will be able to obtain all of the~~experience ~~additional~~uncertainty ~~financing~~about ~~required~~their ~~for~~future ~~this~~role ~~project~~with onus ~~commercially reasonable terms~~ or ~~that the technology development will be successful~~Accuray, ~~any~~and ofthis ~~which~~may ~~could~~adversely ~~limit~~affect our ability to ~~grow~~attract and ~~diversify~~ ~~our~~retain ~~product~~key ~~portfolio~~personnel. ~~Even~~In ifaddition, ~~CPAC~~potential iscustomers ~~able~~may hesitate to ~~obtain~~buy ~~financing and the technology~~our ~~development~~treatment ~~is successful~~systems, ~~CPAC~~and ~~may~~our ~~not~~distributors ~~have~~may ~~the~~hesitate ~~resources~~ to ~~commercialize~~sell ~~the~~our ~~compact~~treatment ~~proton system~~systems, ~~the~~due ~~market~~to uncertainty ~~requirements~~as ~~may~~to ~~change~~whether ~~such that commercialization is no longer feasible,~~ or ~~we may~~ not bethe inMerger awill ~~position~~be tocompleted ~~finance~~and ~~our~~how ~~call right. If~~ we dowill ~~not~~be ~~exercise~~operated ~~our call right and CPAC~~by isAccuray ~~unable~~following tothe ~~obtain~~Merger. ~~additional~~Any ~~financing,~~such ~~our~~disruptions ~~reputation~~could ashave ana ~~initial~~material ~~investor~~adverse ineffect ~~CPAC~~on ~~may be~~our ~~impaired~~business, financial condition and ~~other~~results ~~investors~~of inoperations. ~~CPAC~~Further, ~~may~~the beMerger ~~dissatisfied.~~Agreement ~~Moreover,~~includes certain ifrestrictions weon ~~are~~our ~~unable~~freedom to ~~diversify~~ operate our business ~~through~~prior to the ~~addition~~completion of athe ~~proton therapy product~~Merger, which wecould ~~will~~have ~~continue to rely on~~ a ~~single product~~material ~~line~~adverse ~~for~~effect ~~substantially~~on ~~all of~~ our ~~revenue,~~ability ~~including~~to ~~all~~take ofcertain ~~the~~actions ~~risks~~ and ~~fluctuations in~~pursue ~~revenue~~certain oropportunities ~~profitability~~that ~~resulting~~we ~~from~~might ~~such~~otherwise ~~reliance~~view as advisable.

The Merger will not be completed if all of the conditions to the Merger are not satisfied or waived.

Completion of the Merger is subject to the satisfaction or waiver of various conditions, including the approval of our shareholders and the receipt of certain third-party consents and regulatory approvals, as well as the absence of any event, change or other circumstance constituting a TomoTherapy or Accuray “Material Adverse Effect” for purposes of the Merger Agreement. There can be no assurance that all of the conditions will be satisfied or waived within the anticipated timeframe, or at all, and there can be no assurance as to whether, or when, the Merger will be completed. If all of the conditions to the Merger are not satisfied or waived on or before September 30, 2011 (or, in certain circumstances, on or before October 31, 2011), either TomoTherapy or Accuray may terminate the Merger Agreement.

The failure to complete the Merger could have a material adverse effect on our business, financial condition and results of operations.

There is no assurance that the Merger will occur. If the Merger or a similar transaction is not completed, the share price of our common stock may drop, to the extent that the current market price of our common stock reflects an assumption that a transaction will be completed. In addition, we have incurred certain costs relating to the Merger that are payable whether or not the transaction is completed, including legal, accounting and printing costs, and if the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, we may be required to pay a termination fee of $8.0 million or pay up to $1.5 million of the costs and expenses incurred by Accuray in connection with the Merger Agreement or the transactions contemplated thereby.

Further, non-completion of the transaction may result in negative publicity and a negative impression of TomoTherapy in the investment community. If the Merger Agreement is terminated and our Board of Directors determines to seek another merger or business combination, it may not be able to find a party willing to pay an equivalent or more attractive price than that which would have been paid in the Merger. Finally, any disruptions to our business resulting from the announcement and pending nature of the Merger, including any adverse changes in our relationships with customers, suppliers and employees, could continue or accelerate in the event of a failed transaction. There can be no assurance that, if the Merger is not completed, these relationships, our business, financial condition and results of operations will not be adversely affected in a material way, as compared to the condition prior to the announcement of the Merger.

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.

Since the announcement of the Merger, several lawsuits have been filed in which we and certain of our directors and officers have been named as defendants. These lawsuits allege that our directors breached their fiduciary duties in connection with the transaction by, among other things, agreeing to sell TomoTherapy for inadequate consideration and on otherwise inappropriate terms. The lawsuits further allege that we failed to disclose all material information concerning the transaction and that we aided and abetted the alleged breaches of fiduciary duty by our directors. The lawsuits seek, among other things, injunctive relief, including the enjoining of the transaction, damages and recovery of the costs of the action, including reasonable attorneys’ fees.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

(a) Recent Sales of Unregistered Securities

None.

(b) Use of Proceeds from Public Offering of Common Stock

Our initial public offering of 13,504,933 shares of our common stock, par value $0.01 per share, was effected through a Registration Statement on Form S-1 (Reg. No. 333-140600), which was declared effective by the Securities and Exchange Commission on May 8, 2007. We issued 10,602,960 shares on May 9, 2007 and received gross proceeds of $201.5 million. We paid the underwriters a commission of $14.1 million and incurred additional offering expenses of approximately $2.7 million. After deducting the underwriters’ commission and the offering expenses, we received net proceeds of approximately $184.7 million. The managing underwriter of our initial public offering was Merrill Lynch & Co. In addition, 2,901,973 shares were sold by selling shareholders, 1,761,513 of which were purchased by the underwriters’ exercise of their overallotment option.

No payments of underwriters’ commissions or offering expenses were made directly or indirectly to (i) any of our directors, officers or their associates, (ii) any person(s) owning 10% or more of any class of our equity securities, or (iii) any of our affiliates.

Through ~~September~~March 3031, ~~2010~~2011, we had used $~~102~~124.19 million of the net proceeds from our initial public offering, as ~~detailed~~described in the following table (in millions):

Working capital	$	7489.93
Purchases of property and equipment		1922.63
Purchases of test systems		5.7
Acquisition of Chengdu Twin Peak Accelerator Technology Inc.		1.5
Purchases of intangible assets		4.9
Repayment of debt		0.4
Acquisition of Chengdu Twin Peak Accelerator Technology Inc.		2.0
Total net proceeds used	$	102.1
Repayment of debt		0.7
Total net proceeds used	$	124.9

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6. Exhibits

Exhibit Number			Description
	3.1	(1)	Amended and Restated Articles of Incorporation of the Company
	3.2	(1)	Amended and Restated Bylaws of the Company
	10.1	(2)†	Amendment to Supply Agreement, dated September 9, 2010, between the Company and Hitachi Medical Corporation
	31.1	*	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 (File No. 001-33452).
(2)		Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2010 (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.


Item 6.		Exhibits


Exhibit Number			Description
	2.1		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 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


*		Filed herewith.

+		Executive compensation plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, TomoTherapy Incorporated has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TOMOTHERAPY INCORPORATED
Date: November 9, 2010	By:	/s/ Frederick A. Robertson
Date: May 10, 2011	By:	/s/ Frederick A. Robertson
		Frederick A. Robertson
		Chief Executive Officer and President
		Chief Executive Officer and President (Duly authorized officer and principal executive officer)
Date: November 9, 2010	By:	/s/ Thomas E. Powell
Date: May 10, 2011	By:	/s/ Thomas E. Powell
		Thomas E. Powell
		Chief Financial Officer and Treasurer
		Chief Financial Officer and Treasurer (Duly authorized officer and principal financial officer)

2627

EXHIBIT INDEX

Exhibit Number			Description	~~Description~~
	3.1	(1)		Amended and Restated Articles of Incorporation of the Company
	2.1		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.
	3.2	(1)		Amended and Restated Bylaws of the Company
	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).
	10.1	(2)†		Amendment to Supply Agreement, dated September 9, 2010, between the Company and Hitachi Medical Corporation
	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).
	31.1	*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	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.
	31.2	*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.1	*	Certification of Chief Executive 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
	31.2	*	Certification of Chief Financial Officer Pursuant to Section 302 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
	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 (File No. 001-33452).
(2)		Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2010 (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.


*		Filed herewith.

+		Executive compensation plan or arrangement.

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Filing Compare · TomoTherapy Inc