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What changed in ACCURAY INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ACCURAY INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+533 added−643 removedSource: 10-K (2023-09-07) vs 10-K (2022-08-17)

Top changes in ACCURAY INC's 2023 10-K

533 paragraphs added · 643 removed · 416 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

132 edited+19 added−53 removed146 unchanged
Biggest changeThere are now over 1,900 peer reviewed publications supporting use of the CyberKnife System in the treatment of various targets, including cancers, benign tumors, or functional diseases. Radiosurgery is a commonly used procedure among neurosurgeons, specializing in radiosurgery, who require the high level of precision found with surgery yet want to offer their brain tumor patients a non-invasive option.
Biggest changeRadiosurgery is a commonly used procedure among neurosurgeons, specializing in radiosurgery, who require the high level of precision found with surgery, yet want to offer their brain tumor patients a non-invasive option. With more than two decades of clinical evidence, the CyberKnife System offers distinct advantages in the treatment of diseases in the head, base of the skull, and spine.
The system includes disease-specific tracking and treatment delivery solutions for brain, spine, lung and prostate tumors, improvements in treatment speed as compared to earlier systems, more options to configure the treatment room, and expanded number of nodes leading to more coverage and minimizing dose to healthy tissue.
The system includes disease-specific tracking and treatment delivery solutions for brain, spine, lung and prostate tumors, improvements in treatment speed as compared to earlier systems, more options to configure the treatment room, and expanded number of nodes leading to more coverage and minimizing the dose to healthy tissue.
Accuray iDMS Data Management System . Accuray iDMS creates a centralized platform for storing and managing all patient and treatment plan data. Designed to integrate with a wide range of technologies and systems, iDMS enables users and applications to securely and seamlessly access the data they need to drive efficient, informed, effective treatment.
Accuray iDMS Data Management System . Accuray iDMS creates a centralized platform for storing and managing all patient treatment plan data. Designed to integrate with a wide range of technologies and systems, iDMS enables users and applications to securely and seamlessly access the data they need to drive efficient, informed, effective treatment.
In the past, we have seen our customers’ decision‑making process complicated by the uncertainties surrounding reimbursement rates for radiotherapy and radiosurgery in the United States. State government reimbursement for services is determined pursuant to each state’s Medicaid plan, which is established by state law and regulations, subject to requirements of federal law and regulations.
In the past, we have seen our customers’ decision‑making process complicated by the uncertainties surrounding reimbursement rates for radiotherapy and radiosurgery in the United States. State government reimbursement for services is determined pursuant to each state’s Medicaid plan, which is established by state law and regulations, subject to the requirements of federal law and regulations.
The FDA may review our 510(k) filing decision, and can disagree with our initial determination. FDA may take regulatory action from requiring new filings to injunction if it disagrees with our determinations not to seek a new 510(k) clearance or PMA approval for modifications.
The FDA may review our 510(k) filing decision, and can disagree with our initial determination. The FDA may take regulatory action from requiring new filings to injunction if it disagrees with our determinations not to seek a new 510(k) clearance or PMA approval for modifications.
Foreign Corrupt Practices Act. The United States and foreign government regulators have increased regulation, enforcement, inspections and governmental investigations of the medical device industry, including increased United States government oversight and enforcement of the Foreign Corrupt Practices Act.
The United States and foreign government regulators have increased regulation, enforcement, inspections and governmental investigations of the medical device industry, including increased United States government oversight and enforcement of the Foreign Corrupt Practices Act.
Some manufacturers of standard linac systems, including Varian and Elekta, have products that can be used in combination with body and/or head frame systems and image‑guidance systems to perform both radiosurgical and radiotherapy procedures. Our other competitors include ViewRay Inc. (ViewRay), RefleXion Medical Inc., ZAP® Surgical Systems, and other companies in the radiosurgical and radiation therapy markets.
Some manufacturers of standard linac systems, including Varian and Elekta, have products that can be used in combination with body and/or head frame systems and image‑guidance systems to perform both radiosurgical and radiotherapy procedures. Our other competitors include RefleXion Medical Inc., ZAP® Surgical Systems, Inc., and other companies in the radiosurgical and radiation therapy markets.
Information for patients to be treated or previously treated on any iDMS compatible Accuray platform will be maintained as a single treatment record, providing the flexibility to treat patients on any available Accuray platform compatible with iDMS. It can manage users and privileges to control patient data access.
Information for patients to be treated or previously treated on any iDMS compatible Accuray platforms will be maintained as a single treatment record, providing the flexibility to treat patients on any available Accuray platform compatible with iDMS. It can manage users and privileges to control patient data access.
HIPAA. The Health Insurance Portability and Accountability Act of 1996 (HIPAA), created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors.
HIPAA. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors.
Our Strategy Our goal is to develop equipment and technology that enable physicians to deliver precise and accurate, customized, leading‑edge treatments that help patients with cancerous or benign tumors, or neurologic disorders, get back to living their lives, faster.
Our Strategy Our goal is to develop equipment and technology that enable physicians to deliver precise and accurate, customized, leading‑edge treatments that help patients with cancerous or benign tumors, or neurologic or endocrine disorders, get back to living their lives, faster.
The beams of radiation are delivered continuously throughout the treatment session as the patient behaves naturally. The Synchrony technology provides what we believe is unsurpassed clinical accuracy for tumors that move with respiration without the need for implanted fiducials.
The beams of radiation are delivered continuously throughout the treatment session as the patient behaves naturally. The Synchrony technology provides what we believe is unsurpassed clinical accuracy for lung tumors that move with respiration without the need for implanted fiducials.
The HIPAA privacy standard was amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), enacted as part of the American Recovery and Reinvestment Act of 2009. HITECH significantly increases the civil money penalties for violations of patient privacy rights protected under HIPAA.
The HIPAA privacy standard was amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), enacted as part of the American Recovery and Reinvestment Act of 2009. HITECH significantly increases the civil money penalties for violations of patient privacy rights protected under HIPAA.
Our competitive position also depends, among other things, on: • Widespread awareness, acceptance and adoption of our products by the radiation oncology, cancer therapy and neurosurgery markets; • Innovations that improve the effectiveness and productivity of our systems’ treatment processes and enable them to address emerging customer needs; • Availability of reimbursement coverage from third‑party payors (including insurance companies, governments, and/or others) for procedures performed using our platforms; • Inclusion of radiotherapy in countries’ cancer treatment policies as an effective treatment modality; • Published, peer‑reviewed data supporting the efficacy and safety of our platforms; • Limiting the time required from proof of feasibility to routine production; • Limiting the time period and cost of regulatory approvals or clearances; • The manufacture and delivery of our products in sufficient volumes on time, and accurately predicting and controlling costs associated with manufacturing, installation, warranty and maintenance of the products; • Our ability to attract and retain qualified personnel; • The extent of our intellectual property protection or our ability to otherwise develop and safeguard proprietary products and processes; • Our ability to successfully expand into new and developing markets; • Securing sufficient capital resources to expand both our continued research and development, and sales and marketing efforts; and • Obtaining and maintaining any necessary United States or foreign regulatory approvals or clearances.
Our competitive position also depends, among other things, on: • Widespread awareness, acceptance and adoption of our products by the radiation oncology, cancer therapy and neurosurgery markets; • Innovations that improve the effectiveness and productivity of our systems’ treatment processes and enable them to address emerging customer needs; • Availability of reimbursement coverage from third‑party payors (including insurance companies, governments, and/or others) for procedures performed using our platforms; • Inclusion of radiotherapy in countries’ cancer treatment policies as an effective treatment modality; • Published, peer‑reviewed data supporting the efficiency, efficacy and safety of our platforms; • Limiting the time required from proof of feasibility to routine production; • Limiting the time period and cost of regulatory approvals or clearances; • The manufacture and delivery of our products in sufficient volumes on time, and accurately predicting and controlling costs associated with manufacturing, installation, warranty and maintenance of the products; • Our ability to attract and retain qualified personnel; 15 Table of Contents • The extent of our intellectual property protection or our ability to otherwise develop and safeguard proprietary products and processes; • Our ability to successfully expand into new and developing markets; • Securing sufficient capital resources to expand both our continued research and development, and sales and marketing efforts; and • Obtaining and maintaining any necessary United States or foreign regulatory approvals or clearances.
These include: • Quality System Regulation (QSR), which require manufacturers, including third‑party manufacturers, to follow stringent design, testing, documentation and other quality assurance procedures during product design and throughout the manufacturing process; • Labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off‑label uses; and • Medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur.
These include: • Quality System Regulation (“QSR”), which require manufacturers, including third‑party manufacturers, to follow stringent design, testing, documentation and other quality assurance procedures during product design and throughout the manufacturing process; • Labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off‑label uses; and • Medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur.
We also received 510(k) clearance for our new treatment planning and data management systems, Accuray Precision Treatment Planning System and iDMS Data Management System. In November 2018, we received 510(k) clearance for Synchrony Motion Synchronization and Real-Time Adaptive Radiotherapy Technology for the Radixact System.
We also received 510(k) clearance for our new treatment planning and data management systems, Accuray Precision TPS and iDMS Data Management System. In November 2018, we received 510(k) clearance for Synchrony Motion Synchronization and Real-Time Adaptive Radiotherapy Technology for the Radixact System.
The Physician Payment Sunshine Act (the Sunshine Act), which was enacted by Congress as part of the Patient Protection and Affordable Care Act on December 14, 2011, requires each applicable manufacturer, which includes medical device companies such as Accuray, to track and report to the federal government on an annual basis all payments and other transfers of value from such applicable manufacturer to U.S. licensed physicians and teaching hospitals as well as physician ownership of such applicable manufacturer’s equity, in each case subject to certain statutory exceptions.
The Physician Payment Sunshine Act (the “Sunshine Act”), which was enacted by Congress as part of the Patient Protection and Affordable Care Act on December 14, 2011, requires each applicable manufacturer, which includes medical device companies, such as Accuray, to track and report to the federal government on an annual basis all payments and other transfers of value from such applicable manufacturer to U.S. licensed physicians and teaching hospitals as well as physician ownership of such applicable manufacturer’s equity, in each case subject to certain statutory exceptions.
Reimbursement In the United States, healthcare providers that purchase capital equipment such as the CyberKnife and TomoTherapy platforms generally rely on government and private third‑party payors for reimbursement for the healthcare treatment and services they provide.
Reimbursement In the United States, healthcare providers that purchase capital equipment such as the CyberKnife and/or TomoTherapy platforms generally rely on government and private third‑party payors for reimbursement for the healthcare treatment and services they provide.
FDA regulations govern the following activities that we perform and will continue to perform to ensure medical products distributed domestically or exported internationally are safe and effective for their intended uses: • Product design and development; • Document and purchasing controls; • Production and process controls; • Labeling and packaging controls; • Product storage; • Recordkeeping; • Servicing; • Corrective and preventive action and complaint handling; 20 Table of Contents • Pre‑market clearance or approval; • Advertising and promotion; and • Product sales and distribution.
FDA regulations govern the following activities that we perform and will continue to perform to ensure medical products distributed domestically or exported internationally are safe and effective for their intended uses: • Product design and development; • Document and purchasing controls; • Production and process controls; • Labeling and packaging controls; • Product storage; • Recordkeeping; 17 Table of Contents • Servicing; • Corrective and preventive action and complaint handling; • Pre‑market clearance or approval; • Advertising and promotion; and • Product sales and distribution.
Further corporate governance information, including our corporate governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading “Governance.” The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 28 Table of Contents
Further corporate governance information, including our corporate governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading “Governance.” The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 24 Table of Contents
We believe in comparison to conventional linear accelerators, the Company’s treatment delivery, planning, and data management solutions provide better accuracy, flexibility, and control; fewer treatments with shorter treatment times; and the technology to expand beyond cancer, making it easier for clinical teams around the world to provide treatments that help patients get back to living their lives, faster.
We believe in comparison to conventional linear accelerators, our treatment delivery, planning, and data management solutions provide better accuracy, flexibility, and control; fewer treatments with shorter treatment times; and the technology to expand beyond cancer, making it easier for clinical teams around the world to provide treatments that help patients get back to living their lives, faster.
When a 510(k) clearance is required, we must submit a pre‑market notification demonstrating that our proposed device is substantially equivalent to a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of pre‑market approval applications (PMA).
When a 510(k) clearance is required, we must submit a pre‑market notification demonstrating that our proposed device is substantially equivalent to a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of pre‑market approval (“PMA”) applications.
Our facilities were first awarded the ISO 13485 certification in September 2002 and has been subsequently maintained through periodic assessments, and we are currently authorized to affix the CE mark to our products, allowing us to sell our products throughout the European Economic Area. The Medical Device Regulation (MDR) came into effect in the European Union in May 2021.
Our facilities were first awarded the ISO 13485 certification in September 2002 and has been subsequently maintained through periodic assessments, and we are currently authorized to affix the CE mark to our products, allowing us to sell our products throughout the European Economic Area. The Medical Device Regulation (“MDR”) came into effect in the European Union in May 2021.
The FDA reviews the manufacturer’s decision to file a 510(k) or PMA for modifications during facility audits. 21 Table of Contents We have modified aspects of our CyberKnife and TomoTherapy platforms since receiving regulatory clearance, and we have applied for and obtained additional 510(k) clearances for these modifications when we determined such clearances were required.
The FDA reviews the manufacturer’s decision to file a 510(k) or PMA for modifications during facility audits. 18 Table of Contents We have modified aspects of our CyberKnife and TomoTherapy platforms since receiving regulatory clearance, and we have applied for and obtained additional 510(k) clearances for these modifications when we determined such clearances were required.
Although the payment freeze was set to expire on December 31, 2019, the Centers for Medicare and Medicaid Services (CMS) has continued to recognize these temporary HCPCS G codes in this setting. We expect all valid delivery codes will be recognized by commercial payers.
Although the payment freeze was set to expire on December 31, 2019, the Centers for Medicare and Medicaid Services (“CMS”) has continued to recognize these temporary HCPCS G codes in this setting. We expect all valid delivery codes will be recognized by commercial payers.
Geographic Information For financial reporting purposes, net sales and long‑lived assets attributable to significant geographic areas are presented in Note 17, Segment Disclosure, to the consolidated financial statements, which are incorporated herein by reference. Available Information Our main corporate website address is www.accuray.com .
Geographic Information For financial reporting purposes, net sales and long‑lived assets attributable to significant geographic areas are presented in Note 14, Segment Disclosure, to the consolidated financial statements, which are incorporated herein by reference. Available Information Our main corporate website address is www.accuray.com .
ClearRT offers excellent uniformity and low noise across the entire image, improved soft tissue visualization and exceptional spatial resolution, which is intended to enhance the versatility and efficiency of the Radixact System in the radiation therapy department. Integrated treatment system for precise radiation delivery.
ClearRT offers excellent uniformity and low noise across the entire image, improved soft tissue visualization while maintaining exceptional spatial resolution, which is intended to enhance the versatility and efficiency of the Radixact System in the radiation therapy department. Integrated treatment system for precise radiation delivery.
We manufacture the linear accelerator for our CyberKnife and TomoTherapy platforms at our Chengdu, China facility. Our facilities employ state‑of‑the‑art manufacturing techniques and equipment. The components manufactured at our Chengdu facility are produced under the International Standard Organization (ISO), 13485:2016 certified quality management systems.
We manufacture the linear accelerator for our CyberKnife and TomoTherapy platforms at our Chengdu, China facility. Our facilities employ state‑of‑the‑art manufacturing techniques and equipment. The components manufactured at our Chengdu facility are produced under the International Standard Organization (“ISO”), 13485:2016 certified quality management systems.
We are also currently subject to regulations in Japan. Under the Pharmaceutical Affairs Law in Japan, a pre‑market approval necessary to sell, market and import a product (Shonin) must be obtained from the Ministry of Health, Labor and Welfare (MHLW), for our products.
We are also currently subject to regulations in Japan. Under the Pharmaceutical Affairs Law in Japan, a pre‑market approval necessary to sell, market and import a product (Shonin) must be obtained from the Ministry of Health, Labor and Welfare (“MHLW”), for our products.
These areas of the body require extremely accurate treatment because of the proximity of the tumors to critical structures that may impact a person’s ability to perform basic functions and to think, see, hear and walk. Continue to innovate through clinical development and collaboration.
These areas of the body require extremely accurate treatment because of the proximity of the tumors to critical radiosensitive structures that may impact a person’s ability to perform basic functions and to think, see, hear, walk and breathe. Continue to innovate through clinical development and collaboration.
Also, ClearRT helical kVCT images will be available within the Accuray PreciseART ® automated dose trending tool for clinicians to evaluate if plan adaptation would be beneficial, enabling the most personalized patient care. Low barriers to installation and implementation.
ClearRT helical kVCT images are also available within the Accuray PreciseART ® automated dose trending tool for clinicians to evaluate if plan adaptation would be beneficial, enabling the most personalized patient care. Low barriers to installation and implementation.
Additionally, ClearRT provides clear, high-fidelity images that is designed to reduce the time required for patient imaging and registration, a crucial part of the treatment delivery process, thereby enabling clinical staff to serve more patients.
Additionally, ClearRT provides clear, high-fidelity images that are designed to reduce the time required for patient imaging and registration, a crucial part of the treatment delivery process, thereby enabling clinical staff to serve more patients.
Backlog For a discussion of our fiscal 2022 backlog, please refer to the section entitled “Backlog,” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Employees and Human Capital Resources Our employees are critical to the success of our business.
Backlog For a discussion of our fiscal 2023 backlog, please refer to the section entitled “Backlog,” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Employees and Human Capital Resources Our employees are critical to the success of our business.
The non‑robotic SRS/SBRT codes 77372 and 77373 are also payable codes in the freestanding site of service for non‑robotic SRS/SBRT. In 2022, in the hospital outpatient department, IMRT delivery is billed under CPT code 77385 for simple IMRT and 77386 for complex IMRT.
The non‑robotic SRS/SBRT codes 77372 and 77373 are also payable codes in the freestanding site of service for non‑robotic SRS/SBRT. In 2023, in the hospital outpatient department, IMRT delivery is billed under CPT code 77385 for simple IMRT and 77386 for complex IMRT.
All TomoTherapy platform systems enable an operator to provide non‑isocentric 3D conformal radiotherapy (3D CRT), IG- IMRT, or stereotactic treatments within a typical cylindrical volume of 40 centimeters in diameter and up to 135 centimeters in length. This expansive treatment field allows single or multiple tumors, located anywhere in body, to be treated in a single session.
All TomoTherapy platform systems enable an operator to provide non‑isocentric 3D conformal radiotherapy (“3D CRT”), IG-IMRT, or stereotactic treatments within a typical cylindrical volume of 40 centimeters in diameter and up to 135 centimeters in length. This expansive treatment field allows single or multiple tumors, located anywhere in body, to be treated in a single session.
ClearRT delivers enhanced imaging capabilities compared to conventional linear accelerator systems that rely on cone-beam CT (CBCT) imaging and as an alternative to MR-based radiation therapy systems that can be complex and cost prohibitive to use.
ClearRT delivers enhanced imaging capabilities compared to conventional linear accelerator systems that rely on cone-beam CT (“CBCT”) imaging, and as an alternative to MR-based radiation therapy systems that can be complex and cost prohibitive to use.
Efficient clinical workflow for Image-Guided Radiation Therapy, or IGRT, and adaptive radiation therapy. The TomoTherapy platform integrates into a single system all of the key elements for radiation therapy, including treatment planning, CT image‑guided patient positioning, treatment delivery, quality assurance and adaptive planning.
Efficient clinical workflow for Image-Guided Radiation Therapy and adaptive radiation therapy. The TomoTherapy platform integrates into a single system all of the key elements for radiation therapy, including treatment planning, CT image‑guided patient positioning, treatment delivery, quality assurance and adaptive planning.
The Accuray proprietary Synchrony® artificial intelligence (AI)-driven tumor tracking with dynamic delivery technology is a collection of unique hardware and software technologies that enables personalized real-time adaptive delivery of radiation treatment to targets while they are in motion by synchronizing the treatment delivery beam position to the target location precisely and accurately during the delivery of a treatment fraction.
The Accuray proprietary Synchrony® AI-driven real-time target tracking with dynamic delivery technology is a collection of unique hardware and software technologies that enables personalized real-time adaptive delivery of radiation treatment to targets while they are in motion by synchronizing the treatment delivery beam position to the target location precisely and accurately during the delivery of a treatment fraction.
The latest generation is the CyberKnife S7 System, which combines speed, advanced precision, and real-time artificial intelligence (AI)-driven motion tracking and synchronized treatment delivery for all SRS and SBRT treatments, in as little as 15 minutes. The platform is designed to treat cancerous and benign tumors throughout the body, as well as neurologic disorders.
The latest generation is the CyberKnife S7 System, which combines speed, advanced precision, and real-time AI-driven motion tracking and synchronized treatment delivery for all SRS and SBRT treatments, in as little as 15 minutes. The platform is designed to treat cancerous and benign tumors throughout the body, as well as neurologic and endocrine disorders.
Certain entities were not able to establish viable models for CyberKnife platform operation and therefore canceled their CyberKnife platform purchase agreements. Accordingly, these regulations have resulted in cancellations of CyberKnife platform purchase agreements and could also reduce the attractiveness of medical technology acquisitions, including CyberKnife platform purchases, by physician owned joint ventures or similar entities.
Certain entities were not able to establish viable models for CyberKnife platform operation and therefore, canceled their CyberKnife platform purchase agreements. Accordingly, these regulations have resulted in cancellations of CyberKnife platform purchase agreements and could also reduce the attractiveness of medical 21 Table of Contents technology acquisitions, including CyberKnife platform purchases, by physician owned joint ventures or similar entities.
The primary regulatory environment in Europe is that of the European Union and the three additional member states of the European Economic Area (EEA), which have adopted similar laws and regulations with respect to medical devices.
The primary regulatory environment in Europe is that of the European Union and the three additional member states of the European Economic Area (“EEA”), which have adopted similar laws and regulations with respect to medical devices.
We endeavor to achieve this goal by expanding the clinical options for healthcare providers, helping them offer the best radiation treatment for each patient and by providing patients with treatment tailored to their specific needs. Our vision is to expand the curative power of radiation therapy to improve as many lives as possible.
We endeavor to achieve this goal by expanding the clinical options for healthcare providers, helping them offer the best radiation treatment for each patient and by providing patients with treatment tailored to their specific 4 Table of Contents needs. Our vision is to expand the curative power of radiation therapy to improve as many lives as possible.
The CyberKnife platform maximizes patient comfort. Patients may be treated with the CyberKnife platform on an outpatient basis without anesthesia and without the risks and complications inherent in traditional surgery. Patients do not require substantial pretreatment preparation, and typically there is little to no recovery time or hospital stay associated with CyberKnife platform’s treatments.
The CyberKnife platform is designed to maximize patient comfort. Patients may be treated with the CyberKnife platform on an outpatient basis without anesthesia and without the risks and complications inherent in traditional surgery. Patients do not require substantial pretreatment preparation, and typically there is little to no recovery time or hospital stay associated with CyberKnife platform’s treatments.
We periodically monitor the activities of our competitors and other third parties with respect to their use of intellectual property. 16 Table of Contents Research and Development Continued innovation is critical to our future success. Our current product development activities include projects expanding clinical applications, driving product differentiation, and continually improving the usability, interoperability, reliability, and performance of our products.
We periodically monitor the activities of our competitors and other third parties with respect to their use of intellectual property. Research and Development Continued innovation is critical to our future success. Our current product development activities include projects expanding clinical applications, driving product differentiation, and continually improving the usability, interoperability, reliability, and performance of our products.
We believe clinical use of the CyberKnife platform allows our customers to effectively treat patients where extreme precision and ability to account for motion are important, and patients who otherwise would not have been treated with radiation or who may not have been good candidates for surgery. 10 Table of Contents Upgradeable modular design.
We believe clinical use of the CyberKnife platform allows our customers to effectively treat patients where extreme precision and ability to account for motion are important, and patients who otherwise would not have been treated with radiation or who may not have been good candidates for surgery. Upgradeable modular design.
The PreciseART Option enables clinicians to monitor patient treatment and efficiently adapt plans, helping clinics of all sizes deliver more precise treatments to more patients. It offers automated processing of daily imaging to enable clinicians to monitor all patients and set protocol‑specific action levels to flag cases for review and possible plan adaptation.
The PreciseART Option enables clinicians to monitor patient treatment and efficiently adapt plans, helping clinics of all sizes deliver more precise treatments to more patients. It offers automated processing of daily imaging to enable clinicians to monitor all patients and set protocol‑specific action levels to flag cases for 11 Table of Contents review and possible plan adaptation.
Failure to comply with these requirements could result in enforcement action by the FDA, which can include injunctions, civil penalties, and the issuance of warning letters. Fraud and abuse laws. We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti‑kickback laws and physician self‑referral laws.
Failure to comply with these requirements could result in enforcement action by the FDA, which can include injunctions, civil penalties, and the issuance of warning letters. 19 Table of Contents Fraud and abuse laws. We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti‑kickback laws and physician self‑referral laws.
Treatment plans as well as daily images can be easily accessed remotely, enabling clinical teams to collaboratively work together, regardless of location, ensuring high quality plan development and delivery.
Treatment plans as well as daily images can be easily accessed remotely, enabling clinical teams to collaboratively work together, regardless of location, ensuring higher quality plan development and delivery.
The Office of the Inspector General of the Department of Health and Human Services (OIG) is primarily responsible for enforcing the federal Anti‑Kickback Statute and generally for identifying fraud and abuse activities affecting government programs.
The Office of the Inspector General of the Department of Health and Human Services (“OIG”) is primarily responsible for enforcing the federal Anti‑Kickback Statute and generally for identifying fraud and abuse activities affecting government programs.
The Accuray Precision Treatment Planning System can be further enhanced with optional advanced capabilities described below: PreciseART Adaptive Radiation Therapy Option. The PreciseART Radiation Therapy Option extends adaptive radiotherapy possibilities, delivering an entirely new level of system integration and workflow automation for Radixact and other TomoTherapy Systems compatible with iDMS.
The Accuray Precision TPS can be further enhanced with optional advanced capabilities described below: PreciseART Adaptive Radiation Therapy Option. The PreciseART Radiation Therapy Option extends adaptive radiotherapy possibilities, delivering an entirely new level of system integration and workflow automation for Radixact and other TomoTherapy Systems compatible with iDMS.
The workflow includes importation of patient dose data, from either Accuray or non Accuray planning systems, automatic deformation of original plan contours onto a new treatment planning CT, automatic deformation of previously delivered dose onto a new planning CT, generation of the 14 Table of Contents re-treatment plan based on the information from existing plan and summation of the original and new treatment plans to review the total dose.
The workflow includes importation of patient dose data, from either Accuray or non-Accuray planning systems, automatic deformation of original plan contours onto a new treatment planning CT, automatic deformation of previously delivered dose onto a new planning CT, generation of the re-treatment plan based on the information from the existing plan and summation of the original and new treatment plans to review the total dose.
These laws generally require appropriate state agency determination of public need and approval prior to the acquisition of such capital items or addition of new services. Certificate of need regulations may preclude our customers from acquiring one of our systems, and from performing stereotactic radiosurgery procedures using one of our systems.
These laws generally require appropriate state agency determination of public need and approval prior to the acquisition of such capital items or addition of new services. Certificate of need regulations may preclude our customers from acquiring one of our systems, and from performing stereotactic radiosurgery procedures using 23 Table of Contents one of our systems.
Additionally, the TomoDirect feature provides the TomoTherapy platform with added versatility, enabling the delivery of high quality, fixed angle beams for those cases suited to simple tangential beam radiation delivery.
Additionally, the TomoDirect feature provides the TomoTherapy platform with added versatility, enabling the delivery of high quality, fixed angle beams for those cases suited to simple fixed angle radiation delivery.
The modular design of our systems supports rapid development for new clinical capabilities and performance enhancements by generally allowing each subsystem to evolve within the overall platform design.
The modular design of our systems support rapid development for new clinical capabilities and performance enhancements by generally allowing each subsystem to evolve within the overall platform design.
Traditional surgery and other forms of minimally invasive procedures, brachytherapy, chemotherapy, immunotherapy, and other drugs remain alternatives or are complementary to treatments delivered with the CyberKnife and TomoTherapy platforms. New product sales in this competitive market are primarily dominated by two companies: Elekta AB (Elekta) and Varian, a Siemens Healthineers company.
Traditional surgery and other forms of minimally invasive procedures, brachytherapy, chemotherapy, immunotherapy, and other drugs remain alternatives or are complementary to treatments delivered with the CyberKnife and TomoTherapy platforms. New product sales in this competitive market are primarily dominated by two companies: Elekta AB (Elekta) and Varian Medical Systems, Inc, a Siemens Healthineers company (“Varian”).
The InCise MLC and IMRT planning tools enable expansion of indications that can be treated with a CyberKnife platform to include many IMRT indications.
The InCise MLC and IMRT planning tools are designed to enable expansion of indications that can be treated with a CyberKnife platform to include many IMRT indications.
In addition, the CyberKnife platform eliminates the need for an invasive rigid frame to be screwed into the patient’s skull or affixed to other parts of the body, or for trained breath holding or gating instruments. Additional revenue generation through increased patient volumes.
In addition, the CyberKnife platform eliminates the need for an invasive rigid frame to be screwed into the patient’s skull or affixed to other parts of the body, or gating instruments. Additional revenue generation through increased patient volumes.
Assemblers of diagnostic X‑ray systems are also required to certify in reports to the FDA, equipment purchasers, and where applicable, to state agencies responsible for radiation protection, that diagnostic 22 Table of Contents and/or therapeutic X‑ray systems they assemble meet applicable requirements.
Assemblers of diagnostic X‑ray systems are also required to certify in reports to the FDA, equipment purchasers, and where applicable, to state agencies responsible for radiation protection, that diagnostic and/or therapeutic X‑ray systems they assemble meet applicable requirements.
The FDA reviewed and cleared the most recent versions of the CyberKnife System and TomoTherapy platforms, including the Radixact System, in this fiscal year. Pervasive and continuing regulation. After a device is placed on the market, numerous regulatory requirements apply.
The FDA reviewed and cleared the most recent versions of the CyberKnife System and TomoTherapy platforms, including the Radixact System, in fiscal 2021. Pervasive and continuing regulation. After a device is placed on the market, numerous regulatory requirements apply.
In many cases, these entities entered into arrangements with hospitals that billed Medicare for the furnishing of medical services, and the physician owners were among the 24 Table of Contents physicians who referred patients to the entity for services.
In many cases, these entities entered into arrangements with hospitals that billed Medicare for the furnishing of medical services, and the physician owners were among the physicians who referred patients to the entity for services.
The OIG has identified the following arrangements with purchasers and their agents as ones raising potential risk of violation of the federal Anti‑Kickback Statute: • Discount and free good arrangements that are not properly disclosed or accurately reported to federal healthcare programs; • Product support services, including billing assistance, reimbursement consultation and other services specifically tied to support of the purchased product, offered in tandem with another service or program (such as a reimbursement guarantee) that confers a benefit to the purchaser; • Educational grants conditioned in whole or in part on the purchase of equipment, or otherwise inappropriately influenced by sales and marketing considerations; • Research funding arrangements, particularly post‑marketing research activities, that are linked directly or indirectly to the purchase of products, or otherwise inappropriately influenced by sales and marketing considerations; and 23 Table of Contents • Other offers of remuneration to purchasers that are expressly or impliedly related to a sale or sales volume, such as “rebates” and “upfront payments,” other free or reduced‑price goods or services, and payments to cover costs of “converting” from a competitor’s products, particularly where the selection criteria for such offers vary with the volume or value of business generated.
The OIG has identified the following arrangements with purchasers and their agents as ones raising potential risk of violation of the federal Anti‑Kickback Statute: • Discount and free good arrangements that are not properly disclosed or accurately reported to federal healthcare programs; • Product support services, including billing assistance, reimbursement consultation and other services specifically tied to support of the purchased product, offered in tandem with another service or program (such as a reimbursement guarantee) that confers a benefit to the purchaser; • Educational grants conditioned in whole or in part on the purchase of equipment, or otherwise inappropriately influenced by sales and marketing considerations; • Research funding arrangements, particularly post‑marketing research activities, that are linked directly or indirectly to the purchase of products, or otherwise inappropriately influenced by sales and marketing considerations; and • Other offers of remuneration to purchasers that are expressly or impliedly related to a sale or sales volume, such as “rebates” and “upfront payments,” other free or reduced‑price goods or services, and payments to cover costs of “converting” from a competitor’s products, particularly where the selection criteria for such offers vary with the volume or value of business generated. 20 Table of Contents We have a variety of financial relationships with physicians who are in a position to generate business for us.
We strive to provide technologically superior products that covers substantially all aspects of radiation therapy to deliver precise treatments with high‑quality clinical outcomes that meet or exceed customer expectations. 18 Table of Contents In addition to competition from technologies performing similar functions as our platforms, competition also exists for the limited capital expenditure budgets of our customers.
We strive to provide technologically superior products that cover substantially all aspects of radiation therapy to deliver precise treatments with high‑quality clinical outcomes that meet or exceed customer expectations. In addition to competition from technologies performing similar functions as our platforms, competition also exists for the limited capital expenditure budgets of our customers.
Our marketing activities also include efforts to inform and educate patients with cancerous or benign tumors, or neurologic disorders, about the benefits of the CyberKnife and TomoTherapy platforms. Under our standard distribution agreement, we generally appoint a distributor for a specific country.
Our 12 Table of Contents marketing activities also include efforts to inform and educate patients with cancerous or benign tumors, or neurologic and/or endocrine disorders, about the benefits of the CyberKnife and TomoTherapy platforms. Under our standard distribution agreement, we generally appoint a distributor for a specific country.
Synchrony helps to maximize treatment effectiveness and minimize dose to surrounding healthy tissue because it accounts for the current and changing conditions of the patient during treatment delivery. 12 Table of Contents Diagnostic-like quality kVCT images enable better identification of tumors, dose verification and treatment planning We recently launched ClearRT™ helical kVCT imaging technology for the Radixact System.
Synchrony helps to maximize treatment effectiveness and minimize dose to surrounding healthy tissue because it accounts for the current and changing conditions of the patient during treatment delivery. 9 Table of Contents Diagnostic-like quality kVCT images enable better visualization of tumors, dose verification and re-planning. We recently launched ClearRT™ helical kVCT imaging technology for the Radixact System.
Each of these systems serves patient populations treated by the same medical specialty, radiation oncology, with advanced capabilities. The CyberKnife platform is also used by neurosurgeons specializing in radiosurgery to treat patients with tumors in the brain and spine, and neurologic disorders.
Each of these systems serve patient populations treated by the same medical specialty, radiation oncology, with advanced capabilities. The CyberKnife platform is also used by neurosurgeons specializing in radiosurgery to treat patients with tumors in the brain and spine, and neurologic and/or endocrine disorders.
The InTempo Imaging System with the Synchrony Fiducial Tracking System is designed to optimize imaging frequency during prostate treatments, for example, using time‑based image guidance to assist with tracking and correcting non‑predictable intrafraction target motion. 11 Table of Contents Iris Variable Aperture Collimator.
The InTempo Imaging System with the Synchrony Fiducial Tracking System is designed to optimize imaging frequency during prostate treatments, for example, using time‑based image guidance to assist with tracking and correcting non‑predictable intrafraction target motion. Iris Variable Aperture Collimator.
In addition, our portfolio includes comprehensive software solutions to enable and enhance the precise and efficient radiotherapy treatments with our advanced delivery systems. The CyberKnife Platform The CyberKnife platform is the only robotic, full-body stereotactic radiosurgery (SRS) and stereotactic body radiation therapy (SBRT) delivery device on the market.
In addition, our portfolio includes comprehensive software solutions to enable and enhance the precise and efficient radiotherapy treatments with our advanced delivery systems. The CyberKnife Platform The CyberKnife platform is the only robotic, full-body SRS and SBRT delivery device on the market.
The CyberKnife platform may be used to target tumors that cannot be easily treated with traditional surgical techniques because of their location, number, size, shape or proximity to vital tissues or organs, or because of the age or health of the patient.
Treatment of inoperable or surgically complex tumors. The CyberKnife platform may be used to target tumors that cannot be easily treated with traditional surgical techniques because of their location, number, size, shape or proximity to vital tissues or organs, or because of the age or health of the patient.
It makes it possible and practical for clinicians to deliver radiation dose with sub-millimeter precision and accuracy, even for tumors that move with respiration. X‑ray sources. The low‑energy X‑ray sources generate the X‑ray images that help determine the location of bony or other anatomic landmarks, or implanted fiducials, which are used for tracking throughout the entire treatment. Image detectors.
It makes it possible and practical for clinicians to deliver radiation dose with sub-millimeter precision and accuracy, even for tumors that are prone to movement. Imaging sources. The low‑energy X‑ray sources generate the images that help determine the location of bony or other anatomic landmarks, or implanted fiducials, which are used for tracking throughout the entire treatment. Imaging detectors.
In December 2015, the Patient Access and Medicare Protection Act (PAMPA) stopped the IMRT and 3D CRT delivery codes from being implemented and prevented reimbursement reductions in the freestanding center setting through calendar year 2019.
In December 2015, the Patient Access and Medicare Protection Act (PAMPA) stopped the 16 Table of Contents IMRT and 3D CRT delivery codes from being implemented and prevented reimbursement reductions in the freestanding center setting through calendar year 2019.
Coding The codes that are used to report radiosurgery treatment delivery in 2022 for the hospital outpatient department are Current Procedural Terminology (CPT) codes 77372 and 77373 for single fraction intracranial radiosurgery and single fraction extracranial/multi‑session radiosurgery/stereotactic body radiation therapy. For freestanding centers, robotic radiosurgery is billed with robotic radiosurgery Healthcare Common Procedural Codes (HCPCs) G0339 and G0340.
Coding The codes that are used to report radiosurgery treatment delivery in 2023 for the hospital outpatient department are Current Procedural Terminology (“CPT”) codes 77372 and 77373 for single fraction intracranial radiosurgery and single fraction extracranial/multi‑session radiosurgery/stereotactic body radiation therapy. For freestanding centers, robotic radiosurgery is billed with robotic radiosurgery Healthcare Common Procedural Codes (“HCPCs”) G0339 and G0340.
In 2022, the primary treatment delivery codes for robotic radiosurgery are priced by the regional Medicare Administrative Contractors. In 2022, it is expected the robotic SRS/SBRT delivery codes will remain contractor priced for providers paid under the traditional fee-for-service methodology. Payment rates for IMRT and 3DRT procedures are set by CMS with adjustments to account for geographic market variations.
In 2023, the primary treatment delivery codes for robotic radiosurgery are priced by the regional Medicare Administrative Contractors. In 2023, the robotic SRS/SBRT delivery codes remain contractor priced for providers paid under the traditional fee-for-service methodology. Payment rates for IMRT and 3DRT procedures are set by CMS with adjustments to account for geographic market variations.
By comparison, traditional frame‑based radiosurgery systems are generally limited to treating brain tumors and use cobalt 60 radioactive material, which decays over time and is difficult to replace.
By comparison, traditional frame‑based radiosurgery systems are generally limited to treating brain tumors with some using cobalt 60 radioactive material, which decays over time and is difficult to replace.
The China Supervision and Regulation of Medical Devices (No. 680) requires licensing from the National Medical Products Administration (NMPA) to market, sell, 26 Table of Contents and import our product type. The NMPA licenses require testing by the Beijing Institute for Medical Devices Testing (BIMT) specifically related to China variations of global safety and performance standards.
The China Supervision and Regulation of Medical Devices (No. 680) requires licensing from the National Medical Products Administration (“NMPA”) to market, sell, and import our product type. The NMPA licenses require testing by the Beijing Institute for Medical Devices Testing (“BIMT”) specifically related to China variations of global safety and performance standards.
Devices that comply with the requirements of the relevant directive will be entitled to bear CE conformity marking, indicating that the device conforms to the essential requirements of the applicable directives and, accordingly, may be commercially distributed throughout the member states of the EEA.
Devices that comply with the requirements of the relevant directive will be entitled to bear the Conformité Européene (“CE”) conformity marking, indicating that the device conforms to the essential requirements of the applicable directives and, accordingly, may be commercially distributed throughout the member states of the EEA.
CMS pays separately for ancillary procedures in addition to the delivery of IMRT, 3D CRT, and SRS/SBRT as well as a Comprehensive APC that bundles delivery and some ancillary services for single session cranial radiosurgery. 19 Table of Contents Payment for treatment with CyberKnife and TomoTherapy platforms are also available in the freestanding center setting.
CMS pays separately for ancillary procedures in addition to the delivery of IMRT, 3D CRT, and SRS/SBRT as well as comprehensive ambulatory payment classifications that bundles delivery and some ancillary services for single session cranial radiosurgery. Payment for treatment with CyberKnife and TomoTherapy platforms are also available in the freestanding center setting.
Our solutions: • Novel artificial intelligence driven radiation therapy systems that automatically adapt treatment delivery for targets that move, synchronizing the radiation beam with the target’s motion in real-time throughout treatment delivery. • Powerful treatment planning software and optimizer reduces the time to create high quality treatment plans and the time it takes to deliver patient treatments as compared to the prior planning software, so clinicians can treat more patients each day. • One-of-a-kind imaging solution designed to produce exceptional diagnostic-like quality CT images, quickly and cost-effectively. • Automated tools help to identify the interfraction changes for which re-planning is clinically beneficial and facilitate adaptation of the radiation dose precisely to the patient’s tumor. • Distinctive software accelerates and automates the re-planning process to make re-treatment of a previously irradiated area more efficient for practices and more effective for patients.
Our solutions include: • Novel artificial intelligence driven radiation therapy systems that automatically adapt treatment delivery for targets that move, synchronizing the radiation beam with the target’s motion in real-time throughout treatment delivery. • Powerful treatment planning software and optimizer that reduces the time to create high quality treatment plans and the time it takes to deliver patient treatments as compared to the prior planning software, so clinicians can treat more patients each day. • One-of-a-kind imaging solution designed to produce exceptional diagnostic-like quality CT images, quickly and cost-effectively. • Automated tools that help to identify the interfraction changes for which re-planning is clinically beneficial and facilitate adaptation of the radiation dose precisely to the patient’s tumor. • Distinctive software that accelerates and automates the re-planning process to make re-treatment of a previously irradiated area more efficient for practices and more effective for patients. • Advanced architecture that accommodates third party surface guidance interfaces that can enable Deep Inspiration Breath Hold (“DIBH”) for highly accurate and precise breast treatments.
As of June 30, 2022, we had 1044 full-time employees, including 388 employees employed outside of the United States. We also engage part-time employees and independent contractors to supplement our workforce. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
As of June 30, 2023, we had 1024 employees, including 411 employees employed outside of the United States. We also engage part-time employees and independent contractors to supplement our workforce. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
This flexibility enhances the ability to diversify beam trajectories and beam entrance and exit points, helping to minimize risks of radiation damage to healthy cells near the tumor. Furthermore, the rapid response time of the manipulator arm allows tracking of tumors that move with respiration. Real‑time image‑guidance system with continuous target tracking and correction.
This flexibility enhances the ability to diversify beam trajectories and beam entrance and exit points, helping to minimize risks of radiation damage to healthy cells near the tumor. Furthermore, the rapid response time of the manipulator arm allows tracking of tumors that are prone to movement. 7 Table of Contents Real‑time image‑guidance system with continuous target tracking and correction.
All SEC filings are also available at the SEC’s website at www.sec.gov. 27 Table of Contents We also use our investor relations website as a channel of distribution for important company information. For example, webcasts of our earnings calls and certain events we participate in or host with members of the investment community are on our investor relations website.
All SEC filings are also available at the SEC’s website at www.sec.gov. We also use our investor relations website as a channel of distribution for material company information in compliance with Regulation FD. For example, webcasts of our earnings calls and certain events we participate in or host with members of the investment community are on our investor relations website.
The PreciseART software's streamlined re‑planning capabilities leverage full integration of treatment delivery, planning and database systems to allow clinicians to efficiently generate new treatment plans based on previous plan data. It also maintains the integrity of original treatment plans to ensure tumor coverage, preserve Organ‑At‑Risk (OAR) doses and reduce toxicity.
The PreciseART software's streamlined re‑planning capabilities leverage full integration of treatment delivery, planning and database systems to allow clinicians to efficiently generate new treatment plans based on previous plan data. It is also designed to maintain the integrity of original treatment plans to ensure tumor coverage, preserve Organ‑At‑Risk (“OAR”) doses and reduce toxicity. PreciseRTX Retreatment Option.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands, our products may become obsolete or less useful and our operating results will suffer. • International sales of our products account for a significant portion of our revenue, which exposes us to risks inherent in international operations. • Enhanced international tariffs that affect our products or components within our products, other trade barriers or a global trade war could increase our costs and materially and adversely affect our business operations and financial condition. • The ongoing military action between Russia and Ukraine, and the global response to it, could adversely affect our business, financial condition and results of operations. • We face risks related to the current global economic environment, which could adversely affect our business, financial condition and results of operations. • If we encounter manufacturing problems, or if our manufacturing facilities do not continue to meet federal, state or foreign manufacturing standards, we may be required to temporarily cease all or part of our manufacturing operations, which would result in delays and lost revenue. • If we are unable to develop new products or enhance existing products to meet our customers’ needs and compete favorably in the market, we may be unable to attract or retain customers. • If we do not effectively manage our growth, our business may be significantly harmed. • We could become subject to product liability claims, product recalls, other field actions and warranty claims that could be expensive, divert management’s attention and harm our business. 29 Table of Contents • Our reliance on single‑source suppliers for critical components of our products could harm our ability to meet demand for our products in a timely and cost effective manner. • The inflationary environment could materially adversely impact our business and results of operations. • We depend on key employees, the loss of whom would adversely affect our business. • Disruption of critical information technology systems, infrastructure and data or cyberattacks could harm our business and financial condition. • Any actual or perceived failure by us to comply with legal or regulatory requirements related to privacy, cyber security and data protection in one or multiple jurisdictions could result in proceedings, actions or penalties against us. • The safety and efficacy of our products for certain uses is not yet supported by long‑term clinical data, and our products may therefore prove to be less safe and effective than initially thought. • Third parties may claim we are infringing their intellectual property or that we are operating outside the scope of or violating a license or other agreement relating to their intellectual property, and we could suffer significant audit, litigation or licensing expenses, incur liabilities associated with indemnification obligations to customers, experience disruptions in the supply for components of our product or related services, or be prevented from selling our product or components of our product. • It is difficult and costly to protect our intellectual property and our proprietary technologies and we may not be able to ensure their protection. • Because the majority of our product revenue is derived from sales of the CyberKnife and TomoTherapy platforms, which have a long and variable sales and installation cycle, our revenues and cash flows may be volatile and difficult to predict.
Biggest changeWe may be unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands. • We are subject to risks arising from our international operations, which may adversely affect our business, financial condition, and results of operations. • Our results may be impacted by changes in foreign currency exchange rates. • If we encounter manufacturing problems, or if our manufacturing facilities do not continue to meet federal, state or foreign manufacturing standards, we may be required to temporarily cease all or part of our manufacturing operations, which would result in delays and lost revenue. • If we are unable to develop new products or enhance existing products to meet our customers’ needs and compete favorably in the market, we may be unable to attract or retain customers. • If we do not effectively manage our growth, our business may be significantly harmed. • We could become subject to product liability claims, product recalls, other field actions and warranty claims that could be expensive, divert management’s attention and harm our business. • Our reliance on single‑source suppliers for critical components of our products could harm our ability to meet demand for our products in a timely and cost effective manner. • We depend on key employees, the loss of whom would adversely affect our business.
In addition, some of our customers have been delayed in obtaining, or have not been able to obtain, necessary financing for the construction or renovation of facilities to house CyberKnife or TomoTherapy platforms, the cost of which can be substantial.
In addition, some of our customers have been delayed in obtaining, or have not been able to obtain, necessary financing for the construction or renovation of facilities to house the CyberKnife or TomoTherapy platforms, the cost of which can be substantial.
Governments, public institutions, and other organizations have taken and are taking certain preventative or protective measures to combat the spread of the pandemic. While we are unable to predict the full impact of the pandemic, we are closely monitoring the trends in the COVID-19 pandemic and are continually assessing its current and potential effects on our business.
Governments, public institutions, and other organizations have taken and are taking certain preventative or protective measures to combat the spread of the COVID-19 pandemic. While we are unable to predict the full impact of the COVID-19 pandemic, we are closely monitoring the trends in the COVID-19 pandemic and are continually assessing its current and potential effects on our business.
For example, our cancellations of orders have increased due to the COVID-19 pandemic. Further, a lack of coordinated response on or compliance with risk mitigation with respect to the COVID-19 pandemic could result in significant increases to the duration and severity of the pandemic and could have a corresponding negative impact on our business.
For example, cancellations of orders have increased due to the COVID-19 pandemic. Further, a lack of coordinated response on or compliance with risk mitigation with respect to the COVID-19 pandemic could result in significant increases to the duration and severity of the pandemic and could have a corresponding negative impact on our business.
Although the EU SCCs remain a valid means to transfer personal data from the EEA, the CJEU imposed additional obligations in connection with their use and, on June 4, 2021, the European Commission issued revised the EU SCCs that address certain concerns of the CJEU.
Although the EU SCCs remain a valid means to transfer personal data from the EEA, the CJEU imposed additional obligations in connection with their use and, on June 4, 2021, the European Commission issued revised EU SCCs that address certain concerns of the CJEU.
Any inability to adequately address concerns relating to privacy, data protection or cyber security, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.
Any inability to adequately address concerns relating to privacy, data protection or cyber security, even if unfounded, or to comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.
The military conflict in Ukraine has led to an unprecedented expansion of sanction programs imposed against Russia by the United States, Canada, the EU, the United Kingdom, Switzerland, and Japan, among others, that in relevant part, impose sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and certain Russian businesses, some of which have significant financial and trade ties to the EU, making it increasingly difficult to transfer money from Russia to other countries.
The military conflict in Ukraine has also led to an unprecedented expansion of sanction programs imposed against Russia by the United States, Canada, the EU, the United Kingdom, Switzerland, and Japan, among others, that in relevant part, impose sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and certain Russian businesses, some of which have significant financial and trade ties to the EU, making it increasingly difficult to transfer money from Russia to other countries.
For example, any delays in the JV obtaining necessary regulatory clearances for a Class B device, in customers in China obtaining Class A or Class B user licenses or in the subsequent tender process to complete the sale could 57 Table of Contents affect the JV’s expected ability to initiate sales, recognize revenue and achieve revenue and orders expectations in China; • we may not be in a position to exercise sole decision making authority regarding any collaboration, partnership, alliance or joint venture, which could result in impasses on decisions or decisions made by our partners, and our partners in such collaborations, partnerships, alliances or joint ventures may have economic or business interests that are, or may become, inconsistent with our interests; • collaborations, partnerships, alliances and joint ventures can be difficult to manage and may involve significant expense and divert the focus and attention of our management and other key personnel away from our existing businesses; • with respect to joint ventures, we may not be able to attract qualified employees, acquire customers or develop reliable supply, distribution or other partnerships; • we could face potential damage to existing customer relationships or lack of customer acceptance or inability to attract new customers as a result of certain collaborations, partnerships, alliances and joint ventures; • collaborators, partners, alliance partners and joint ventures may also operate in foreign jurisdictions with laws and regulations with which we have limited familiarity, which could adversely impact our ability to comply with such laws and regulations and may lead to increased litigation risk; and • foreign laws may offer us inadequate or less intellectual property protection relative to U.S. laws, which may impact our ability, as well as the ability of the collaborator, partner, alliance partner and joint venture, to safeguard our respective intellectual property from infringement and misappropriation.
For example, any delays in the JV obtaining necessary regulatory clearances for a Class B device, in customers in China obtaining Class A or Class B user licenses or in the subsequent tender process to complete the sale could affect the JV’s expected ability to initiate sales, recognize revenue and achieve revenue and orders expectations in China; • we may not be in a position to exercise sole decision making authority regarding any collaboration, partnership, alliance or joint venture, which could result in impasses on decisions or decisions made by our partners, and our partners in such collaborations, partnerships, alliances or joint ventures may have economic or business interests that are, or may become, inconsistent with our interests; • collaborations, partnerships, alliances and joint ventures can be difficult to manage and may involve significant expense and divert the focus and attention of our management and other key personnel away from our existing businesses; • with respect to joint ventures, we may not be able to attract qualified employees, acquire customers or develop reliable supply, distribution or other partnerships; • we could face potential damage to existing customer relationships or lack of customer acceptance or inability to attract new customers as a result of certain collaborations, partnerships, alliances and joint ventures; • collaborators, partners, alliance partners and joint ventures may also operate in foreign jurisdictions with laws and regulations with which we have limited familiarity, which could adversely impact our ability to comply with such laws and regulations and may lead to increased litigation risk; and • foreign laws may offer us inadequate or less intellectual property protection relative to U.S. laws, which may impact our ability, as well as the ability of the collaborator, partner, alliance partner and joint venture, to safeguard our respective intellectual property from infringement and misappropriation.
As a result, we may be subject to significant consequences, including penalties and fines, for any failure to comply with such laws, regulations and directives. Privacy, cyber security and data protection legislation around the world is comprehensive and complex and there has been a recent trend towards more stringent enforcement of requirements regarding protection and confidentiality of personal data.
As a result, we may be subject to significant consequences, including penalties and fines, for any failure to comply with such laws, regulations and directives. Privacy, cyber security and data protection legislation around the world is comprehensive and complex and there has been a trend towards more stringent enforcement of requirements regarding protection and confidentiality of personal data.
From time to time, we may not be in compliance with such covenants or other terms governing the Credit Facilities and we may be required to obtain waivers or amendments to the credit agreement from our lenders in order to maintain compliance and there can be no certainty that any such waiver or amendment will be available, or what the cost of such waiver or amendment, if obtained, would be.
From time to time, we may not be in compliance with such covenants or other terms governing the Credit Facilities and we may be required to obtain waivers or amendments to the Existing Credit Agreement from our lenders in order to maintain compliance and there can be no certainty that any such waiver or amendment will be available, or what the cost of such waiver or amendment, if obtained, would be.
If we do not allocate and effectively manage the resources necessary to build, sustain and secure the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions or the loss, unavailability of or damage to intellectual property through a cyberattack (including ransomware and other attacks) or other security breach or incident.
If we do not allocate and effectively manage the resources necessary to build, sustain and secure the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions or the loss, unavailability of or damage to data and intellectual property through a cyberattack (including ransomware and other attacks) or other security breach or incident.
Furthermore, certain parts required for the manufacture and servicing of our products are scarce and becoming increasingly difficult to source even at increased prices. If such parts become unavailable to us, we would not be able to manufacture or service our products, which would adversely impact revenue, gross margins, and net income (loss).
Furthermore, certain parts required for the manufacturing and servicing of our products are scarce and becoming increasingly difficult to source, even at increased prices. If such parts become unavailable to us, we would not be able to manufacture or service our products, which would adversely impact revenue, gross margins, and net income (loss).
Further, the imposition of additional tariffs by the U.S. could result in the adoption of additional tariffs by China and other countries, as well as further retaliatory actions by any affected country. Any resulting trade war could negatively impact the global market for medical devices, including radiation therapy devices, and could have a significant adverse effect on our business.
Further, the imposition of additional tariffs by the U.S. could result in the adoption of additional tariffs by other countries, as well as further retaliatory actions by any affected country. Any resulting trade war could negatively impact the global market for medical devices, including radiation therapy devices, and could have a significant adverse effect on our business.
For example, in the U.S., Health Insurance Portability and Accountability Act (“HIPAA”) privacy and security rules require us as a business associate, in certain instances, to protect the confidentiality of patient health information, and the Federal Trade Commission has consumer protection authority, including regarding privacy and cyber security.
For example, in the U.S., privacy and security rules implementing the Health Insurance Portability and Accountability Act (“HIPAA”) require us as a business associate, in certain instances, to protect the confidentiality of patient health information, and the Federal Trade Commission has consumer protection authority, including regarding privacy and cyber security.
The ultimate reaction of other countries and the impact of these tariffs or other actions on the U.S., China, the global economy and our business, financial condition and results of operations, cannot be predicted at this time, nor can we predict the impact of any other developments with respect to global trade.
The ultimate reaction of other countries and the impact of these tariffs or other actions on the U.S., the global economy and our business, financial condition and results of operations, cannot be predicted at this time, nor can we predict the impact of any other developments with respect to global trade.
In the UK, the Data Protection Act of 2018 and the UK GDPR, which collectively implement material provisions of the GDPR and provide for penalties for noncompliance of up to the greater of £17.5 million or four percent of worldwide revenues. Data transfer and localization requirements also appear to be increasing and becoming more complex.
In the UK, the Data Protection Act of 2018 and the UK GDPR collectively implement material provisions of the GDPR and provide for penalties for noncompliance of up to the greater of £17.5 million or four percent of worldwide revenues. Data transfer and localization requirements also appear to be increasing and becoming more complex.
As a result of timing delays caused by the COVID-19 pandemic, we have and are continuing to experience disruptions in our sales and revenue cycle as well as declines in deliveries and installations of our products, which has adversely impacted the pace at which our backlog converts to revenue.
In addition, as a result of timing delays caused by the COVID-19 pandemic, we have and are continuing to experience disruptions in our sales and revenue cycle as well as declines in deliveries and installations of our products, which has adversely impacted the pace at which our backlog converts to revenue.
Unexpected events at any of our facilities or otherwise, including as a result of responses to epidemics or pandemics; fires or explosions; natural disasters, such as hurricanes, floods, tornados and earthquakes; war or terrorist activities (including the conflict between Russia and Ukraine); unplanned outages; supply disruptions; and failures of equipment or systems, including telecommunications systems, or the failure to take adequate steps to mitigate the likelihood or potential impact of such events, could significantly disrupt our operations, delay or prevent product manufacturing and shipment for the time required to repair, rebuild or replace our manufacturing facilities, which could be lengthy, result in large expenses to repair or replace the facilities, and adversely affect our results of operation.
Unexpected events at any of our facilities or otherwise, including as a result of responses to epidemics or pandemics; fires or explosions; natural disasters, such as hurricanes, floods, tornadoes and earthquakes; war or terrorist activities (including the conflict between Russia and Ukraine); unplanned outages; supply disruptions; and failures of equipment or systems, including telecommunications systems, or the failure to take adequate steps to mitigate the likelihood or potential impact of such events, could significantly disrupt our operations, delay or prevent product manufacturing and shipment for the time required to repair, rebuild or replace our manufacturing facilities, which could be lengthy, result in large expenses to repair or replace the facilities, and adversely affect our results of operation.
For example, the People’s Republic of China and Russia have passed laws that require individually identifiable data on their citizens to be maintained on local servers and that may restrict transfer or processing of that data if certain data quantity thresholds are triggered.
For example, the People’s Republic of China (“PRC”) and Russia have passed laws that require individually identifiable data on their citizens to be maintained on local servers and that may restrict transfer or processing of that data if certain data quantity thresholds are triggered.
President Joseph Biden signed an executive order instituting a framework for determining national security risks of transactions that involve applications connected to governments or militaries of certain foreign adversaries or that collect sensitive personal data from U.S. consumers.
President Biden signed an executive order instituting a framework for determining national security risks of transactions that involve applications connected to governments or militaries of certain foreign adversaries or that collect sensitive personal data from U.S. consumers.
We are and may become a party to legal proceedings, claims and other legal matters in the ordinary course of business or otherwise including intellectual property, product liability, employment, class action, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings.
We are and may become a party to legal proceedings, claims, investigations, demands and other legal matters in the ordinary course of business or otherwise including intellectual property, product liability, employment, class action, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings.
Also, because we purchase major components for each of our products from outside suppliers, we face the additional risk that infringement claims may be brought against us based on patents and other intellectual property rights that are embodied or contained in, or practiced by, those components (including software components) that we obtain from third parties, and any such claims against us, such as by our direct and indirect suppliers, may additionally allege that we are operating outside the scope of or violating a license or other agreement relating to their intellectual property.
Also, because we purchase major components and software for each of our products from third party suppliers and manufacturers, we face the additional risk that infringement claims may be brought against us based on patents and other intellectual property rights that are embodied or contained in, or practiced by, those components (including software components) that we obtain from third parties, and any such claims against us, such as by our direct and indirect suppliers, may additionally allege that we are operating outside the scope of or violating a license or other agreement relating to their intellectual property.
Provisions in the indenture for the Notes, the credit agreement for our New Credit Facilities, our certificate of incorporation and our bylaws could discourage or prevent a takeover, even if an acquisition would be beneficial in the opinion of our stockholders.
Provisions in the indenture for the Notes, the credit agreement for our Credit Facilities, our certificate of incorporation and our bylaws could discourage or prevent a takeover, even if an acquisition would be beneficial in the opinion of our stockholders.
Dollar; 40 Table of Contents • effects of and uncertainties caused by the United Kingdom’s withdrawal from the European Union; • contractual provisions governed by foreign laws; and • natural disasters, such as earthquakes and fires, and global or regional health pandemics or epidemics, such as COVID-19, or data privacy or security incidents, that may have a disproportionate effect in certain geographies resulting in decreased demand or decreased ability of our employees or employees of our customers and partners to work and travel.
Dollar; 35 Table of Contents • effects of and uncertainties caused by the United Kingdom’s withdrawal from the European Union; • contractual provisions governed by foreign laws; and • natural disasters, such as earthquakes and fires, and global or regional health pandemics or epidemics, such as COVID-19 or data privacy or security incidents, that may have a disproportionate effect in certain geographies resulting in decreased demand or decreased ability of our employees or employees of our customers and partners to work and travel.
These and other factors, including the following, may affect the rate and level of market acceptance of the CyberKnife and TomoTherapy platforms: • the CyberKnife and TomoTherapy platforms’ price relative to other products or competing treatments; • our ability to develop new products and enhancements and receive regulatory clearances and approval, if required, to such products in a timely manner; • increased scrutiny by state boards when evaluating certificates of need requested by purchasing institutions; • perception by patients, physicians and other members of the healthcare community of the CyberKnife and TomoTherapy platforms’ safety, efficacy, efficiency and benefits compared to competing technologies or treatments; • willingness of physicians to adopt new techniques and the ability of physicians to acquire the skills necessary to operate the CyberKnife and TomoTherapy platforms; • extent of third‑party coverage and reimbursement rates, particularly from Medicare, for procedures using the CyberKnife and TomoTherapy platforms; and • development of new products and technologies by our competitors or new treatment alternatives.
These and other factors, including the following, may affect the rate and level of market acceptance of the CyberKnife and TomoTherapy platforms: • the CyberKnife and TomoTherapy platforms’ price relative to other products or competing treatments; • our ability to develop new products and enhancements and receive regulatory clearances and approval, if required, to such products in a timely manner; • increased scrutiny by state boards when evaluating certificates of need requested by purchasing institutions; 28 Table of Contents • perception by patients, physicians and other members of the healthcare community of the CyberKnife and TomoTherapy platforms’ safety, efficacy, efficiency and benefits compared to competing technologies or treatments; • willingness of physicians to adopt new techniques and the ability of physicians to acquire the skills necessary to operate the CyberKnife and TomoTherapy platforms; • extent of third‑party coverage and reimbursement rates, particularly from Medicare, for procedures using the CyberKnife and TomoTherapy platforms; and • development of new products and technologies by our competitors or new treatment alternatives.
The credit agreement governing the Credit Facilities also include certain restrictive covenants that limit, among other things, our ability and our subsidiaries’ ability to (i) incur indebtedness, (ii) incur liens on their property, (iii) pay dividends or make other distributions, (iv) sell their assets, (v) make certain loans or investments, (vi) merge or consolidate, (vii) voluntarily repay or prepay certain indebtedness and (viii) enter into transactions with affiliates, in each case, subject to certain exceptions.
The credit agreement governing the Credit Facilities (the “Existing Credit Agreement”) also include certain restrictive covenants that limit, among other things, our ability and our subsidiaries’ ability to (i) incur indebtedness, (ii) incur liens on their property, (iii) pay dividends or make other distributions, (iv) sell their assets, (v) make certain loans or investments, (vi) merge or consolidate, (vii) voluntarily repay or prepay certain indebtedness and (viii) enter into transactions with affiliates, in each case, subject to certain exceptions.
As the techniques used to obtain unauthorized access to our systems change frequently and may be difficult to detect, we may not be able to anticipate and prevent these intrusions or mitigate them when they occur.
The techniques used to obtain unauthorized access to our systems change frequently and may be difficult to detect, and we may not be able to anticipate and prevent these intrusions or mitigate them when they occur.
We cannot assure you that our backlog will result in revenue on a timely basis or at all, or that any cancelled contracts will be replaced. 38 Table of Contents Our industry is subject to intense competition and rapid technological change, which may result in products or new tumor treatments that are superior to the CyberKnife and TomoTherapy platforms.
We cannot assure you that our backlog will result in revenue on a timely basis or at all, or that any cancelled contracts will be replaced. 33 Table of Contents Our industry is subject to intense competition and rapid technological change, which may result in products or new tumor treatments that are superior to the CyberKnife and TomoTherapy platforms.
Several of these competitors are also able to leverage their fixed sales, service and other costs over multiple products or product lines. In particular, we compete with a number of existing radiation therapy equipment companies, including Varian, a Siemens Healthineers company, Elekta AB (“Elekta”), ViewRay, Inc., RefleXion Medical Inc. and Zap Surgical Systems.
Several of these competitors are also able to leverage their fixed sales, service and other costs over multiple products or product lines. In particular, we compete with a number of existing radiation therapy equipment companies, including Varian Medical Systems, Inc., a Siemens Healthineers company (“Varian”), Elekta AB (“Elekta”), RefleXion Medical Inc. and Zap Surgical Systems.
We may be held liable if one of our CyberKnife or TomoTherapy platforms or our Precision Treatment Planning with iDMS Data Management System software causes or contributes to injury or death or is found otherwise unsuitable during usage. Our products incorporate sophisticated components and computer software. Complex software can contain errors, particularly when first introduced.
We may be held liable if one of our CyberKnife or TomoTherapy platforms or our software, including the Precision Treatment Planning with iDMS Data Management System software causes or contributes to injury or death or is found otherwise unsuitable during usage. Our products incorporate sophisticated components and computer software. Complex software can contain errors, particularly when first introduced.
This impact could result in reputational, competitive, operational, or other business harm as well as financial costs and regulatory action. While we do maintain insurance coverage that is intended to address certain aspects of data security risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
This impact could result in reputational, competitive, operational, or other business harm as well as financial costs and claims, demands, litigation and regulatory action. While we do maintain insurance coverage that is intended to address certain aspects of data security risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
Our ability to compete may also be adversely affected when purchase decisions are based solely upon price, since our products are premium‑priced systems due to their higher level of functionality and performance. 39 Table of Contents We are subject to risks arising from our international operations, which may adversely affect our business, financial condition, and results of operations.
Our ability to compete may also be adversely affected when purchase decisions are based solely upon price, since our products are premium‑priced systems due to their higher level of functionality and performance. 34 Table of Contents We are subject to risks arising from our international operations, which may adversely affect our business, financial condition, and results of operations.
Our logistics providers may terminate their relationship with us, suffer an interruption in their business, including as a result of COVID-19, significantly increase fees for services or experience delays, disruptions or quality control problems in their operations, or we may have to change and qualify alternative logistics providers for our spare parts.
Our logistics providers may terminate their relationship with us, suffer an interruption in their business, including as a result of macroeconomic factors or COVID-19, significantly increase fees for services or experience delays, disruptions or quality control problems in their operations, or we may have to change and qualify alternative logistics providers for our spare parts.
We generally do not maintain large volumes of inventory, which makes us even more susceptible to harm if a single‑source supplier fails to deliver components on a timely basis, and maintaining our historical levels of inventory has been adversely impacted by the COVID-19 pandemic.
We generally do not maintain large volumes of inventory, which makes us even more susceptible to harm if a single source supplier fails to deliver components on a timely basis, and maintaining our historical levels of inventory has been adversely impacted by the COVID-19 pandemic and macroeconomic environment.
To manage our growth, we must expand our facilities, augment our management, operational and financial systems, hire and train additional qualified personnel, scale‑up our manufacturing capacity and expand our marketing and distribution capabilities, all of which will be more difficult to accomplish the longer that our employees must work remotely from home.
To manage our growth, we must expand our facilities, augment our management, operational and financial systems, hire and train additional qualified personnel, scale‑up our manufacturing capacity and expand our marketing and distribution capabilities, all of which will be more difficult to accomplish the more employees we have that work remotely from home.
GAAP, and are not within the scope of the audit conducted by our independent registered public accounting firm. Also, for the reasons discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, our orders and backlog cannot necessarily be relied upon as accurate predictors of future revenues.
GAAP”), and are not within the scope of the audit conducted by our independent registered public accounting firm. Also, for the reasons discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, our orders and backlog cannot necessarily be relied upon as accurate predictors of future revenues.
We often need to educate physicians about the use of stereotactic radiosurgery, image guided radiation therapy (IGRT) and adaptive radiation therapy, convince healthcare payors that the benefits of the CyberKnife and TomoTherapy platforms and their related treatment processes outweigh their costs, and help train qualified physicians in the skilled use of these systems.
We often need to educate physicians about the use of stereotactic radiosurgery, image guided radiation therapy (“IGRT”) and adaptive radiation therapy, convince healthcare payors that the benefits of the CyberKnife and TomoTherapy platforms and their related treatment processes outweigh their costs, and help train qualified physicians in the skilled use of these systems.
We have expended and will continue to expend significant resources on marketing and educational efforts to create awareness of stereotactic radiosurgery and robotic intensity-modulated radiotherapy (IMRT) as well as adaptive radiation therapy and IGRT generally and to encourage the acceptance and adoption of our products for these technologies.
We have expended and will continue to expend significant resources on marketing and educational efforts to create awareness of stereotactic radiosurgery and robotic intensity-modulated radiotherapy (“IMRT”) as well as adaptive radiation therapy and IGRT generally and to encourage the acceptance and adoption of our products for these technologies.
In addition, as a result of global supply chain disruptions, we have experienced and continue to experience disruptions in parts of our supply chain, which has caused delays in the receipt of certain component parts for our products and increased pricing pressure for such parts, including with respect to parts purchased from our single-source suppliers, adversely affecting our gross margins in the near term, and increasing the risk that these supply chain disruptions could materially affect our ability to meet customer demand.
In addition, as a result of global supply chain disruptions, we have experienced and continue to experience disruptions in parts of our supply chain, which has caused delays in the receipt of certain component parts for our products and increased pricing pressure for such parts, including with respect to parts purchased from our single-source suppliers, adversely affecting our gross margins in the near 40 Table of Contents term, and increasing the risk that these supply chain disruptions could materially affect our ability to meet customer demand.
If one or more holders elect 67 Table of Contents to convert such notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying solely cash in lieu of any fractional share), including if we have irrevocably elected full physical settlement upon conversion, we would be required to make cash payments to satisfy all or a portion of our conversion obligation based on the applicable conversion rate, which could adversely affect our liquidity.
If one or more holders elect to convert such notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying solely cash in lieu of any fractional share), including if we have irrevocably elected full physical settlement upon conversion, we would be required to make cash payments to satisfy all or a portion of our conversion obligation based on the applicable conversion rate, which could adversely affect our liquidity.
In the event that we become subject to a patent infringement or other intellectual property lawsuit and if the relevant patents or other intellectual property were upheld as valid and enforceable and we were found to infringe or violate the terms of a license or other agreement to which we are a party, we could be subject to third-party audit, experience disruptions in the supply of third-party components or related services, or be prevented from selling our 53 Table of Contents products (or components of our products) unless we obtain a license or are able to redesign the product to avoid infringement.
In the event that we become subject to a patent infringement or other intellectual property lawsuit and if the relevant patents or other intellectual property were upheld as valid and enforceable and we were found to infringe or violate the terms of a license or other agreement to which we are a party, we could be subject to third-party audit, experience disruptions in the supply of third-party components or related services, or be prevented from selling our products (or components of our products) unless we obtain a license or are able to redesign the product to avoid infringement.
In addition, even if holders do not elect to convert such notes, if we have irrevocably elected net share settlement upon conversion we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such notes as a current rather than long‑term liability, which could result in a material reduction of our net working capital.
In addition, even if holders do not elect to convert such notes, if we have irrevocably elected net share settlement upon conversion we could be required under applicable accounting rules to 60 Table of Contents reclassify all or a portion of the outstanding principal of such notes as a current rather than long‑term liability, which could result in a material reduction of our net working capital.
We cannot predict what healthcare reform legislation or regulations, if any, including any potential repeal or 65 Table of Contents amendment of the ACA, will be enacted in the United States or elsewhere, what impact any legislation or regulations related to the healthcare system that may be enacted or adopted in the future might have on our business, or the effect of ongoing uncertainty or public perception about these matters will have on the purchasing decisions of our customers.
We cannot predict what healthcare reform legislation or regulations, if any, including any potential repeal or amendment of the ACA, will be enacted in the United States or elsewhere, what impact any legislation or regulations related to the healthcare system that may be enacted or adopted in the future might have on our business, or the effect of ongoing uncertainty or public perception about these matters will have on the purchasing decisions of our customers.
In addition, unauthorized persons may attempt to hack into our products or systems to obtain personal data relating to patients or employees, our confidential or proprietary information or confidential information we hold on behalf of third parties, which, if successful, could pose a risk of loss, unavailability, or corruption of, or unauthorized access to or acquisition of, data, risk to patient safety and risk of product recall.
In addition, unauthorized persons may attempt to hack into our products or systems to obtain personal data relating to patients or employees, our confidential or proprietary 42 Table of Contents information or confidential information we hold on behalf of third parties, which, if successful, could pose a risk of loss, unavailability, or corruption of, or unauthorized access to or acquisition of, data, risk to patient safety and risk of product recall.
We cannot fully predict the impact of the CCPA, CPRA, or other new or proposed legislation on our business or operations, but the restrictions imposed by these laws and regulations may require us to modify our data handling practices and impose additional costs and burdens, including risks of regulatory fines, litigation and associated reputational harm.
We cannot fully predict the impact of the CCPA, CPRA, or other new or proposed legislation on our business or operations, but the restrictions imposed by these laws and regulations may require us to modify 44 Table of Contents our data handling practices and impose additional costs and burdens, including risks of regulatory fines, litigation and associated reputational harm.
In addition, other impacts of the COVID-19 pandemic have included and could include significant and unpredictable reductions in the demand for our products, a deepening of the changes to the operations and workflows of our customers that could result in increased customer defaults or delays in payment; additional delays, cancellations and redirection of planned capital expenditures and installations of our system by our customers to focus resources on COVID-19; disruptions in our supply chain or a reduction or interruption in any of our manufacturing processes resulting in our inability to meet demand for our products or services; or closures of our key facilities or the facilities of our customers or suppliers.
Other impacts of the COVID-19 pandemic have included and could include significant and unpredictable reductions in the demand for our products; a deepening of the changes to the operations and workflows of our customers that could result in increased customer defaults or delays in payment; additional delays, cancellations and redirection of planned capital expenditures and installations of our system by our customers to focus resources on COVID-19; a reduction or interruption in any of our manufacturing processes resulting in our inability to meet demand for our products or services; or closures of our key facilities or the facilities of our customers or suppliers.
If we are unable to obtain necessary waivers and the debt under such credit facility is accelerated, we would be required to obtain replacement financing at prevailing market rates, which may not be favorable to us. Additionally, a default on indebtedness could result in a default under the terms of the indenture governing the Notes.
If we are unable to obtain necessary waivers and the debt under such credit facility is accelerated, we would be required to obtain 31 Table of Contents replacement financing at prevailing market rates, which may not be favorable to us. Additionally, a default on indebtedness could result in a default under the terms of the indenture governing the Notes.
Because our manufacturing processes include the production of diagnostic and therapeutic X‑ray equipment and laser equipment, we are subject to the electronic product radiation control provisions of the Federal Food, Drug and Cosmetic Act, which requires that we file reports with the FDA, applicable states and our customers regarding the distribution, manufacturing and installation of these types of equipment.
Because our manufacturing 37 Table of Contents processes include the production of diagnostic and therapeutic X‑ray equipment and laser equipment, we are subject to the electronic product radiation control provisions of the Federal Food, Drug and Cosmetic Act, which requires that we file reports with the FDA, applicable states and our customers regarding the distribution, manufacturing and installation of these types of equipment.
In addition, sales to some of our customers are subject to competitive bidding or public tender processes. These approval and bidding processes can be lengthy. Selling our systems, from first contact with a potential customer to a 55 Table of Contents complete order, generally spans six months to two years and involves personnel with multiple skills.
In addition, sales to some of our customers are subject to competitive bidding or public tender processes. These approval and bidding processes can be lengthy. Selling our systems, from first contact with a potential customer to a complete order, generally spans six months to two years and involves personnel with multiple skills.
The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing, production process and controls, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. 42 Table of Contents Furthermore, we are required to verify that our suppliers maintain facilities, procedures and operations that comply with our quality requirements.
The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing, production process and controls, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. Furthermore, we are required to verify that our suppliers maintain facilities, procedures and operations that comply with our quality requirements.
After a product is placed in the market, we are also subject to regulations by the FDA and Federal Trade Commission related to the advertising and promotion of our products to ensure our claims are consistent with our regulatory clearances, that there is scientific data to substantiate our claims and that our advertising is not false or misleading.
After a product is placed in the market, we are also subject to regulations by the FDA and Federal Trade Commission related to the advertising and promotion of our products to ensure our 54 Table of Contents claims are consistent with our regulatory clearances, that there is scientific data to substantiate our claims and that our advertising is not false or misleading.
If the FDA disagrees, based on new finalized guidance and requires us to obtain additional premarket approvals or 510(k) clearances for any 61 Table of Contents modifications to the CyberKnife or TomoTherapy platforms and we fail to obtain such approvals or clearances or fail to secure approvals or clearances in a timely manner, we may be required to cease manufacturing and marketing the modified device or to recall such modified device until we obtain FDA approval or clearance and we may be subject to significant regulatory fines or penalties.
If the FDA disagrees, based on new finalized guidance and requires us to obtain additional premarket approvals or 510(k) clearances for any modifications to the CyberKnife or TomoTherapy platforms and we fail to obtain such approvals or clearances or fail to secure approvals or clearances in a timely manner, we may be required to cease manufacturing and marketing the modified device or to recall such modified device until we obtain FDA approval or clearance and we may be subject to significant regulatory fines or penalties.
We cannot be certain that our personnel, systems, procedures and internal controls will be adequate to support our future operations and any expansion of our systems and infrastructure may require us to commit significant additional financial, operational and management resources. If we cannot manage our growth effectively, our business will suffer.
We cannot be certain that our personnel, systems, procedures and internal controls will be adequate to support our future operations and any 39 Table of Contents expansion of our systems and infrastructure may require us to commit significant additional financial, operational and management resources. If we cannot manage our growth effectively, our business will suffer.
The impact of any such violations may lead to curtailment or restructuring of our operations, which could adversely affect our ability to operate our business and our financial results. 62 Table of Contents Anti‑corruption laws. We are also subject to laws regarding the conduct of business overseas, such as the FCPA, the U.K.
The impact of any such violations may lead to curtailment or restructuring of our operations, which could adversely affect our ability to operate our business and our financial results. Anti‑corruption laws. We are also subject to laws regarding the conduct of business overseas, such as the FCPA, the U.K.
These privacy rules protect medical records and other personal health information of patients by limiting their use and disclosure, giving patients the right to access, amend and seek accounting of their own health information and limiting most uses and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose.
These privacy rules protect medical records and other personal health information of patients by 56 Table of Contents limiting their use and disclosure, giving patients the right to access, amend and seek accounting of their own health information and limiting most uses and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose.
The disruption or termination of the supply of components, including as a result of global shortages in important components, have resulted in, and will continue to cause inflationary pressure on our supply chain and could cause a significant increase in the costs of these components, which could affect our results of operations.
The disruption or termination of the supply of components, including as a result of global shortages in important components, have resulted in, and will continue to cause, inflationary pressure on our supply chain and a significant increase in the costs of these components, which have materially affected and could continue to adversely affect our results of operations.
A number of factors may adversely impact such gross margins, including: • lower than expected manufacturing yields of high cost components leading to increased manufacturing costs; • low production volume, which will result in high levels of overhead cost per unit of production; • lower selling pricing, which we have recently experienced; • our ability to sell products and services, recognize revenue from our sales and the timing of revenue recognition and revenue deferrals; • increased labor costs or other costs as a result of increased inflation and supply chain constraints; • delays in receipt of or increased costs related to critical components parts, including as a result of supply chain disruptions; • increased inventory costs and liabilities for excess inventory resulting from inventory held in excess of forecasted demand; • increased service or warranty costs or the failure to reduce service or warranty costs; • increased price competition; • variation in the margins across products installed in a particular period; • changes to U.S. and foreign trade policies, including enactments of tariffs on goods imported into the U.S. and any retaliatory tariffs imposed by other countries on U.S. goods, including our products; and • how well we execute on our strategic and operating plans.
A number of factors have adversely impacted or could impact gross margins, including: • lower than expected manufacturing yields of high cost components leading to increased manufacturing costs; • low production volume, which will result in high levels of overhead cost per unit of production; • lower selling pricing; • our ability to sell products and services, recognize revenue from our sales and the timing of revenue recognition and revenue deferrals; • increased labor costs or other costs as a result of increased inflation and supply chain constraints; • delays in receipt of or increased costs related to critical components parts, including as a result of supply chain disruptions; • increased inventory costs and liabilities for excess inventory resulting from inventory held in excess of forecasted demand; • increased service or warranty costs or the failure to reduce service or warranty costs; • increased price competition; • variation in the margins across products installed in a particular period; • changes to U.S. and foreign trade policies, including enactments of tariffs on goods imported into the U.S. and any retaliatory tariffs imposed by other countries on U.S. goods, including our products; and 29 Table of Contents • how well we execute on our strategic and operating plans.
In addition, hospitals and other health professionals have reduced staffing and reduce or postpone meetings with potential suppliers in response to the spread of an infectious disease, such as COVID-19, effectively delaying the decision on potential purchases of new products such as ours.
In addition, hospitals and other health professionals may reduce staffing and reduce or postpone meetings with potential suppliers in response to the spread of an infectious disease, such as COVID-19, effectively delaying the decision on potential purchases of new products such as ours.
If we are unable to protect our intellectual property rights, we may be unable to prevent competitors from using our own inventions and intellectual property to compete against us and our business may be harmed. Unfavorable results of legal proceedings could materially and adversely affect our financial condition.
If we are unable to protect our intellectual property rights, we may be unable to prevent competitors from using our own inventions and intellectual property to compete against us and our business may be harmed. 48 Table of Contents Unfavorable results of legal proceedings could materially and adversely affect our financial condition.
To date, we have experienced no material realized losses on or lack of access to our invested cash, or cash equivalents; however, we can provide no assurances that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
To date, we have experienced no material realized losses on or lack of access to our invested cash, or 61 Table of Contents cash equivalents; however, we can provide no assurances that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
The COVID-19 pandemic has adversely impacted the pace at which the backlog converts to revenue. This is primarily the result of delays in the timing of deliveries and installations in fiscal 2020 and 2021 caused by the COVID-19 pandemic, which resulted in decreased revenue for these periods.
The COVID-19 pandemic has adversely impacted the pace at which the backlog converts to revenue. This is primarily the result of delays in the timing of deliveries and installations in fiscal 2020 through 2022 caused by the COVID-19 pandemic, which resulted in decreased revenue for these periods.
There can be no assurance that any efforts we make to prevent against such privacy or security breaches or incidents will prevent breakdowns or breaches or incidents in our systems or those of our third-party service providers that could adversely affect our business.
There can be no assurance that any efforts we make to prevent against such privacy or security breaches or incidents have been or will be able to prevent breakdowns or breaches or incidents in our systems or those of our third-party service providers that could adversely affect our business.
As a result of these fluctuations, it is likely that in some future quarters, our operating results will fall below the expectations of securities analysts or investors. If that happens, the market price of our stock would likely decrease.
As a result of these fluctuations, it is likely that in some future quarters, our operating results will fall below the 49 Table of Contents expectations of securities analysts or investors. If that happens, the market price of our stock would likely decrease.
Furthermore, on October 25, 2018, President Trump signed into law the “Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act” which in part (under a provision entitled “Fighting the Opioid Epidemic with Sunshine”) extends the reporting and transparency requirements for physicians in the Physician Payments Sunshine Act to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives (with reporting requirements going into effect in 2022 for payments made in 2021).
Furthermore, on October 25, 2018, President Trump signed into law the “Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act” which in part (under a provision entitled “Fighting the Opioid Epidemic with Sunshine”) extends the reporting and transparency requirements for physicians in the Physician Payments Sunshine Act to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives.
If our distributors experience difficulties, do not comply with regulatory or 56 Table of Contents legal requirements that results in fines or penalties, do not actively market the CyberKnife or TomoTherapy platforms or do not otherwise perform under our distribution agreements, our potential for revenue from international markets may be dramatically reduced, and our business could be harmed.
If our distributors experience difficulties, do not comply with regulatory or legal requirements that results in fines or penalties, do not actively market the CyberKnife or TomoTherapy platforms or do not otherwise perform under our distribution agreements, our potential for revenue from international markets may be dramatically reduced, and our business could be harmed.
With regard to transfers to the U.S. of personal data from our employees and European customers and users, both the EU-U.S. Privacy Shield and standard contractual clauses issued by the European Commission (the "EU SCCs") have been subject to legal challenge.
With regard to transfers to the U.S. of personal data from our employees and European customers and users, both the EU-U.S. Privacy Shield and standard contractual clauses issued by the European Commission (the “EU SCCs”) have been subject to legal challenge.
These ongoing supply chain challenges and heightened logistics costs have affected our gross margins and net income (loss), and our current expectations are that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistic expenses at least through the remainder of the calendar year of 2022, if not longer.
These ongoing supply chain challenges and heightened logistics costs have affected our gross margins and net income (loss), and our current expectations are that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistic expenses at least through the remainder of fiscal year 2024, if not longer.
We may incur net losses in the future, particularly as selling and marketing activities increase ahead of any expected revenue. Our ability to achieve and sustain long‑term profitability is largely dependent on our ability to successfully market and sell the CyberKnife and TomoTherapy platforms, control our costs, and effectively manage our growth.
We have incurred net losses, and expect to incur net losses in the future, particularly as selling and marketing activities increase ahead of any expected revenue. Our ability to achieve and sustain long‑term profitability is largely dependent on our ability to successfully market and sell the CyberKnife and TomoTherapy platforms, control our costs, and effectively manage our growth.
As of June 30, 2022, customer contracts with extended payment terms of more than one year amounted to approximately 6% of our current accounts receivable balance. While we qualify customers to whom we offer longer or extended payment terms, their financial positions may change adversely over the longer time period given for payment.
As of June 30, 2023, customer contracts with extended payment terms of more than one year amounted to approximately 6% of our total accounts receivable balance. While we qualify customers to whom we offer longer or extended payment terms, their financial positions may change adversely over the longer time period given for payment.
A required notification of a correction or removal to a regulatory authority or recall could result in an investigation by regulatory authorities of 45 Table of Contents our products, which could in turn result in required recalls, restrictions on the sale of the products or other civil or criminal penalties.
A required notification of a correction or removal to a regulatory authority or recall could result in an investigation by regulatory authorities of our products, which could in turn result in required recalls, restrictions on the sale of the products or other civil or criminal penalties.
Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time consuming and could divert our management’s attention from our core business. Damage awards resulting from successful litigation in foreign jurisdictions may not be in 54 Table of Contents amounts commensurate with damage awards in the U.S.
Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time consuming and could divert our management’s attention from our core business. Damage awards resulting from successful litigation in foreign jurisdictions may not be in amounts commensurate with damage awards in the U.S.
These directives, along with other laws and regulations that may be adopted by other countries, could increase our operating costs in order to maintain access to certain markets, which could adversely affect our business. 64 Table of Contents Healthcare reform legislation could adversely affect demand for our products, our revenue and our financial condition.
These directives, along with other laws and regulations that may be adopted by other countries, could increase our operating costs in order to maintain access to certain markets, which could adversely affect our business. Healthcare reform legislation could adversely affect demand for our products, our revenue and our financial condition.
Failure to obtain regulatory approval or clearance for our products or to complete these processes in a timely and efficient manner could result in delays that 44 Table of Contents could affect our ability to attract and retain customers, or could cause customers to delay or cancel orders, causing our backlog, revenues and operating results to suffer.
Failure to obtain regulatory approval or clearance for our products or to complete these processes in a timely and efficient manner could result in delays that could affect our ability to attract and retain customers, or could cause customers to delay or cancel orders, causing our backlog, revenues and operating results to suffer.
Any actual or perceived failure by us to comply with legal or regulatory requirements related to privacy, cyber security and data protection in one or multiple jurisdictions could result in proceedings, actions or penalties against us.
Any actual or perceived failure by us to comply with legal or regulatory requirements related to privacy, cybersecurity and data protection in one or multiple jurisdictions could result in proceedings, actions or penalties against us.
The application of tax laws of various foreign jurisdictions is subject to interpretation and depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
The application of tax laws of various foreign jurisdictions and within the United States is subject to interpretation and depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
A network security or systems security breach or incident suffered by ourselves or our third-party service providers or other events that cause the loss or unauthorized use or disclosure of, or access by third parties to, sensitive information stored by us or our customers, or the perception that these events have occurred or that our security measures for our products are lacking, could have serious negative consequences for our business, including loss of information, indemnity obligations, possible fines, penalties and damages, reduced demand for our products and services, an unwillingness of our customers to use our products or services, harm to our reputation and brand, and time consuming and expensive litigation, any of which could have an adverse effect on our financial results.
A network security or systems security breach of incident suffered by ourselves or our third-party service providers or other events that cause the loss or unauthorized use or disclosure of, or access by third parties to, sensitive information stored by us or our customers could result in loss, unavailability, or unauthorized acquisition, modification, or other processing of data, and any such events, or the perception that these events have occurred or that our security measures for our products are lacking, could have serious negative consequences for our business, including indemnity obligations, possible fines, penalties and damages, reduced demand for our products and services, an unwillingness of our customers to use our products or services, harm to our reputation and brand, and time consuming and expensive litigation, any of which could have an adverse effect on our financial results.
There also may be countries in which we sell or intend to sell the CyberKnife or TomoTherapy platforms but have no patents or pending patent applications. Our ability to prevent others from making or selling duplicate or similar technologies will be impaired in those countries in which we have no patent protection.
There also may be countries in which we sell or intend to sell the CyberKnife or TomoTherapy platforms 47 Table of Contents but have no patents or pending patent applications. Our ability to prevent others from making or selling duplicate or similar technologies will be impaired in those countries in which we have no patent protection.
In addition, such agreements require us to meet certain financial covenants, including a consolidated fixed charge coverage ratio and consolidated senior net leverage ratio, as defined in the credit agreement governing the Credit Facilities.
In addition, such agreements require us to meet certain financial covenants, including a consolidated fixed charge coverage ratio and consolidated senior net leverage ratio, as defined in the Existing Credit Agreement.
In addition, we have employees engaged in R&D, manufacturing, administration, manufacturing, support and sales and marketing activities. • As a result of our international operations, in addition to similar risks we face in our U.S. operations, we are affected by economic, business, regulatory, social, and political conditions in foreign countries, including the following: economic or political instability in the world or in particular regions or countries in which we do business, including the market volatility resulting from the COVID-19 pandemic and, conflicts or war, such as the war in Ukraine; • import delays; • changes in foreign laws and regulations governing, among other matters, the clearance, approval and sales of medical devices; • compliance with differing foreign regulatory requirements to sell and market our products; • longer payment cycles associated with many customers outside the United States; • inability of customers to obtain requisite government approvals, such as customers in China, including customers of the JV, obtaining one of the limited number of Class A or Class B user licenses available in order to purchase our products; • effective compliance with privacy, data protection and information security laws, such as the European Union General Data Protection Regulation (the “GDPR”) and new regulations in China; • adequate coverage and reimbursement for the CyberKnife and TomoTherapy platform treatment procedures outside the United States; • failure of local laws to provide the same degree of protection against infringement of our intellectual property; • protectionist laws and business practices that favor local competitors; • U.S. trade and economic sanctions policies that are in effect from time to time and the possibility that foreign countries may impose additional taxes, tariffs or other restrictions on foreign trade; • trade restrictions that are in effect from time to time, including U.S. prohibitions and restrictions on exports of certain products and technologies to certain nations and customers; • the unfamiliarity of shipping companies and other logistics providers with U.S. export control laws, which may lead to their unwillingness to ship or delays in shipping, our products to certain nations and customers despite such shipments being permitted under such laws; • U.S. relations with the governments of the foreign countries in which we operate; • the inability to obtain required export or import licenses or approvals; • risks relating to foreign currency, including fluctuations in foreign currency exchange rates possibly causing fewer sales due to the strengthening of the U.S.
As a result of our international operations, in addition to similar risks we face in our U.S. operations, we are affected by economic, business, regulatory, social, and political conditions in foreign countries, including the following: • economic or political instability in the world or in particular regions or countries in which we do business, including the market volatility resulting from the COVID-19 related restrictions and conflicts or war, such as the war in Ukraine; • import delays; • changes in foreign laws and regulations governing, among other matters, the clearance, approval and sales of medical devices; • compliance with differing foreign regulatory requirements to sell and market our products; • U.S. relations with the governments of the foreign countries in which we operate, which may, among other things, affect our access to such markets, including China, where our JV is located; • longer payment cycles associated with many customers outside the United States; • inability of customers to obtain requisite government approvals, such as customers in China, including customers of the JV, obtaining one of the limited number of Class A or Class B user licenses available in order to purchase our products; • effective compliance with privacy, data protection and information security laws, such as the European Union (“EU”) General Data Protection Regulation (the “GDPR”) and new regulations in China; • adequate coverage and reimbursement for the CyberKnife and TomoTherapy platform treatment procedures outside the United States; • failure of local laws to provide the same degree of protection against infringement of our intellectual property; • protectionist laws and business practices that favor local competitors; • U.S. trade and economic sanctions policies that are in effect from time to time and the possibility that foreign countries may impose additional taxes, tariffs or other restrictions on foreign trade; • trade restrictions that are in effect from time to time, including U.S. prohibitions and restrictions on exports of certain products and technologies to certain nations and customers; • the unfamiliarity of shipping companies and other logistics providers with U.S. export control laws, which may lead to their unwillingness to ship or delays in shipping, our products to certain nations and customers despite such shipments being permitted under such laws; • the inability to obtain required export or import licenses or approvals; • risks relating to foreign currency, including fluctuations in foreign currency exchange rates possibly causing fewer sales due to the strengthening of the U.S.
For example, multi-system sales or sales involving negotiations with integrated delivery networks involve additional complexities to the transaction and require a longer timeline to 36 Table of Contents finalize the sale, which make it more difficult to predict the quarter in which the sale will occur.
For example, multi-system sales or sales involving negotiations with integrated delivery networks involve additional complexities to the transaction and require a longer timeline to finalize the sale, which make it more difficult to predict the quarter in which the sale will occur.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. P ROPERTIES Facilities We currently lease approximately 124,000 square feet of product development and administrative space in two buildings in Sunnyvale, California, as follows: • A headquarters building that is approximately 74,000 square feet, which is leased to us until December 2023.
Biggest changeItem 2. P ROPERTIES Facilities On July 31, 2023, we moved our corporate headquarters from Sunnyvale, California to Madison, Wisconsin. We lease approximately 187,000 square feet in Madison, Wisconsin for product development, manufacturing, administrative and warehouse space. We lease approximately 124,000 square feet in Sunnyvale, California for administrative and product development functions.
Removed
We have the right to renew the lease term of our headquarters office building for two five‑year terms upon prior written notice and the fulfillment of certain conditions; and • A research and development facility totaling approximately 50,000 square feet, which is leased to us until December 2023.
Added
We lease approximately 20,000 square feet in Morges, Switzerland, for administrative functions. We lease approximately 42,000 square feet of space in a manufacturing facility in Chengdu, China. We also lease offices in Solon, Ohio and Chapel Hill, North Carolina for research and development functions; and lease international offices in China; Hong Kong; Japan; Korea; India; Spain; and Belgium.
Removed
We also lease approximately 158,000 square feet of product development, manufacturing, administrative and warehouse space in four buildings in Madison, Wisconsin, as follows: • An office building totaling approximately 61,000 square feet, which is leased to us until June 2025; • A manufacturing facility totaling approximately 56,000 square feet, which is leased to us until June 2025; and • Warehouse and office space in two buildings totaling approximately 41,000 square feet, which are leased to us through various dates until April 2023.
Removed
Our wholly owned subsidiary, Accuray International Sàrl, leases one office building that consists of approximately 21,000 square feet of administrative space in Morges, Switzerland, which are leased to Accuray International until December 2024. In addition, our wholly‑owned subsidiary, Accuray Accelerator Technology Company Limited, leases approximately 42,000 square feet of space in a manufacturing facility in Chengdu, China until July 2023.
Removed
We, directly or through our subsidiaries, also maintain offices in: Pennsylvania; Durham, North Carolina; Solon, Ohio; China; Hong Kong; Japan; Spain; India; Russia; Germany; Brazil; and the United Arab Emirates.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. LEGAL PROCEEDINGS Refer to Note 9, Commitments and Contingencies , to the Consolidated Financial Statements for a description of certain legal proceedings currently pending against the Company. From time to time, we are involved in legal proceedings arising in the ordinary course of our business. Item 4.
Biggest changeItem 3. LEGAL PROCEEDINGS Refer to Note 8, Commitments and Contingencies , to the Consolidated Financial Statements for a description of certain legal proceedings currently pending against the Company. From time to time, we are involved in legal proceedings arising in the ordinary course of our business. Item 4.
MINE SAF ETY DISCLOSURES Not applicable. 70 Table of Contents PART II
MINE SAF ETY DISCLOSURES Not applicable. 63 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The Company had no repurchases of its common stock during the quarter ended June 30, 2022. 71 Table of Contents Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between June 30, 2017 and June 30, 2022, with the cumulative total return of (i) the S&P Healthcare Index and (ii) the Nasdaq Composite Index, over the same period.
Biggest changeStock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between June 30, 2018 and June 30, 2023, with the cumulative total return of (i) the S&P Healthcare Index and (ii) the Nasdaq Composite Index, over the same period.
Fiscal year ending June 30. Copyright© 2019 Standard & Poor's, a division of S&P Global. All rights reserved. The comparisons shown in the graph above are based upon historical data.
Fiscal year ending June 30. Copyright© 2019 Standard & Poor's, a division of S&P Global. All rights reserved 64 Table of Contents The comparisons shown in the graph above are based upon historical data.
We caution that the stock price performance shown in the graph above is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. Item 6. [RESERVED] 72 Table of Contents
We caution that the stock price performance shown in the graph above is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. Item 6. [RESERVED]
Our Board of Directors intends to use any future earnings to support operations and reinvest in the growth and development of our business. There are no current plans to pay cash dividends to common stockholders in the foreseeable future. As of August 15, 2022, there were 176 stockholders of record of our common stock.
Our Board of Directors intends to use any future earnings to support operations and reinvest in the growth and development of our business. There are no current plans to pay cash dividends to common stockholders in the foreseeable future. As of August 31, 2023, there were 174 stockholders of record of our common stock.
This graph assumes the investment of $100.00 on June 30, 2017 in our common stock, the S&P Healthcare Index and the Nasdaq Composite Index, and assumes the reinvestment of dividends, if any.
This graph assumes the investment of $100 on June 30, 2018 in our common stock, the S&P 500 Health Care Index and the Nasdaq Composite Index, and assumes the reinvestment of dividends, if any.
Removed
In May 2022, we granted 312,500 shares of restricted stock units (“RSUs”) to an employee, with a grant-date fair value of $2.08 per restricted stock unit. Each restricted stock unit represents the right to receive one share of our common stock upon vesting. One fourth of the aggregate RSUs vest annually over a period of four years.
Removed
We did not receive any proceeds from this issuance. The issuance of such securities was exempt from registration under the Securities Act, in reliance upon Section 4(a)(2) of the Securities Act, for transactions by an issuer not involving a public offering.
Removed
Other than as noted above and as previously reported to the Securities and Exchange Commission (SEC) on our Current Reports on Form 8-K, there were no sales of unregistered equity securities by us during the year ended June 30, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet cash provided by operating activities was $38.5 million in fiscal 2021, resulting primarily from non cash items of $39.4 million and changes in working capital of $7.6 million offset by, a net loss of $6.3 million. • Non-cash items primarily consisted of the loss on extinguishment of debt of $4.3 million related to the exchange of our 3.75% Convertible Notes due 2022 for our 3.75% Convertible Notes due 2026 and $5.7 million related to refinancing of our credit facilities with new lenders, depreciation and amortization expense of $6.4 million, share-based compensation expense of $9.3 million, inventories write-down of $6.9 million, non-cash interest expense on debt of $4.9 million, amortization of debt issuance cost of $1.4 million and intra-entity profit elimination from transactions with the JV of $0.3 million, offset by an in-kind system upgrade contribution to the JV of $1.4 million and an income on equity method investment of $0.9 million ; • The net change in working capital of $7.6 million was primarily due to an increase of $8.1 million in compensation related accrued liabilities due to bonus accrual, a decrease in accounts receivable of $5.2 million and a decrease of $1.7 million in inventories offset by a decrease of $4.0 million in accounts payable, a decrease of $1.6 million in customer advances, deferred revenue and deferred cost of revenue, an increase of $1.0 million in prepaid expenses and other assets and a decrease of $0.7 million in net operating lease liabilities.
Biggest changeCash Flows Years Ended June 30, 2023 2022 2021 Net cash provided by (used in) operating activities $ 15,539 $ (2,400 ) $ 38,512 Net cash used in investing activities (12,681 ) (4,717 ) (2,399 ) Net cash used in financing activities (2,112 ) (15,369 ) (28,805 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 302 (5,561 ) 982 Net increase (decrease) in cash, cash equivalents and restricted cash $ 1,048 $ (28,047 ) $ 8,290 Cash Flows From Operating Activities Net cash provided by operating activities was $15.5 million during the year ended 2023, resulting primarily from a $20.2 million increase in non-cash items and a $4.6 million increase from the net changes in assets and liabilities, offset by a net loss of $9.3 million. • Non-cash items primarily consisted of consisted of share-based compensation expense of $10.1 million, depreciation and amortization expense of $4.5 million, provision for inventories write-down of $4.4 million, and $2.3 million for provision for credit losses, partially offset by income from our equity method investment of $2.6 million. 72 Table of Contents • The major contributors to the increase in net changes of assets and liabilities during the year ended 2023 were as follows: an $18.5 million decrease in accounts receivable primarily due to an increase in collections; and a $2.9 million increase in accounts payable primarily due to the timing of payments; partially offset by a $6.9 million increase in inventories primarily due to increased costs for parts; a $4.7 million decrease in customer advances due to delivery of orders, and a $2.6 million decrease in deferred revenue primarily due to the timing of revenue recognition.
This may require us to obtain waivers or amendments to the credit and security agreement in order to maintain compliance and there can be no certainty that any such waiver or amendment will be available, or what the cost of such waiver or amendment, if obtained, would be.
This may require us to obtain waivers or amendments to the credit and security agreement in order to maintain compliance and there can be no certainty that any such waiver or amendments will be available, or what the cost of such waiver or amendment, if obtained, would be.
In recent years, the percentage of gross orders received from our distribution partners in the international markets represented 71%, 82%, and 76% of gross orders for fiscal year ended June 30, 2022, 2021 and 2020, respectively. We anticipate that distributor orders from international markets will continue to represent a significant portion of our gross orders in the foreseeable future.
In recent years, the percentage of gross orders received from our distribution partners in the international markets represented 76%, 71%, and 82% of gross orders for fiscal year ended June 30, 2023, 2022 and 2021, respectively. We anticipate that distributor orders from international markets will continue to represent a significant portion of our gross orders in the foreseeable future.
Each of these systems serves patient populations treated by the same medical specialty, radiation oncology, with advanced capabilities. The CyberKnife platform is also used by neurosurgeons specializing in radiosurgery to treat patients with tumors in the brain and spine, and neurologic disorders.
Each of these systems serves patient populations treated by the same medical specialty, radiation oncology, with advanced capabilities. The CyberKnife platform is also used by neurosurgeons specializing in radiosurgery to treat patients with tumors in the brain and spine, and neurologic and/or endocrine disorders.
The contract has either cleared all its contingencies or contained no contingencies when signed; • We have received a minimum deposit or a letter of credit; or the sale is to a customer where a deposit is deemed not necessary or customary (i.e. sale to a government entity, a large hospital, group of hospitals or cancer care group that has sufficient credit, customers with trade-in of existing equipment, sales via tender awards, or indirect channel sales that have signed contracts with end-customers); • The specific end customer site has been identified by the customer in the written contract or written amendment; and • Less than 2.5 years have passed since the contract met all the criteria above.
The contract has either cleared all its contingencies or contained no contingencies when signed; • We have received a minimum deposit or a letter of credit; or the sale is to a customer where a deposit is deemed not necessary or customary (i.e., sale to a government entity, a large hospital, group of hospitals or cancer care group that has sufficient credit, customers with trade-in of existing equipment, sales via tender awards, or indirect channel sales that have signed contracts with end-customers); • The specific end-customer site has been identified by the customer in the written contract or written amendment; and • Less than 30 months have passed since the contract met all the criteria above.
Sale of Our Products Generating revenue from the sale of our platforms is a lengthy process. Selling our platforms, from first contact with a potential customer to a signed sales contract that meets our backlog criteria (as discussed below) varies significantly and generally spans between six months and two years.
Sale of Our Products Generating revenue from the sale of our platforms is a lengthy process. Selling our platforms, from first contact with a potential customer to a signed sales contract that meets our backlog criteria (as discussed below) varies significantly and generally spans between six months and 30 months.
Operating and Capital Expenditure Requirements and Contractual Obligations Our purchase commitments and obligations include all open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which we have not received the goods or services and acquisition and licensing of intellectual property.
Operating and Capital Expenditure Requirements and Contractual Obligations Our purchase commitments and obligations include all open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which we have not received the 73 Table of Contents goods or services and acquisition and licensing of intellectual property.
We monitor this investment for events or circumstances indicative of a potential 90 Table of Contents impairment, and we make appropriate reductions in carrying value if we determine that an impairment charge is required, based primarily on the financial condition or near term prospects of the investee.
We monitor this investment for events or circumstances indicative of a potential impairment, and we make appropriate reductions in carrying value if we determine that an impairment charge is required, based primarily on the financial condition or near term prospects of the investee.
These factors include but are not limited to the following: • Revenue generated by sales of our products and service plans; • Our ability to generate cash flows from operations; • Costs associated with our sales and marketing initiatives and manufacturing activities; • Facilities, equipment and IT systems required to support current and future operations; • Rate of progress and cost of our research and development activities; • Costs of obtaining and maintaining FDA and other regulatory clearances of our products; • Effects of competing technological and market developments; • Number and timing of acquisitions and other strategic transactions; • Servicing and maturity of our current future indebtedness; • The impact of inflation of our expenses; and 87 Table of Contents • The unpredictable impact of the COVID-19 pandemic, including on collections, supply chains and logistics.
These factors include but are not limited to the following: • Revenue generated by sales of our products and service plans; • Our ability to generate cash flows from operations; • Costs associated with our sales and marketing initiatives and manufacturing activities; • Facilities, equipment and IT systems required to support current and future operations; • Rate of progress and cost of our research and development activities; • Costs of obtaining and maintaining FDA and other regulatory clearances of our products; • Effects of competing technological and market developments; • Number and timing of acquisitions and other strategic transactions; • Servicing and maturity of our current future indebtedness, including interest rates; • The impact of inflation on our expenses; and • The unpredictable impact of the macroeconomic environment and the COVID-19 pandemic, including on collections, supply chain, and logistics.
For sale arrangements that contain multiple performance obligations, we account for individual products and services separately if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on relative its own or with other resources that are readily available to the customer. The stand-alone selling price (“SSP”).
For sale arrangements that contain multiple performance obligations, we account for individual products and services separately if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer.
Additionally, the undistributed earnings of our foreign subsidiaries at June 30, 2022 for all countries except Japan, France and Switzerland are considered to be indefinitely reinvested and unavailable for distribution in the form of dividends or otherwise. Repatriation of the Company’s foreign earnings from Japan, France and Switzerland are subject to income taxes.
Additionally, the undistributed earnings of our foreign subsidiaries at June 30, 2023, for all countries except Japan, France, and Switzerland are considered to be indefinitely reinvested and unavailable for distribution in the form of dividends or otherwise. Future repatriation of our foreign earnings could be subject to income taxes.
Concurrently, in May 2021, we entered into a senior secured credit agreement with Silicon Valley Bank, individually as a lender and agent, and 84 Table of Contents the other lenders (the “Credit Agreement”), which provides for a new five-year $80 million term loan facility and a $40 million revolving credit facility (the “Revolving Credit Facility”).
Concurrently, with the issuance of the notes, in May 2021, we entered into a senior secured credit agreement with Silicon Valley Bank, individually as a lender and agent, and the other lenders (the “Existing Credit Agreement”), which provides for a five-year $80 million term loan facility (the "Term Loan Facility") and a $40 million revolving credit facility (the “Revolving Credit Facility”).
Payments received in advance of system shipment are recorded as customer advances and are deferred until product shipment when they are recognized in revenue. We assess the probability of collection based on a number of factors, including past transaction history with the customer and creditworthiness of the customer. We generally do not request collateral from our customers.
Payments received in advance of system shipment are recorded as customer advances and are deferred until product shipment when they are recognized in revenue. We assess the probability of collection based on a number of factors, including past transaction history with the customer and creditworthiness of the customer.
As of June 30, 2022, our systems were named in 100 out of 118 Class A user licenses awarded in the 13th five year plan by the China National Health Commission to purchase radiation therapy devices.
Our systems have been named in 100 out of 118 Class A user licenses awarded in the 13th five year plan by the China National Health Commission to purchase radiation therapy devices.
Our innovative technologies, the CyberKnife ® and TomoTherapy ® platforms, including the Radixact ® System, our next generation TomoTherapy platform, are designed to deliver advanced treatments, including stereotactic radiosurgery (SRS), stereotactic body radiation therapy (SBRT), intensity modulated radiation therapy (IMRT), image-guided radiation therapy (IGRT), and adaptive radiation therapy (ART).
Our innovative technologies, the CyberKnife ® and TomoTherapy ® platforms, including the Radixact ® System, our next generation TomoTherapy platform, are designed to deliver advanced treatments, including stereotactic radiosurgery (“SRS”), stereotactic body radiation therapy (“SBRT”), intensity modulated radiation therapy (IMRT), image-guided radiation therapy (“IGRT”), and adaptive radiation therapy (“ART”).
The determination of obsolete or excess inventory requires us to estimate the future demand for our products. We regularly review inventory quantities on hand and adjust for excess and obsolete inventory based primarily on historical usage rates and our estimates of product demand to support future sales and service.
We regularly review inventory quantities on hand and adjust for excess and obsolete inventory based primarily on historical usage rates and our estimates of product demand to support future sales and service.
Contracts may age-out for many reasons, including but not limited to, inability of the customer to pay, inability of the customer to adapt their facilities to accommodate our products in a timely manner, or inability to timely obtain licenses necessary for customer facilities or operation of our equipment. Our backlog also includes amounts not denominated in U.S.
Agreements may age-out for many reasons, including but not limited to, the inability of the customer to pay, the inability of the customer to adapt their facilities to accommodate our products in a timely manner, or the inability to timely obtain licenses necessary for customer facilities or operation of our equipment.
As of June 30, 2022, we had approximately $55.1 million of cash and cash equivalents at our foreign subsidiaries. When such funds are repatriated, there will be additional foreign tax withholdings imposed depending on the country from which the funds were repatriated.
As of June 30, 2023, we had $8.5 million of cash and cash equivalents at our foreign subsidiaries. If such funds were repatriated, there will be additional foreign tax withholdings imposed, depending on the country from which the funds were repatriated.
However, w e continue to critically review our liquidity and anticipated capital requirements in light of the significant uncertainty created by the COVID-19 pandemic.
We continue however, to critically review our liquidity and anticipated capital requirements in light of the significant uncertainty created by macroeconomic conditions and ongoing recovery from the COVID-19 pandemic.
In May 2021, we issued $100.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2026 under an indenture between us and The Bank of New York Mellon Trust Company, N.A., as trustee. $97.1 million aggregate principal amount of the 3.75% Convertible Notes due 2026 were issued to certain holders of 3.75% Convertible Notes due 2022 in exchange for $82.1 million aggregate principal amount of 3.75% Convertible Notes due 2022 outstanding and $2.9 million aggregate principal amount were issued for cash.
In May 2021, we issued $100.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2026 under an indenture between us and The Bank of New York Mellon Trust Company, N.A., as trustee.
If our demand forecast for specific products is greater than actual demand and we fail to reduce purchasing and manufacturing output accordingly, we could be required to write off inventory beyond the current reserve, which would negatively impact our gross margin.
If our demand forecast for specific products is greater than actual demand and we fail to reduce purchasing and manufacturing output accordingly, we could be required to write off inventory beyond the current reserve, which would negatively impact our gross margin. Valuation of Equity Method Investments We have an equity method investment in CNNC Accuray (Tianjin) Medical Technologies Co.
However, the economic uncertainty in the current environment caused by the COVID-19 pandemic could limit our ability to accurately make and evaluate our estimates and judgments.
The economic uncertainty in the current environment caused by the COVID-19 pandemic however, could limit our ability to accurately make and evaluate our estimates and judgments. Actual results could therefore differ materially from those estimates if actual conditions differ from our assumptions.
Revenue Recognition Our revenue is primarily derived from sales of CyberKnife and TomoTherapy platforms and services, which include PCS contracts (warranty period services and post-warranty services), installation services, training and other professional services. We record our revenue net of any value added or sales tax.
Revenue Recognition and the Assessment of Stand-Alone Selling Price Our revenue is primarily derived from new system and upgrade sales of CyberKnife and TomoTherapy platforms and services, which include post-contract customer support (“PCS”) contracts (warranty period services and post-warranty services), installation services, training and other professional services. We record our revenue net of any value-added or sales tax.
The Company’s equity method investment is held at cost and adjusted for impairment when it would be deemed to be impaired.
Ltd., our joint venture in China. Our equity method investment is held at cost and adjusted for impairment when it would be deemed to be impaired.
Liquidity and Capital Resources At June 30, 2022, we had $88.7 million in cash and cash equivalents.
Liquidity and Capital Resources At June 30, 2023, we had $89.4 million in cash and cash equivalents.
These ongoing supply chain challenges and heightened logistics costs have affected our gross margins and net income (loss), and our current expectations are that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistic expenses at least through the remainder of the calendar year of 2022, if not longer.
In addition, rising inflation and the ongoing supply chain challenges and attendant heightened logistics costs have materially affected our gross margins and net income (loss), and we expect that gross margins and net income (loss) will continue to be adversely affected by increased material costs and freight and logistic expenses through at least fiscal year 2024, if not longer.
We did not have any off balance sheet arrangements for the year ended June 30, 2020. Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
In the long term, we anticipate that the JV will manufacture and sell a locally branded “Made in China” radiotherapy device in the Class B license category, or Class B device, which would replace our current offering in that category. We believe this strategy will allow us to best maximize both near and longer-term opportunities in China.
In the long term, we anticipate that the JV will manufacture and sell a locally branded “Made in China” 66 Table of Contents radiotherapy device in the Class B license category, or Class B device, which would replace our current offering in that category.
Accordingly, management is carefully evaluating our liquidity position, communicating with and monitoring the 77 Table of Contents actions of our customers and suppliers, and reviewing our near-term financial performance as the uncertainty related to these factors continues to unfold. Backlog As of June 30, 2022, backlog totaled $563.7 million, of which $0.2 million represented upgrades sold through service contracts.
Accordingly, management is carefully evaluating our liquidity position, communicating with and monitoring the actions of our customers and suppliers, and reviewing our near-term financial performance as the uncertainty related to these factors continues to unfold.
Our book to bill ratio is defined as gross orders for the period divided by product revenue for the period. Gross orders increased by $6.3 million for the year ended June 30, 2022, as compared to the year ended June 30, 2021.
Gross orders were unfavorably impacted by $12.0 million due to foreign exchange rate fluctuations during the year ended June 30, 2023, as compared to the year ended June 30, 2022. Our book to bill ratio is defined as gross orders for the period divided by product revenue for the period.
During the year ended June 30, 2022, we delivered Class A devices to China and recognized system revenue related to such devices of approximately $65.1 million in the same period. We currently anticipate system revenue related to the remaining Class A user licenses awarded to date in the next 12 to 18 months.
During the year ended June 30, 2023, we delivered Class A devices to China and recognized system revenue related to such devices of approximately $32.6 million in the same period.
Actual results could therefore differ materially from those estimates if actual conditions differ from our assumptions. 88 Table of Contents All of our significant accounting policies and methods used in the preparation of our consolidated financial statements are described in Note 1, The Company and its Significant Accounting Policies, to the consolidated financial statements.
All of our significant accounting policies and methods used in the preparation of our consolidated financial statements are described in Note 1, The Company and its Significant Accounting Policies, to the consolidated financial statements.
While we were in compliance with such covenants for the year ended June 30, 2022, failure to meet the covenant requirements in the future could cause us to be in default and the maturity of the related debt could be accelerated and become immediately payable.
We may also experience other, unexpected impacts to our business, including matters discussed in the Part I, Item 1A titled “Risk Factors.” While we were in compliance with such covenants for the period ended June 30, 2023, failure to meet the covenant requirements in the future could cause us to be in default and the maturity of the related debt could be accelerated and become immediately payable.
As of June 30, 2021, backlog totaled $616.4 million. In order for the product portion of a system sales agreement to be counted as backlog, it must meet the following criteria: • The contract is properly executed by both the customer and us.
Backlog In order for the product portion of a system sales agreement to be included in backlog, it must meet the following criteria: • The contract is properly executed by both the customer and us. A customer purchase order that incorporates the terms of our contract quote will be considered equivalent to a signed and executed contract.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report on Form 10‑K, particularly in “Risk Factors.” See “Special Note Regarding Forward‑Looking Statements.” Overview Company Accuray Incorporated is a radiation therapy company that develops, manufactures, sells and supports market-changing solutions that are designed to deliver radiation treatments for even the most complex cases, while making commonly treatable cases even more straightforward, to meet the full spectrum of patient needs.
Overview Company Accuray Incorporated is a radiation therapy company that develops, manufactures, sells and supports market-changing solutions that are designed to deliver radiation treatments for even the most complex cases, while making commonly treatable cases even more straightforward, to meet the full spectrum of patient needs.
In addition to these products, we also provide services, which include post-contract customer support (warranty period services and post warranty services), installation services, training, and other professional services. The CyberKnife Platform The CyberKnife platform is the only robotic, full-body stereotactic radiosurgery (SRS) and stereotactic body radiation therapy (SBRT) delivery device on the market.
In addition to these products, we also provide services, which include post-contract customer support (warranty period services and post-warranty services), installation services, training, and other professional services.
If our evaluation of our customers’ financial conditions does not reflect our future ability to collect outstanding receivables, additional provisions may be needed and our operating results could be negatively affected.
On a quarterly basis, we evaluate aged items in the accounts receivable aging report and provide an allowance in an amount we deem adequate for credit losses. If our evaluation of our customers’ financial conditions does not reflect our future ability to collect outstanding receivables, additional provisions may be needed and our operating results could be negatively affected.
In addition, we are unable to predict with certainty the impact of the COVID-19 pandemic on our ability to maintain compliance with the debt covenants contained in the credit and security agreements related to our Credit Facilities, including financial covenants regarding the fixed charge coverage ratio and the consolidated senior net leverage ratio.
As a result, we are unable to predict with certainty the impacts of these factors on our ability to maintain compliance with the financial covenants contained in the credit and security agreements related to our credit facilities.
Net orders decreased by $24.6 million for the year ended June 30, 2022, as compared to the year ended June 30, 2021, resulting from an increase in age-outs of $35.0 million and an unfavorable impact of foreign currency exchange rates of $7.9 million offset by an increase in age-ins of $8.2 million, an increase in gross orders of $6.3 million, and a decrease in cancellations of $3.8 million. • The age-outs for the year ended June 30, 2022 were $183.8 million.
Net orders increased by $15.6 million during the year ended June 30, 2023, as compared to the year ended June 30, 2022, resulting from a reduction in the age-out of orders, a reduction in the cancellation of orders and an increase in the age-ins of orders, partially offset by a decrease in gross orders and unfavorable foreign exchange rate fluctuations.
The JV has also completed construction of its manufacturing facility and has obtained the Quality Management System certification with ISO13485 standard. With the receipt of the necessary permits and licenses to operate, the JV has begun selling products in China, much like a distributor.
Accuray Asia has a 49% ownership interest in the JV and the CIRC Subsidiary has a 51% ownership interest in the JV. With the receipt of the necessary permits and licenses to operate, the JV has begun selling products in China, much like a distributor.
Our book to bill ratio for June 30, 2021 was 1.8 as compared to 2.3 for June 30, 2020. Net Orders Net orders are defined as gross orders less cancellations, age-outs, foreign exchange and other adjustments during the period.
Net Orders Net orders are defined as gross orders, less cancellations, age-outs net of age-ins, foreign exchange and other adjustments during the period.
Net cash used in financing activities during fiscal 2021 was $28.8 million, primarily due to the repayment of all outstanding obligations and termination of the Prior Revolving Credit Facility and Prior Term Loan of $105.4 million, the prepayment during the year of $10.0 million of the principal amount outstanding on our Prior Term Loan, the amendment fee of $0.5 million related to our Prior Credit Facilities, the repurchase of our common stock of $14.1 million, the paydown on our New Revolving Credit Facility of $5.0 million, $0.1 million net cost related to the exchange of our 3.75% Convertible Notes 3.75% due 2022 for our 3.75% Convertible Notes due 2026 and $0.3 million in taxes paid related to net settlement of equity awards, offset by net proceeds from New Revolving Credit Facility and New Term Loan Facility of $103.7 million, proceeds from employee stock plans of $2.2 million and proceeds from exercises of stock options of $0.9 million.
Cash Flows From Financing Activities Net cash used in financing activities during the year ended 2023 was due to the scheduled payment of $6.0 million of the principal amount outstanding on our Term Loan Facility and a $2.9 million repayment of our 3.75% Convertible Senior Notes due 2022, primarily offset by a $5.0 million drawdown on our Revolving Credit Facility and $2.2 million in proceeds from the issuance of common stock to employees from employee stock plans.
The length of time between receipt of a signed contract and revenue recognition is generally governed by the time required by the customer to build, renovate or prepare the treatment room for installation of the platform. 75 Table of Contents In the United States, we primarily market directly to customers, including hospitals and stand-alone treatment facilities, through our sales organization we also market to customers through sales agents and group purchasing organizations.
The length of time between receipt of a signed contract and revenue recognition is generally governed by the time required by the customer to build, renovate or prepare the treatment room for installation of the platform. We report our customer revenues in four geographic regions: the Americas, EIMEA, Asia Pacific and Japan.
Service Net Revenue Service net revenue increased by $4.0 million, or 2%, as compared to the year ended June 30, 2020, primarily due to an increase in service contract revenue of $2.8 million, a reduced cost of service of $2.6 million, and an increase in upgrade and installation revenue of $1.8 million, offset by a decrease in training revenue and revenue from service parts.
Services net revenue decreased by $0.8 million during the year ended June 30, 2023, as compared to the year ended June 30, 2022, primarily due to a $4.9 million decrease in revenue from contract services that was largely driven by unfavorable foreign exchange rate fluctuations, partially offset by $4.1 million increase in revenue from training, spare parts, upgrades and installation activity.
Although our backlog includes only contractual agreements with our customers for the purchase of our CyberKnife or TomoTherapy platforms, including the Radixact Systems and related upgrades, we cannot provide assurance that we will convert backlog into recognized revenue due primarily to factors outside of our control.
Our backlog includes contractual agreements with our customers for the purchase of our CyberKnife or TomoTherapy platforms, including the Radixact Systems and related upgrades. The amount of backlog recognized into revenue is primarily impacted by three items: cancellations, age-outs and age-ins, and foreign currency fluctuations.
Management believes the critical accounting policies and estimates are those related to revenue recognition, assessment of recoverability of goodwill, valuation of inventories, convertible notes, impairment of investments and allowance for credit losses. C oncentration of Credit and Other Risks Our cash and cash equivalents are deposited with several major financial institutions.
Management believes the critical accounting policies and estimates are those related to revenue recognition and the assessment of stand-alone selling price ("SSP"), allowance for credit losses, valuation of inventories, and the valuation of equity method investments.
The SSP is determined based on observable prices at which we separately sell the products and services. If a SSP is not directly observable, then we will estimate the SSP considering market conditions, entity-specific factors, and information about the customer or class of customer that is reasonably available.
If the SSP is not directly observable, then we will estimate the SSP considering market conditions, entity-specific factors, and information about the customer or class of customer that is reasonably available. 74 Table of Contents Allowance for Credit Losses We evaluate the creditworthiness of our customers prior to authorizing shipment for all major sale transactions.
There remain uncertainties as to how the COVID-19 pandemic is likely to materially impact our liquidity in the future.
Accordingly, there remain uncertainties as to how the COVID-19 pandemic and the current macroeconomic environment will impact our business, results of operations, access to sources of liquidity and financial condition in the future.
Outside the United States, we market to customers directly and through use of distributors and sales agents. In addition to our offices in the United States, we have sales and service offices in Europe, India, Asia, and South America.
In the United States, we primarily market directly to customers, including hospitals and stand-alone treatment facilities, through our sales organization we also market to customers through sales agents and group purchasing organizations. Outside the United States, we market to customers directly and through use of distributors and sales agents.
The amount of backlog recognized into revenue is primarily impacted by three items: cancellations, age-outs and foreign currency fluctuations. Orders could be cancelled for reasons including, without limitation, changes in customers’ needs, priorities or financial condition, changes in government or health insurance reimbursement policies, or changes to regulatory requirements.
We cannot provide assurance that we will convert backlog into recognized revenue, primarily due to factors outside of our control, such as: • Orders could be cancelled for reasons such as, changes in customers’ priorities or financial condition, changes in government or health insurance reimbursement policies, or changes to regulatory requirements.
Based on our cash and cash equivalents balance, available debt facilities, current business plan and revenue prospects, we believe that we will have sufficient cash resources and anticipated cash flows to fund our operations for at least the next 12 months.
Cash from operations could be affected by various risks and uncertainties, including, but not limited to, the ongoing recovery from the COVID-19 pandemic, inflation, actions taken to counter inflation, foreign currency exchange rate fluctuations and instability in the banking sector and the risks included in Part I, Item 1A titled “Risk Factors.” Based on our cash and cash equivalents balance, available debt facilities, current business plan and revenue prospects, we believe we will have sufficient cash resources and anticipated cash flows to fund our operations for at least the next 12 months.
Net revenue Product Net Revenue Product net revenue increased by $9.3 million for the year ended June 30, 2021 or 6%, as compared to the year ended June 30, 2020, primarily due to an increase in unit volume sales coupled with an increase in system average product revenue of $18.8 million.
Products net revenue increased by $18.5 million during the year ended June 30, 2023, as compared to the year ended June 30, 2022, primarily due to an increase in Tomo Therapy platform sales, partially offset by a decrease in CyberKnife platform sales.
If the estimated fair value of the reporting unit exceeds the carrying value of the reporting unit, goodwill is not impaired and no further analysis is required. Valuation of Inventories The valuation of inventory requires us to estimate obsolete or excess inventory as well as damaged inventory.
Valuation of Inventories The valuation of inventory requires us to estimate obsolete or excess inventory as well as damaged inventory. The determination of obsolete or excess inventory requires us to estimate the future demand for our products.
This was primarily due to an increase in CyberKnife platform orders and upgrades of $8.9 million and $2.0 million, respectively. TomoTherapy platform orders decreased by $5.8 million while upgrades increased by $2.1 million. In addition, gross order activity during the year ended June 30, 2021 was adversely impacted by the COVID-19 pandemic, particularly in the Americas region.
Gross orders decreased by $21.2 million during the year ended June 30, 2023, as compared to the year ended June 30, 2022, primarily due to decreases in EIMEA, partially offset by an increase in Asia Pacific and China. CyberKnife platform gross orders decreased by $45.5 million and TomoTherapy platform gross orders increased by $24.3 million.
Dollars and therefore fluctuations in the U.S. Dollar as compared to other currencies will impact revenue. Generally, strengthening of the U.S. Dollar will negatively impact revenue. Backlog is stated at historical foreign currency exchange rates, and revenue is released from backlog at current exchange rates, with any difference recorded as a backlog adjustment.
Age-ins represent orders that previously aged-out but have been recognized as revenue in the current period; and • Orders include amounts not denominated in U.S. Dollars and therefore, fluctuations in the U.S. Dollar as compared to other currencies will impact revenue. Generally, strengthening of the U.S. Dollar will negatively impact revenue.
Service Net Revenue Service net revenue decreased by $4.4 million, or 2%, as compared to the year ended June 30, 2021, primarily due to a decrease in service contract revenue of $3.6 million driven by the strong US dollar that reduced the dollar value of all foreign currency service contract revenue, primarily in Japan and Europe, slightly offset by an increase in installation revenue.
Revenues from the Americas region decreased by $3.7 million during the year ended June 30, 2023, as compared to the year ended June 30, 2022, primarily due to a decrease from service revenue, partially offset by an increase from sales of systems.
In addition to cancellations, after 2.5 years, if we have not been able to recognize revenue on a contract, we remove the revenue associated with the contract from backlog and the order is considered aged out.
Cancellations are outside of our control and are difficult to forecast; however, we continue to work closely with our customers to minimize the impact of cancellations on our business; • Orders are considered aged-out and removed from reported backlog if we have not been able to recognize revenue on an agreement after 30 months.
Income on equity method investment, net Income (loss) on equity method investment was an income of $0.2 million as compared to an income of $0.9 million during the year ended June 30, 2021. Other expense, net Other expense, net decreased by $17.3 million for the year ended June 30, 2022, as compared to the year ended June 30, 2021.
Provision for income taxes Years Ended June 30, (Dollars in thousands) 2023 Percent Change 2022 Percent Change 2021 Provision for income taxes $ 2,492 (26 )% $ 3,345 91 % $ 1,752 Provision for income taxes decreased by $0.9 million during the year ended June 30, 2023, as compared to the year ended June 30, 2022, primarily due to lower deferred tax liability on Switzerland withholding taxes as compared to the prior year.
The increase was primarily driven by an increase of $4.1 million in compensation and benefits cost due to an increase in headcount, an increase of $2.0 million in marketing expenses due to a greater number of in-person tradeshows as compared to virtual tradeshows in the previous year and an increase of $1.3 million in traveling expenses. 81 Table of Contents General and administrative expenses General and administrative expenses increased by $2.7 million, or 6%, for the year ended June 30, 2022, as compared to the year ended June 30, 2021.
General and administrative expenses increased by $3.9 million during the year ended June 30, 2023, as compared to the year ended June 30, 2022, primarily due to higher external consulting fees related to the implementation of a new enterprise resource planning system, a $2.0 million bad debt reserve in the fourth quarter of fiscal year 2023 related to the unplanned U.S. bankruptcy of one customer, and employee compensation and benefits, as a result of an increase in headcount.
We frequently enter into sales arrangements that contain multiple performance obligations.
We generally do not request collateral from our customers but will request advance payments or letter’s of credit when deemed necessary. We frequently enter into sales arrangements that contain multiple performance obligations.
The initial borrowings under the Credit Agreement, including $25 million under the Revolving Credit Facility, were funded on May 14, 2021, and as of June 30, 2022 we had an outstanding balance under the Revolving Credit Facility of $5.0 million.
As of June 30, 2023, we had an outstanding balance under the Term Loan Facility of $69.1 million and Revolving Credit Facility of $10.0 million. The weighted average effective interest rate on the outstanding balances under the Term Loan Facility was 7.26% and Revolving Credit Facility was 8.27% during the twelve months ended June 30, 2023.
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Our actual results could differ materially from those discussed in the forward‑looking statements.
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Our actual results could differ materially from those discussed in the forward‑looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report on Form 10‑K, particularly in “Risk Factors.” See “Special Note Regarding Forward‑Looking Statements” for more information.
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The latest generation is the CyberKnife S7 System, which combines speed, advanced precision, and real-time artificial intelligence (AI)-driven motion tracking and synchronized treatment delivery for all SRS and SBRT treatments, in as little as 15 minutes. The platform is designed to treat cancerous and benign tumors throughout the body, as well as neurologic disorders.
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This section generally discusses the results of our operations for the year ended June 30, 2023, compared to the year ended June 30, 2022.
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The use of SRS and SBRT with the CyberKnife platform to treat tumors throughout the body has grown significantly in recent years. SRS and SBRT are performed on an outpatient basis in a limited number of treatment sessions - typically 1-5 fractions.
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For a discussion of the year ended June 30, 2022 compared to the year ended June 30, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2022, as filed with the SEC on August 17, 2022.
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They enable the treatment of patients who might not otherwise be treated with radiation, who may not be good candidates for surgery, or who desire a non-surgical treatment option.
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Current Economic Conditions We are subject to risks and uncertainties caused by events with significant macroeconomic impacts, including, but not limited to, rising inflation, actions taken to counter inflation, including rising interest rates, foreign currency exchange rate fluctuations, instability in the banking sector, the COVID-19 pandemic, and geopolitical concerns, such as the Russian invasion of Ukraine and increasing tension between China and the U.S., including with respect to Taiwan.
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The CyberKnife S7 System includes disease-specific tracking and treatment delivery solutions for brain, spine, lung and prostate tumors, improvements in treatment speed as compared to earlier systems, more options to configure the treatment room, and expanded number of nodes leading to more coverage and minimizing dose to healthy tissue.
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We are also continuing to navigate supply chain and inflation challenges and foreign exchange, all of which continues to have a negative impact on our results of operations.
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The system has the option of fixed collimators plus the Iris Variable Aperture Collimator and/or InCise Multileaf Collimator (MLC). With the addition of the InCise MLC, the CyberKnife S7 System enables treatment of larger tumors previously thought untreatable with radiosurgery and SBRT.
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We expect that our customers’ business and our business will continue to be adversely impacted, directly or indirectly, by macroeconomic and geopolitical issues, including supply chain issues, inflation, labor, foreign currency exchange rate fluctuations, uncertainty and volatility in the banking and financial services sector, tightening credit markets, the effects of 65 Table of Contents the COVID-19 related restrictions, and other factors that may emerge.
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The InCise MLC and IMRT planning tools enable expansion of indications that can be treated with a CyberKnife platform to include many IMRT indications. 73 Table of Contents Using our Synchrony® real-time target tracking with dynamic delivery technology and computer controlled robotic mobility, the CyberKnife platform is designed to deliver radiation from a wide array of beam angles and autonomously track, detect and correct for even the slightest tumor and patient movement in real time throughout the entire treatment.
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The extent of the ongoing impact of these macroeconomic events on our business, our markets and on global economic activity however, is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time.
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This design is intended to enable the CyberKnife platform to deliver high dose radiation with precision and accuracy, which minimizes damage to surrounding healthy tissue and eliminates the need for invasive head or body immobilization frames.
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Our past results may not be indicative of our future performance, and historical trends including conversion of backlog to revenue, income (loss) from operations, net income (loss), net income (loss) per share and cash flows may differ materially.
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The Accuray Precision® Treatment Planning System (TPS) with the VOLO Optimizer software on the CyberKnife S7 System enables customers to significantly improve operational efficiency by reducing both the time to create high quality treatment plans and the time it takes to deliver patient treatments.
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We also continue to evaluate our operating expenses, including our real estate needs and continue to assess our operations and how and to what extent we will continue to utilize our current real estate assets.
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The next-generation TPS with the optimizer facilitates the development of clinically optimal treatment plans up to 90 percent faster than before and the delivery of the treatment up to an estimated 50 percent faster than before the availability of this software.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeLikewise, increases and decreases in interest rates could have had a material impact on interest earnings for our portfolio. We do not currently carry investments that are sensitive to interest rate risk. Our debt obligations consist of a variety of financial instruments that expose us to interest rate risk, including, but not limited to the New Credit Facilities and Notes.
Biggest changeInterest Rate Risk Our debt obligations consist of a variety of financial instruments that expose us to interest rate risk, including, but not limited to the Credit Facilities and our 3.75% Convertible Senior Notes due 2026.
Upon conversion, we can settle the obligation by issuing our common stock, cash or a combination thereof at an initial conversion rate equal to 170.5611 shares of common stock per $1,000 principal amount of the 3.75% Convertible Notes due 2026, which is equivalent to a conversion price of approximately $5.86 per share of common stock, subject to adjustment.
Upon conversion, we can settle the obligation by issuing our common stock, cash or a combination thereof at an initial conversion rate equal to 170.5611 shares of common stock per $1,000 principal amount of the 3.75% Convertible Senior Notes due 2026, which is equivalent to a conversion price of approximately $5.86 per share of common stock, subject to adjustment.
There is no equity price risk if the share price of our common stock is below $5.86 upon conversion of the 3.75% Convertible Notes due 2026.
There is no equity price risk if the share price of our common stock is below $5.86 upon conversion of the 3.75% Convertible Senior Notes due 2026.
If the amount outstanding under the New Credit Facilities remained at this level for the next 12 months and interest rates increased or decreased by 50 basis point change, our annual interest expense would increase or decrease, respectively, approximately $0.4 million.
If the amount outstanding under the Credit Facilities remained at this level for the next 12 months and interest rates increased or decreased by a 50 basis point change, our annual interest expense would increase or decrease, respectively, approximately $0.4 million.
For every $1 that the share price of our common stock exceeds $5.86, we expect to issue an additional $17.1 million in cash or shares of our common stock, or a combination thereof, if all of the 3.75% Convertible Notes due 2026 are converted. 92 Table of Contents
For every $1 that the share price of our common stock exceeds $5.86, we expect to issue an additional $17.1 million in cash or shares of our common stock, or a combination thereof, if all of the 3.75% Convertible Senior Notes due 2026 are converted. 76 Table of Contents
We expect the changes in the fair value of the net foreign currency assets arising from fluctuations in foreign currency exchange rates to be materially offset by the changes in the fair value of the forward contracts.
We expect the changes in the 75 Table of Contents fair value of the net foreign currency assets arising from fluctuations in foreign currency exchange rates to be materially offset by the changes in the fair value of the forward contracts.
As of June 30, 2022, we had open currency forward contracts to purchase or sell foreign currencies with stated, or notional value of approximately $68.3 million. The purpose of these forward contracts is to minimize the risk associated with foreign exchange rate fluctuations. We have developed a foreign exchange policy to govern our forward contracts.
As of June 30, 2023, we had open currency forward contracts to purchase or sell foreign currencies with stated, or notional value, of approximately $61.5 million. The purpose of these forward contracts is to minimize the risk associated with foreign exchange rate fluctuations. We have developed a foreign exchange policy to govern our forward contracts.
As of June 30, 2022, borrowings under the New Term Loan Facility totaled $78.7 million net of issuance cost with an annual interest rate of 3.0% plus 90-day LIBOR, and borrowings under the New Revolving Credit Facility totaled $5.0 million with an annual interest rate of 3.0% plus 90-day LIBOR.
As of June 30, 2023, borrowings under the Term Loan Facility totaled $69.1 million, net of issuance cost, with an annual interest rate of 3.0% plus 90-day term SOFR, and borrowings under the Revolving Credit Facility totaled $10.0 million with an annual interest rate of 3.0% plus 90-day term SOFR.
Our foreign currency forward contract valuation inputs are based on quoted prices and quoted pricing intervals from public data and do not involve management judgment. Interest Rate Risk We maintain an investment portfolio of various holdings, types and maturities.
Our foreign currency forward contract valuation inputs are based on quoted prices and quoted pricing intervals from public data and do not involve management judgment.
The interest rates on the Notes are fixed and the interest rate on the New Credit Facilities are at variable rates, which are tied to a “prime rate” and LIBOR.
The interest rates on the 3.75% Convertible Senior Notes due 2026 are fixed and the interest rate on the Credit Facilities are at variable rates, which are tied to a “prime rate” and the Secured Overnight Financing Rate (“SOFR”).
Item 7A. QUANTITATIVE & QUALITAT IVE DISCLOSURES ABOUT MARKET RISK We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions. Foreign Currency Exchange Rate Risk A portion of our net sales are denominated in foreign currencies, most notably the Euro and the Japanese Yen.
Item 7A. QUANTITATIVE & QUALITAT IVE DISCLOSURES ABOUT MARKET RISK We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions. C oncentration of Credit and Other Risks Our cash and cash equivalents are deposited with several major financial institutions.
On May 13, 2021, we issued approximately $100.0 million aggregate principal amount of 3.75% Convertible Notes due 2026.
Refer to Note 9, Debt to our consolidated financial statements included in this Annual Report on Form 10-K for a discussion regarding our debt obligations. Equity Price Risk On May 13, 2021, we issued approximately $100.0 million aggregate principal amount of 3.75% Convertible Senior Notes due 2026.
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These securities are generally classified as available for sale and consequently are recorded on the balance sheet at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive income. At any time, a sharp rise or decline in interest rates could have a material adverse impact on the fair value of our investment portfolio.
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At times, deposits in these institutions exceed the amount of insurance provided on such deposits. We have not experienced any losses in such accounts and do not believe that we are exposed to any significant risk of loss on these balances.
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Refer to Note 10, Debt to our consolidated financial statements included in this Annual Report on Form 10-K for a discussion regarding our debt obligations. 91 Table of Contents Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations or financial condition.
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For the years ended June 30, 2023, and 2022, there was one customer that represented 10% or more of total net revenue. We had one customer as of June 30, 2023 and two customers as of June 30, 2022, respectively, that each accounted for more than 10% of our total accounts receivable, net.
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Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.
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We perform ongoing credit evaluations of our customers and maintain reserves for potential credit losses. Accounts receivable are deemed past due in accordance with the contractual terms of the agreement with such customer. Accounts receivable balances are charged against the allowance for doubtful accounts once collection efforts are unsuccessful. Single-source suppliers presently provide us with several components.
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Equity Price Risk On August 7, 2017, we issued approximately $85.0 million aggregate principal amount of 3.75% Convertible Notes due 2022.
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In most cases, if a supplier was unable to deliver these components, we believe that we would be able to find other sources for these components subject to any regulatory qualifications, if required. Foreign Currency Exchange Rate Risk A portion of our net sales are denominated in foreign currencies, most notably the Swiss Franc, Euro and the Japanese Yen.
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Upon conversion, we can settle the obligation by issuing our common stock, cash or a combination thereof at an initial conversion rate equal to 174.8252 shares of common stock per $1,000 principal amount of the 3.75% Convertible Notes due 2022, which is equivalent to a conversion price of approximately $5.72 per share of common stock, subject to adjustment.
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There is no equity price risk if the share price of our common stock is below $5.72 upon conversion of the 3.75% Convertible Notes due 2022.
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As of June 30, 2022 the remaining outstanding principal amount of 3.75% Convertible Notes due 2022 is $2.9 million for every $1 that the share price of our common stock exceeds $5.72, we expect to issue an additional $0.5 million in cash or shares of our common stock, or a combination thereof, if all of the 3.75% Convertible Notes due 2022 are converted.

Other ARAY 10-K year-over-year comparisons