Accuray(ARAY) - 2023 Q2 - Quarterly Report

PART I. Financial Information Item 1. Unaudited Condensed Consolidated Financial Statements This section presents Accuray Incorporated's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, cash flows, and detailed notes Unaudited Condensed Consolidated Balance Sheets This section presents Accuray's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity Balance Sheet Summary (USD thousands) | ASSETS | December 31, 2022 (USD thousands) | June 30, 2022 (USD thousands) | |:---|:---|:---| | Cash and cash equivalents | $67,729 | $88,737 | | Accounts receivable, net | $89,187 | $94,442 | | Inventories | $155,665 | $142,254 | | Total current assets | $336,948 | $350,890 | | Total assets | $468,769 | $472,849 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $33,861 | $31,337 | | Accrued compensation | $20,099 | $29,441 | | Total current liabilities | $184,720 | $208,858 | | Long-term debt | $174,102 | $171,907 | | Total liabilities | $417,024 | $419,660 | | Total stockholders' equity | $51,745 | $53,189 | | Total liabilities and stockholders' equity | $468,769 | $472,849 | - Total assets decreased from $472.8 million at June 30, 2022, to $468.8 million at December 31, 2022, with cash and cash equivalents decreasing from $88.7 million to $67.7 million[15] - Total liabilities decreased slightly from $419.7 million to $417.0 million, while total stockholders' equity also decreased from $53.2 million to $51.7 million[15] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section presents Accuray's unaudited condensed consolidated statements of operations and comprehensive income (loss) for the reported periods Statements of Operations and Comprehensive Income (Loss) Summary (USD thousands) | Metric | Three Months Ended Dec 31, 2022 (USD thousands) | Three Months Ended Dec 31, 2021 (USD thousands) | Six Months Ended Dec 31, 2022 (USD thousands) | Six Months Ended Dec 31, 2021 (USD thousands) | |:---|:---|:---|:---|:---|\n| Net revenue | $114,760 | $116,275 | $211,253 | $223,717 | | Products revenue | $63,269 | $60,721 | $107,892 | $113,480 | | Services revenue | $51,491 | $55,554 | $103,361 | $110,237 | | Gross profit | $42,967 | $42,627 | $77,564 | $82,151 | | Income from operations | $2,705 | $3,981 | $523 | $6,392 | | Net income (loss) | $(1,874) | $179 | $(7,323) | $(849) | | Net income (loss) per share - basic | $(0.02) | $0.00 | $(0.08) | $(0.01) | | Comprehensive income (loss) | $916 | $71 | $(8,188) | $(726) | - Net revenue decreased by 1% for the three months ended December 31, 2022, and by 6% for the six months ended December 31, 2022, compared to the prior year periods[19] - The company reported a net loss of $1.9 million for the three months ended December 31, 2022, a significant decline from a net income of $0.2 million in the prior year period, with the six-month net loss widening to $7.3 million from $0.8 million[19] Unaudited Condensed Consolidated Statements of Stockholders' Equity This section presents Accuray's unaudited condensed consolidated statements of stockholders' equity, detailing changes in equity components Stockholders' Equity Summary (USD thousands) | Stockholders' Equity Component | Balance at June 30, 2022 (USD thousands) | Balance at December 31, 2022 (USD thousands) | |:---|:---|:---|\n| Common Stock (Shares) | 93,500 | 95,494 | | Common Stock (Amount) | $94 | $95 | | Additional Paid-in Capital | $543,211 | $550,288 | | Accumulated Other Comprehensive Income (Loss) | $2,406 | $1,541 | | Accumulated Deficit | $(492,522) | $(500,179) | | Total Stockholders' Equity | $53,189 | $51,745 | - Total stockholders' equity decreased from $53.2 million at June 30, 2022, to $51.7 million at December 31, 2022, primarily due to a net loss of $7.3 million and a negative foreign currency translation adjustment of $0.9 million[24][19] - Share-based compensation contributed $6.0 million to additional paid-in capital during the six months ended December 31, 2022[24][28] Unaudited Condensed Consolidated Statements of Cash Flows This section presents Accuray's unaudited condensed consolidated statements of cash flows, detailing operating, investing, and financing activities Cash Flow Summary (USD thousands) | Cash Flow Activity | Six Months Ended Dec 31, 2022 (USD thousands) | Six Months Ended Dec 31, 2021 (USD thousands) | |:---|:---|:---|\n| Net cash provided by (used in) operating activities | $(17,968) | $24,011 | | Net cash used in investing activities | $(2,806) | $(2,259) | | Net cash used in financing activities | $(90) | $(14,510) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | $(79) | $(747) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(20,943) | $6,495 | | Cash, cash equivalents and restricted cash at end of period | $69,211 | $124,696 | - Net cash used in operating activities was $18.0 million for the six months ended December 31, 2022, a significant decrease from $24.0 million provided in the prior year, primarily due to a net loss and changes in assets and liabilities[28][156] - Investing activities used $2.8 million, mainly for property and equipment purchases, while financing activities used $0.1 million, reflecting debt repayments partially offset by revolving credit facility drawdowns and employee stock plan proceeds[28][158][159] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed notes explaining Accuray's significant accounting policies and other financial information Note 1. The Company and its Significant Accounting Policies This note describes Accuray's business, financial statement preparation, and significant accounting policies - Accuray Incorporated designs, develops, and sells advanced radiosurgery and radiation therapy systems globally for tumor treatment, with primary offices in the US, Switzerland, China, Hong Kong, and Japan[31] - The financial statements are prepared in accordance with GAAP, with certain information condensed per SEC rules, and results for the three and six months ended December 31, 2022, are not indicative of future periods[33] - The company faces risks from geopolitical and macroeconomic impacts, including the Russian invasion of Ukraine, inflation, and the COVID-19 pandemic, which have affected and may continue to affect demand, supply chain, and operating results[35] Note 2. Recent Accounting Pronouncements This note details recent accounting pronouncements adopted by Accuray and their impact on financial statements - Accuray adopted ASU 2020-04, Reference Rate Reform, transitioning from LIBOR to SOFR for its Term Loan and Revolving Credit Facility in October 2022, with no material financial statement impact[38] Note 3. Revenue This note provides details on Accuray's revenue recognition, contract balances, and remaining performance obligations Contract Balance Summary (USD thousands) | Contract Balance | December 31, 2022 (USD thousands) | June 30, 2022 (USD thousands) | Change ($ thousands) | Change (%) | |:---|:---|:---|:---|:---|\n| Unbilled accounts receivable – current | $22,395 | $13,325 | $9,070 | 68% | | Customer advances | $17,169 | $25,290 | $(8,121) | (32%) | | Deferred revenue – current | $72,675 | $75,375 | $(2,700) | (4%) | | Deferred revenue – non-current | $30,357 | $24,694 | $5,663 | 23% | - Contract assets increased primarily due to changes in billing timing after revenue recognition and transactions with payment terms over 12 months, while contract liabilities decreased due to changes in revenue recognition timing, reduced customer deposits, and deferred warranty[42] - As of December 31, 2022, total remaining performance obligations were $1,077.6 million, with $71.9 million related to long-term warranty and non-cancellable post-warranty services, and approximately 26% to 29% of the remaining $1,005.7 million expected to be recognized in the next 12 months[45] Note 4. Supplemental Financial Information This note provides supplemental financial details, including financing receivables, inventories, and interest expense Financing Receivables Summary (USD thousands) | Financing Receivables | December 31, 2022 (USD thousands) | June 30, 2022 (USD thousands) | |:---|:---|:---|\n| Total, gross | $6,165 | $6,137 | | Allowance for credit losses | $(943) | $(943) | | Total, net | $5,222 | $5,194 | | Reported as: Current | $2,245 | $2,435 | | Reported as: Non-current | $2,977 | $2,759 | Inventories Summary (USD thousands) | Inventories | December 31, 2022 (USD thousands) | June 30, 2022 (USD thousands) | |:---|:---|:---|\n| Raw materials | $65,463 | $61,871 | | Work-in-process | $16,427 | $16,367 | | Finished goods | $73,775 | $64,016 | | Total Inventories | $155,665 | $142,254 | - Interest expense increased to $2.6 million for the three months ended December 31, 2022, from $2.1 million in the prior year, and to $4.9 million for the six-month period from $4.1 million, primarily due to higher interest rates[60] Note 5. Leases This note describes Accuray's operating lease arrangements and related liabilities - Accuray has operating leases for offices and facilities, with some non-cancellable agreements extending through June 2035, including a material lease for its Madison, Wisconsin facility extended in August 2022[61] Operating Lease Liabilities (USD thousands) | Operating Lease Liabilities | December 31, 2022 (USD thousands) | |:---|:---|\n| 2023 (remaining six months) | $4,793 | | 2024 | $2,839 | | 2025 | $4,344 | | 2026 | $3,315 | | 2027 | $3,175 | | Thereafter | $26,263 | | Total operating lease payments | $44,729 | | Less: imputed interest | $(17,152) | | Present value of operating lease liabilities | $27,577 | | Weighted average remaining lease term (in years) | 8.7 | | Weighted average discount rate | 8.8% | Note 6. Goodwill and Intangible Assets This note provides information on Accuray's goodwill and intangible assets, including impairment testing Goodwill and Intangible Assets (USD thousands) | Asset Type | December 31, 2022 (USD thousands) | June 30, 2022 (USD thousands) | |:---|:---|:---|\n| Goodwill | $57,776 | $57,840 | | Patent license, net | $268 | $250 | - Goodwill decreased slightly due to currency translation, and the company's annual impairment test in Q2 FY23 found no impairment[68] - No triggering events for impairment of definite-lived intangible and long-lived assets were identified as of December 31, 2022[69] Note 7. Derivative Financial Instruments This note details Accuray's use of derivative financial instruments to manage foreign currency exposure - Accuray uses foreign currency forward contracts to manage exposure to exchange rate fluctuations on intercompany balances, cash, receivables, and liabilities, primarily in Japanese Yen, Swiss Franc, and U.S. Dollar, which are not designated as hedging instruments[71] Notional Amount of Outstanding Forward Currency Exchange Contracts (USD thousands) | Currency | Notional Amount as of December 31, 2022 (USD thousands) | Notional Amount as of June 30, 2022 (USD thousands) | |:---|:---|:---|\n| Swiss Franc | $32,981 | $27,910 | | Japanese Yen | $17,224 | $14,167 | | Euro | $1,462 | $16,307 | | Total outstanding forward currency exchange contracts | $57,678 | $68,335 | Foreign Currency Exchange Gain (Loss) (USD thousands) | Gain (Loss) Type | Three Months Ended Dec 31, 2022 (USD thousands) | Six Months Ended Dec 31, 2022 (USD thousands) | |:---|:---|:---|\n| Foreign currency exchange gain (loss) on forward contracts | $(213) | $1,446 | | Foreign currency transaction gain (loss) | $180 | $(1,730) | Note 8. Fair Value Measurements This note provides information on Accuray's fair value measurements for financial instruments - The company's open currency forward contracts are measured at fair value using Level 2 inputs, based on observable market data, with a notional value of $57.7 million as of December 31, 2022[78] Debt Instrument Carrying Value vs. Fair Value (USD thousands) | Debt Instrument | Carrying Value (Dec 31, 2022, USD thousands) | Fair Value (Dec 31, 2022, USD thousands) | |:---|:---|:---|\n| 3.75% Convertible Notes Due 2026 | $97,901 | $83,161 | | Term Loan Facility | $71,903 | $71,903 | | Revolving Credit Facility | $10,000 | $10,000 | | Total | $179,804 | $165,064 | - The carrying value of the Revolving Credit Facility and Term Loan Facility approximates their estimated fair value, based on bank quoted market rates (Level 2 fair value measurement)[79] Note 9. Commitments and Contingencies This note outlines Accuray's legal proceedings, indemnities, bank guarantees, royalty costs, and restructuring charges - Accuray is involved in legal proceedings in the ordinary course of business but does not believe any current claims will materially and adversely affect its financial condition or operating results[81] - The company provides indemnities for software infringement and to landlords, with no recorded liability as of December 31, 2022, as no probable losses are anticipated[82][83] - Bank guarantees totaled $1.3 million as of December 31, 2022, primarily for customer bidding processes, with royalty costs of $0.6 million and $1.1 million recorded for the three and six months ended December 31, 2022, respectively[85][86] - A Q2 FY23 cost-saving initiative resulted in a 4.5% global workforce reduction, costing an estimated $2.4 million, with $1.9 million charged in Q2 FY23 and a remaining accrual of $1.1 million expected to be paid in FY23[87] Note 10. Debt This note provides details on Accuray's outstanding debt, including convertible notes and credit facilities - The remaining $2.9 million of 3.75% Convertible Senior Notes due July 2022 were repaid in cash in July 2022[88] - As of December 31, 2022, $100.0 million aggregate principal amount of 3.75% Convertible Senior Notes due July 2026 remained outstanding[88] Debt Summary (USD thousands) | Debt Instrument | Principal Amount (Dec 31, 2022, USD thousands) | Net Carrying Amount (Dec 31, 2022, USD thousands) | |:---|:---|:---|\n| 3.75% Convertible Notes Due 2026 | $100,000 | $97,901 | | Revolving Credit Facility | $10,000 | $10,000 | | Term Loan Facility | $73,000 | $71,903 | | Total Debt | $183,000 | $179,804 | | Reported as: Short-term debt | | $5,702 | | Reported as: Long-term debt | | $174,102 | - In October 2022, the company amended its credit agreement, increasing the senior net leverage ratio and reducing the consolidated fixed charge coverage ratio requirements until June 30, 2023[92] Note 11. Stock Incentive Plan and Employee Stock Purchase Plan This note details Accuray's share-based compensation expense and changes to its stock incentive plans Share-Based Compensation Expense (USD thousands) | Expense Category | Three Months Ended Dec 31, 2022 (USD thousands) | Six Months Ended Dec 31, 2022 (USD thousands) | |:---|:---|:---|\n| Cost of revenue | $443 | $809 | | Research and development | $403 | $771 | | Selling and marketing | $458 | $944 | | General and administrative | $1,822 | $3,518 | | Total share-based compensation | $3,126 | $6,042 | - Total share-based compensation increased to $3.1 million for the three months ended December 31, 2022, from $2.7 million in the prior year, and to $6.0 million for the six-month period from $5.2 million[94] - In October 2022, the company increased shares available under its 2016 Equity Incentive Plan by 4.0 million and its 2007 Employee Stock Purchase Plan by 2.5 million[94] Note 12. Net Income (Loss) Per Common Share This note provides the calculation of basic and diluted net income (loss) per common share Net Income (Loss) Per Common Share (USD thousands, except per share data) | Metric | Three Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2022 | |:---|:---|:---|\n| Net income (loss) | $(1,874) | $(7,323) | | Weighted average shares outstanding - basic | 94,567 | 94,048 | | Basic net income (loss) per share | $(0.02) | $(0.08) | | Diluted net income (loss) per share | $(0.02) | $(0.08) | - Potentially dilutive securities, including stock options, RSUs, PSUs, and convertible notes, were excluded from diluted EPS calculation for the periods ended December 31, 2022, and 2021, as their effect would have been anti-dilutive due to net losses[97][98] Note 13. Segment Information This note provides information on Accuray's operating segment and geographic revenue distribution - Accuray operates as one operating and reporting segment: Oncology systems group, which develops, manufactures, and markets medical devices for radiation therapy[100] Revenue by Geographic Region (USD thousands) | Geographic Region | Three Months Ended Dec 31, 2022 (USD thousands) | Six Months Ended Dec 31, 2022 (USD thousands) | |:---|:---|:---|\n| Americas | $27,919 | $55,204 | | Europe, India, Middle East and Africa | $39,664 | $76,410 | | Asia Pacific, excluding Japan and China | $9,199 | $17,173 | | Japan | $15,700 | $27,188 | | China | $22,278 | $35,278 | | Total | $114,760 | $211,253 | - Revenue from outside the Americas increased for both the three and six months ended December 31, 2022, driven by system sales in EIMEA, Japan, and China, while Americas revenue decreased due to lower system sales and contract services[104][140][141] Note 14. Joint Venture This note describes Accuray's investment in its China Joint Venture and its financial impact - Accuray holds a 49% interest in CNNC Accuray (Tianjin) Medical Technology Co. Ltd. (the JV) and applies the equity method of accounting, recognizing sales to the JV with profit eliminated until goods are sold to an end customer[107] Joint Venture Financial Data (USD thousands) | JV Financial Data | Three Months Ended Sep 30, 2022 (USD thousands) | Six Months Ended Sep 30, 2022 (USD thousands) | |:---|:---|:---|\n| Revenue | $23,983 | $50,723 | | Net loss | $(1,416) | $(2,168) | | Net loss attributable to the Company | $(699) | $(1,067) | - The carrying value of the investment in the JV decreased to $12.3 million at December 31, 2022, from $13.9 million at June 30, 2022, partly due to the company's proportional share of the JV's currency translation adjustment[108] Note 15. Income Tax This note provides information on Accuray's income tax expense, GILTI inclusion, and unrecognized tax benefits - Income tax expense was $1.0 million for the three months and $1.4 million for the six months ended December 31, 2022, primarily due to foreign taxes[113] - GILTI inclusion is expected to be fully absorbed by net operating loss carryforwards, not causing a U.S. taxable income position for fiscal year 2023, and the change in U.S. tax law requiring capitalization of R&E expenditures is not expected to materially impact FY23 financial statements[114] - Gross unrecognized tax benefits were $19.8 million as of December 31, 2022, with $19.6 million not affecting income tax expense before valuation allowance[115] Note 16. Subsequent Events This note discloses any significant events occurring after the balance sheet date - The company evaluated subsequent events through the filing date of this 10-Q and found no events requiring adjustments to its unaudited condensed consolidated financial statements[116] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Accuray's financial condition, operating results, liquidity, and critical accounting policies for the reported periods - Accuray develops, manufactures, sells, and supports advanced radiosurgery and radiation therapy systems (CyberKnife® and TomoTherapy® platforms) for tumor treatment, aiming for better accuracy, flexibility, and shorter treatment times[120][121] - Macroeconomic factors (e.g., Russian invasion of Ukraine, inflation, foreign currency fluctuations) and the COVID-19 pandemic continue to create significant global economic uncertainty, impacting demand, supply chain, and operating results[123][124] - A Q2 FY23 cost-saving initiative reduced the global workforce by 4.5%, incurring $1.9 million in charges, with an estimated additional $0.5 million in Q3 FY23[125] - The China Joint Venture (JV) has begun selling products, with regulatory submission for a locally branded Class B device completed, expecting NMPA clearance in H2 FY24[126][127] Order Backlog Summary (USD thousands) | Metric | Three Months Ended Dec 31, 2022 (USD thousands) | Three Months Ended Dec 31, 2021 (USD thousands) | Six Months Ended Dec 31, 2022 (USD thousands) | Six Months Ended Dec 31, 2021 (USD thousands) | |:---|:---|:---|:---|:---|\n| Gross orders | $79,035 | $85,381 | $148,883 | $155,365 | | Net orders | $40,869 | $40,183 | $60,439 | $80,946 | | Order backlog at period end | $515,236 | $581,267 | $515,236 | $581,267 | - Gross orders decreased by $6.3 million (3 months) and $6.5 million (6 months) year-over-year, primarily due to declines in EIMEA, Japan, and Asia Pacific regions, partially offset by Americas and China increases[131][132] - Net orders increased by $0.7 million (3 months) year-over-year due to lower cancellations and age-outs, but decreased by $20.5 million (6 months) year-over-year due to lower age-ins, gross orders, and unfavorable foreign exchange impacts[133] Key Financial Results (USD thousands) | Metric | Three Months Ended Dec 31, 2022 (USD thousands) | Change ($ thousands) | Change (%) | Six Months Ended Dec 31, 2022 (USD thousands) | Change ($ thousands) | Change (%) | |:---|:---|:---|:---|:---|:---|:---|\n| Products Net Revenue | $63,269 | $2,548 | 4% | $107,892 | $(5,588) | (5%) | | Services Net Revenue | $51,491 | $(4,063) | (7%) | $103,361 | $(6,876) | (6%) | | Total Net Revenue | $114,760 | $(1,515) | (1%) | $211,253 | $(12,464) | (6%) | | Gross Profit | $42,967 | $340 | 1% | $77,564 | $(4,587) | (6%) | | Net Income (Loss) | $(1,874) | $(2,053) | (1147%) | $(7,323) | $(6,474) | (763%) | - Products net revenue increased by $2.5 million (3 months) due to system sales, but decreased by $5.6 million (6 months) due to lower product upgrades and system sales, both unfavorably impacted by foreign exchange[136] - Services net revenue decreased by $4.1 million (3 months) and $6.9 million (6 months) year-over-year, primarily due to foreign exchange impacts on contract services and reduced training/installation activity[137] - Overall gross profit increased by 1% (3 months) due to lower service costs, but decreased by 6% (6 months) due to unfavorable product mix and foreign exchange impacts on product revenue[142] - Net cash used in operating activities was $18.0 million for the six months ended December 31, 2022, compared to $24.0 million provided in the prior year, driven by net loss and changes in working capital[155][156] - The company believes its current cash and debt facilities are sufficient to fund operations for at least the next 12 months, but continues to critically review liquidity due to ongoing macroeconomic uncertainty[150][161] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details Accuray's exposure to market risks, including foreign currency, interest rate, equity price, and inflation risks, and mitigation strategies - Accuray uses foreign currency forward contracts (notional value ~$57.7 million as of Dec 31, 2022) to manage exposure to foreign currency exchange rate fluctuations, primarily in Euro and Japanese Yen, with changes in fair value reported in earnings[175][176] - The company's Credit Facilities (Term Loan and Revolving Credit) have variable interest rates tied to SOFR, where a 50 basis point change in interest rates would impact annual interest expense by approximately $0.4 million[177] - Equity price risk exists for the 3.75% Convertible Notes due 2026; if the common stock price exceeds $5.86 per share upon conversion, the company may issue additional cash or shares[178] - Elevated inflation levels could materially impact Accuray's business by increasing costs (e.g., freight, logistics) that may not be fully offset by price increases, especially for long-term contractual agreements[179] Item 4. Controls and Procedures This section confirms the effectiveness of Accuray's disclosure controls and procedures and reports no significant changes in internal control over financial reporting - Accuray's disclosure controls and procedures were evaluated as effective as of December 31, 2022, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[181] - No significant changes in internal control over financial reporting occurred during the six months ended December 31, 2022[182] - Internal controls have inherent limitations, including human diligence, judgment lapses, and potential circumvention by collusion or management override, meaning they can only provide reasonable, not absolute, assurance[183] PART II. Other Information Item 1. Legal Proceedings This section incorporates information on commitments and contingencies related to litigation, with no anticipated material adverse effects on financial condition - Information regarding legal proceedings is incorporated by reference from Note 9, Commitments and Contingencies, of the financial statements[185] - Management believes there are no probable and reasonably estimable material losses related to any current legal proceedings and claims[81] Item 1A. Risk Factors This section outlines significant risks to Accuray's business, including global economic conditions, market acceptance, debt, competition, and regulatory compliance - Accuray faces risks from the current global economic environment, including inflation, recession, and the COVID-19 pandemic, which could delay customer financing, impact demand, and disrupt supply chains[197][198][200] - Widespread market acceptance of CyberKnife and TomoTherapy platforms is crucial; failure to achieve this due to physician adoption, capital purchase decisions, or competition could harm revenue[207][209][210] - Maintaining or increasing gross margins is vital for profitability, but factors like manufacturing costs, low production volume, pricing, and supply chain disruptions could adversely impact them[211] - Outstanding debt (Convertible Senior Notes, Credit Facilities) poses risks, including substantial interest and principal payments, restrictive covenants, and potential acceleration of debt if covenants are breached[216][217][218] - Operating results, including orders, revenues, and margins, are volatile due to long sales cycles, high unit prices, and external factors like the COVID-19 pandemic, making financial performance unpredictable[220][221][222][225] - The medical device industry is highly competitive and subject to rapid technological change; failure to innovate or keep pace with competitors (e.g., Varian, Elekta) could render Accuray's products obsolete[228][230][232] - International operations, which generate a majority of revenue, are exposed to economic, political, regulatory, and currency risks, including trade tariffs and sanctions, which could adversely affect business[234][235][238][239][240] - Reliance on single-source suppliers for critical components, coupled with global supply chain disruptions, poses risks of delays, increased costs, and inability to meet demand, impacting gross margins and revenue[257][258][259] - The company's ability to protect its intellectual property (patents, trade secrets) is difficult and costly, with risks of infringement claims, challenges to patent validity, and inadequate protection in foreign jurisdictions[296][297][298][302] - Compliance with extensive federal, state, and foreign laws (e.g., anti-kickback, false claims, HIPAA, FCPA, GDPR) is critical; violations could result in substantial penalties, reputational harm, and operational restructuring[338][339][340][344][345][272][273][274] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds to report[378] Item 3. Defaults Upon Senior Securities This section reports no defaults upon senior securities for the period - No defaults upon senior securities to report[378] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[378] Item 5. Other Information This section reports no other information for the period - No other information to report[378] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including key agreements and certifications - Exhibit 10.1: First Amendment to Credit Agreement, dated October 28, 2022[381] - Exhibit 10.2: Accuray Incorporated Amended and Restated 2016 Equity Incentive Plan[382] - Exhibit 31.1 and 31.2: Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a)[385][386] - Exhibit 32.1: Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. 1350[387]