ViewRay
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549 FORM 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017OR☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number: 001-37725 ViewRay, Inc.(Exact Name of Registrant as Specified in its Charter) Delaware42-1777485(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.) 2 Thermo Fisher WayOakwood Village, OH44146(Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code: (440) 703-3210 Securities registered pursuant to section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 The NASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Exchange Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ (Do not check if a small reporting company) Small reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒At June 30, 2017, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $166,918,728 based on the closing sale price asreported on the Nasdaq Global Market. As of March 2, 2018, the registrant had 67,653,974 shares of common stock, $0.01 par value per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the 2018 annual meeting of stockholders are incorporated byreference in Part III of this Form 10-K where indicated.  VIEWRAY, INC.FORM 10-KANNUAL REPORTTABLE OF CONTENTS Page PART I Item 1.Business 4 Item 1A.Risk Factors 34 Item 1B.Unresolved Staff Comments 74 Item 2.Properties 74 Item 3.Legal Proceedings 75 Item 4.Mine Safety Disclosures 75 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 76 Item 6.Selected Financial Data 77 Item 7.Management's Discussion and Analysis of Financial Condition and Results 79 Item 7A.Quantitative and Qualitative Disclosure About Market Risk 96 Item 8.Consolidated Financial Statements and Supplementary Data 97 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 131 Item 9A.Controls and Procedures 131 Item 9B.Other Information 132 PART III Item 10.Directors, Executive Officers and Corporate Governance 132 Item 11.Executive Compensation 132 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 132 Item 13.Certain Relationships and Related Transactions, and Director Independence 132 Item 14.Principal Accountant Fees and Services 132 PART IV Item 15.Exhibits and Financial Statement Schedules 133 Item 16.Form 10-K Summary 138 2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K, or this Report, contains forward-looking statements, including, without limitation, in the sections captioned “RiskFactors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained inthis Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,”“project,” “estimate,” “pro forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,”“expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements.However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include,without limitation, statements regarding: (i) the plans and objectives of management for future operations, including plans or objectives relating to thedevelopment of products; (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends,capital structure or other financial items; (iii) our future financial performance, including any such statement contained in a discussion and analysis offinancial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission,or the SEC; and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized becausethey are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks anduncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differmaterially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to theinaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation: •market acceptance of magnetic resonance imaging (“MRI”)-guided radiation therapy; •the benefits of MRI-guided radiation therapy; •our ability to successfully sell and market MRIdian in our existing and expanded geographies; •the performance of MRIdian in clinical settings; •competition from existing technologies or products or new technologies and products that may emerge; •the pricing and reimbursement of MRI-guided radiation therapy; •the implementation of our business model and strategic plans for our business and MRIdian; •the scope of protection we are able to establish and maintain for intellectual property rights covering MRIdian; •our ability to obtain regulatory approval in targeted markets for MRIdian; •estimates of our future revenue, expenses, capital requirements and our need for additional financing; •our financial performance; •our expectations related to the MRIdian linear accelerator technology, or MRIdian Linac; •developments relating to our competitors and the healthcare industry; and •other risks and uncertainties, including those listed under the section titled “Risk Factors.”Any forward-looking statements in this Report reflect our current views with respect to future events or to our future financial performance and involveknown and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from anyfuture results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differmaterially from current expectations include, among other things, those listed under Part II, Item 1A, titled “Risk Factors” and discussed elsewhere in thisReport. Given these uncertainties, you are cautioned not to place 3 undue reliance on these forward-looking statements. We disclaim any obligation to update the forward-looking statements contained in this Report to reflectany new information or future events or circumstances or otherwise, except as required by law.This Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain products, includingdata regarding the estimated size of those markets. Information that is based on estimates, forecasts, projections, market research or similar methodologies isinherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information.Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data preparedby market research firms and other third parties, industry, medical and general publications, government data and similar sources.PART IItem 1. BUSINESSCompany OverviewWe design, manufacture and market the ViewRay MRIdian®, the only clinical MRI-guided radiation therapy system on the market. The MRIdian combinesMRI and external-beam radiation therapy to simultaneously image and treat cancer patients. MRI is a broadly used imaging tool that has the ability to clearlydifferentiate between types of soft tissue. In contrast, X-ray or computed tomography (CT), the most commonly used imaging technologies in radiationtherapy today, are often unable to distinguish soft tissues such as the tumor and critical organs. MRIdian integrates MRI technology, radiation delivery andour proprietary software to locate, target and track soft-tissue tumors, while radiation is delivered. These capabilities allow MRIdian to deliver radiation tothe tumor more accurately, while reducing the radiation amount delivered to nearby healthy tissue, as compared to other radiation therapy treatmentscurrently available. We believe this will lead to improved patient outcomes and reduced treatment-related side effects.There are two generations of the MRIdian: the first generation MRIdian with Cobalt-60 based radiation beams and the second generation MRIdian Linac,with more advanced linear accelerator or ‘linac’ based radiation beams. ViewRay’s first generation MRIdian was a breakthrough that integrated high qualityradiation therapy with simultaneous magnetic resonance imaging (MRI). ViewRay first-generation MRIdian System with radiation powered by Cobalt-60 was cleared by the FDA in May 2012. By the end of 2016, the Company hadshipped nine of these first generation MRIdian Systems. The MRIdian System demonstrated in clinical practice for the first time the benefits of MRI-guidedradiation treatment for cancer, generating a large body of clinical evidence from its use in pancreatic, breast, lung, prostate and other cancers.ViewRay’s second-generation system, the MRIdian Linac (Linear Accelerator) system received the Conformité Européene, or CE Mark in September 2016and FDA 510k clearance in February 2017. The MRIdian Linac System has several advantages over the first generation MRIdian System. Linac-basedradiation therapy delivery systems allow for higher dose, faster electronic variation of dose and very fast electronic beam activation and deactivation. LinearAccelerator technology obviates the need for the inspection, replacement, and disposal of Cobalt-60, and oversight from the U.S. Nuclear RegulatoryCommission (or similar national agency in foreign countries). ViewRay solved two major long-standing problems to integrate a linac beam compactly withan MRI system: 1) linac radiofrequency interference with the operation of the MRI and 2) MRI magnetic interference with the operation of the linac.•Linacs utilize high-powered microwave generators similar to equipment used in radar at airports. These “radar stations” inside the linac create noisethat can corrupt the delicate signals measured from the patient’s body to generate MR images. ViewRay solved this problem by introducingtechnology similar to that used in stealth aircraft. Stealth aircraft can hide from radar by using a coating that reflects and absorbs microwaves, thuspreventing radar beams that strike the aircraft from bouncing back to the radar station. In a similar manner, ViewRay’s linac based system reflects andabsorbs the output of the linac “radar station” to prevent it from interfering with the MRI, producing images as noise-free as MRI images with nointegrated linac. 4 •MRIs utilize high-powered superconducting magnets that are required to image the patient’s tissues. Many linac components will not operate properlywhen placed close to or inside these strong magnetic fields. Close placement is necessary to produce a compact system that can fit in existing radiationtherapy vaults, as the MRIdian linac does. ViewRay overcame this challenge by creating magnetic shielding shells that create voids in the magneticfield without significantly disturbing the magnetic field used for imaging. This allows the linac to operate on the MRIdian linac gantry as if there wereno magnetic field present.In addition, ViewRay has applied the same double-focused multi-leaf collimator technology, originally designed for the first generation MRIdian System, toViewRay’s MRIdian linac technology. This new high-resolution beam-shaping multi-leaf collimator (MLC), called the RayZR® MLC, when combined withthe already sharp linac radiation source results in the sharpest linac beam commercially available in the industry. Therefore, we believe that ViewRay’sMRIdian linac technology could be transformative to the standard of care in radiation therapy.Both generations of the MRIdian have received 510(k) marketing clearance from the US Food and Drug Administration, or FDA, and permission to affix theCE mark. •We received initial 510(k) marketing clearance from the US Food and Drug Administration, or FDA, for our treatment planning and deliverysoftware in January 2011. •We received 510(k) marketing clearance for MRIdian, with Cobalt-60 as the radiation source, in May 2012. We also received permission to affixthe CE mark to MRIdian with Cobalt-60 in November 2014, allowing MRIdian with Cobalt-60 to be sold within the European Economic Area, orEEA. In August 2016, we received regulatory approval from the Japanese Ministry of Health, Labor and Welfare to market MRIdian with Cobalt-60 in Japan. In August 2016, we also received approval from the China Food and Drug Administration to market MRIdian with Cobalt-60 inChina. •In September 2016, we received the CE mark for the second generation MRIdian Linac (with a linear accelerator as the radiation source) in theEEA. In February 2017, we received 510(k) clearance from the FDA to market MRIdian Linac. In June 2017, we received 510(k) clearance tomarket RayZR™, our high-resolution beam-shaping multi-leaf collimator, or MLC. We also received MRIdian Linac regulatory approval inTaiwan and Canada in August 2017, and in Israel in November 2017. We are also seeking required MRIdian Linac approvals in other countriessuch as Japan and China.Cancer is a leading cause of death globally and the second leading cause of death in the United States. Radiation therapy is a common method used to treatcancer that uses lethal doses of ionizing energy to damage genetic material in cells. Nearly two-thirds of all treated cancer patients in the United States willreceive some form of radiation therapy during the course of their illness, according to estimates by the American Society for Radiation Oncology, or ASTRO.In 2016, IMV Medical Information Division, Inc., or IMV, reported that 97% of patients receiving radiation therapy in the United States were treated by alinear accelerator, or linac. The global linac market was estimated at approximately $4.6 billion in 2015 and was expected to grow to approximately$6.3 billion by 2020 according to a 2015 Markets and Markets report. IAEA Human Health Campus reported that there are over 11,500 linacs installed atover 7,800 centers worldwide. We currently estimate the annual market for linacs to be 1,000 units per year globally, the majority of which are replacementunits. We believe the addressable market for MRIdian is the annual market for linacs due to MRIdian’s ability to treat a broad spectrum of disease sites.However, we believe that MRIdian may initially be used more frequently for complex cancer cases that may be difficult to treat on a standard linac due to thelocation of the tumor in relation to the surrounding organs at risk for radiation damage.Despite the prevalence of MRI for diagnostic purposes and its ability to image soft tissue clearly, the radiation therapy industry has previously been unableto integrate MRI into external-beam radiation therapy systems successfully. Existing radiation therapy systems use X-ray-based imaging technologies, suchas CT, which do not clearly differentiate between types of soft tissues or provide a fully accurate view of a tumor’s position in relation to critical organs. X-ray based imaging systems integrated into radiation delivery devices also often suffer from imaging artifacts caused by organ motion related to breathing, andartifacts related to air/fluid levels in the stomach and bowels. In addition, existing systems that offer imaging during the course of a treatment are limited bythe rate at which they can image, due to the level of additional radiation to which they expose the patient. These constraints can make it difficult for aclinician to locate a soft tissue tumor accurately, track its motion in real-time or adapt treatment as internal anatomy changes. It is very difficult to bothirradiate a tumor and minimize the amount of radiation exposure to critical organs, without the ability to see the exact location and shape of the tumor and 5 surrounding critical organs. If a tumor is insufficiently irradiated, it may not respond to the treatment, resulting in a higher rate of local tumor recurrence andlower probability of overall survival for the patient. Excess radiation exposure to healthy organs and other healthy soft tissues can lead to severe side effects,including organ failure, secondary cancers and in the most serious cases, even death. We believe that the MRIdian’s ability to see the exact location andshape of the tumor and surrounding critical organs will lead to improved patient outcomes and reduced treatment related side effects.MRIdian is the first radiation therapy solution that enables simultaneous radiation treatment delivery and real-time MRI imaging of a patient’s internalanatomy. It generates high-quality images that differentiate between the targeted tumor, surrounding soft tissue and nearby critical organs. MRIdian alsorecords the level of radiation dose that the treatment area has received, enabling physicians to adapt the prescription between treatments, as needed. Webelieve this improved visualization and accurate dose recording will enable better treatment, improve patient outcomes and reduce side effects. Key benefitsto users and patients include: improved imaging and patient alignment; the ability to adapt the patient’s radiation treatments to changes while the patient isstill on the treatment table, or “on-table adaptive treatment planning”; MRI-based motion management; and an accurate recording of the delivered radiationdose. Physicians have already used MRIdian to treat a broad spectrum of radiation therapy patients with more than 45 different types of cancer, as well aspatients for whom radiation therapy was previously not an option.We currently market MRIdian through a direct sales force in the United States and Canada and are developing a sales force to assist distributors in the rest ofthe world. At December 31, 2017, we had installed or delivered 15 MRIdian systems worldwide and had a backlog with total value of $203.6 million. Wegenerated revenue of $34.0 million, $22.2 million, and $10.4 million for the years ended December 31, 2017, 2016 and 2015, respectively. We had net lossesof $72.2 million, $50.6 million and $45.0 million for the years ended December 31, 2017, 2016 and 2015, respectively.Corporate InformationWe were incorporated under the laws of the state of Nevada on September 6, 2013 under the name “Mirax Corp”. Prior to the Merger and Split-Off (each asdefined below), Mirax developed and supplied mobile communications accessories.On July 8, 2015, we completed a 1.185763-for-1 forward stock split of our common stock in the form of a dividend. The result was that the 4,343,339 sharesof common stock with a par value of $0.001 per share outstanding immediately prior to the stock split, became 5,150,176 shares of common stock, with a parvalue of $0.001 per share, outstanding immediately thereafter.On July 15, 2015, we changed our name to ViewRay, Inc. by filing the Certificate of Amendment to our Articles of Incorporation. Additionally, on July 21,2015, we changed our domicile from the State of Nevada to the State of Delaware by reincorporation, or the Conversion, and as a result of the Conversion,increased our authorized capital stock from 75,000,000 shares of common stock, par value $0.001 per share, to 300,000,000 shares of common stock, parvalue $0.01 per share and 10,000,000 shares of “blank check” preferred stock, par value $0.01 per share. Upon effectiveness of the Conversion, our corporatematters and affairs ceased to be governed by the Nevada Revised Statutes and became subject to the General Corporation Law of the State of Delaware. Allshare and per share numbers in this Report relating to our common stock have been adjusted to give effect to this forward stock split and the Conversion,unless otherwise stated. On July 23, 2015, we amended and restated our certificate of incorporation by filing the Amended and Restated Certificate ofIncorporation with the Secretary of State of the State of Delaware and adopted the Amended and Restated Bylaws.On July 23, 2015, our wholly-owned subsidiary, Vesuvius Acquisition Corp., a corporation formed in the State of Delaware on July 16, 2015, or theAcquisition Sub, merged with and into ViewRay Technologies, Inc. Pursuant to this transaction, or the Merger, ViewRay Technologies, Inc. was thesurviving corporation and became our wholly-owned subsidiary. All of the outstanding capital stock of ViewRay Technologies, Inc. was converted intoshares of our common stock, as described in more detail below.Immediately prior to the closing of the Merger, under the terms of a split-off agreement, or the Split-Off Agreement, and a general release agreement, wetransferred all of our pre-Merger operating assets and liabilities to our wholly-owned special-purpose subsidiary, Mirax Enterprise Corp., a Nevadacorporation, or the Split-Off Subsidiary, formed on July 16, 2015. Thereafter, pursuant to the Split-Off Agreement, we transferred all of the outstanding 6 shares of capital stock of the Split-Off Subsidiary to our pre-Merger majority stockholders, and our former sole officer and director, in consideration of and inexchange for: (i) the surrender and cancellation of an aggregate of 4,150,171 shares of our common stock; and (ii) certain representations, covenants andindemnities, together referred to as the Split-Off.As a result of the Merger and Split-Off, we discontinued our pre-Merger business, acquired the business of ViewRay Technologies, Inc. and continue thebusiness operations of ViewRay Technologies, Inc. as a publicly-traded company under the name ViewRay, Inc.On March 31, 2016, our shares of common stock commenced trading on the Nasdaq Global Market under the symbol “VRAY.” Prior to this time, ourcommon stock was quoted on the OTC Markets, OTCQB tier of OTC Markets Group, Inc. under the same symbol. As a result of the Merger we have ceased to be a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act).As used in this Report henceforward, unless otherwise stated or the context clearly indicates otherwise, the terms the “Company,” the “Registrant,”“ViewRay,” “we,” “us” and “our” refer to ViewRay, Inc., incorporated in Delaware, after giving effect to the Merger and the Split-Off.ViewRay, Inc. is the sole stockholder of ViewRay Technologies, Inc., which commenced operations as a Florida corporation in 2004, subsequentlyreincorporated in Delaware in in 2007, and changed its name to ViewRay Technologies, Inc. in July 2015.Our authorized capital stock currently consists of 300,000,000 shares of common stock, and 10,000,000 shares of the preferred stock. Our common stock islisted on The NASDAQ Global Market under the symbol “VRAY.”Our principal corporate headquarters are located at 2 Thermo Fisher Way, Oakwood Village, Ohio 44146. Our telephone number is (440) 703-3210. Ourwebsite address is www.viewray.com. (Any information on ViewRay’s website or which can be accessed through it, are not a part of this Annual Report onForm 10-K.)Cancer and Radiation Therapy MarketIncidence of CancerCancer is a leading cause of death globally and the second leading cause of death in the United States behind cardiovascular disease. According to theAmerican Cancer Society, nearly 1.7 million people were expected to be diagnosed with cancer in the United States during 2016 and approximately0.6 million were expected to die from cancer, accounting for nearly one of every four deaths. As a result of a growing and aging population, the World HealthOrganization’s, or WHO, Global Initiative for Cancer Registry Development estimates that the number of new cancer cases worldwide will grow from14.1 million in 2008 to 19.3 million in 2025.Cancer TherapyThe primary goal of cancer therapy is to kill cancerous tissues, while minimizing damage to healthy tissues. There are three main ways to treat cancer:surgery, chemotherapy and radiation therapy. Surgery attempts to remove the tumor from the body, while minimizing trauma to healthy tissue andpreventing the spread or translocation of the disease to other parts of the body. Surgery is particularly effective because the surgeon can see the tumor andsurrounding healthy tissue directly throughout the course of the procedure and can adapt his or her planned removal approach mid-procedure accordingly.Chemotherapy uses drugs to kill cancer cells. Unlike surgery, most forms of chemotherapy circulate throughout the patient’s body to reach cancer cellsalmost anywhere in the body systemically. Chemotherapy is most effective at destroying microscopic levels of disease. Radiation therapy is typically used asa local treatment, directed at a tumor and surrounding areas where microscopic cancerous cells are assumed to have spread. Radiation may be used as theprimary treatment modality, or in combination with either chemotherapy or surgery or both. Radiation therapy works by damaging genetic material in cellsand other cell components through interaction with ionizing energy. Effective radiation therapy balances destroying cancer cells with minimizing damage tonormal cells. It can be used at high doses to ablate a tumor, an effect similar to surgery, or at moderate doses to target local microscopic disease, as is donewith chemotherapy. Other, more recently developed ways of treating cancer, include hormone therapy and targeted therapy, such as immunotherapy. 7 Radiation TherapyRadiation therapy has become widespread, with nearly two-thirds of all treated cancer patients in the United States receiving some form of radiation therapyduring the course of their cancer treatments, according to estimates by ASTRO. For most cancer types treated with radiation therapy, at least 75% of thepatients are treated with the intent to cure the cancer. For lung and brain cancers, that number is somewhat lower, with 59% of lung cancer patients and 50%of brain cancer patients being treated with the goal of curing cancer. The remainder of cases are treated with palliative intent to relieve pain or other tumorrelated symptoms. The type of radiation therapy delivered by linac or Cobalt 60 based devices is a non-invasive outpatient procedure with little or norecovery time and can be used on patients who are unable to undergo conventional surgery. According to IMV, 97% of patients receiving radiation therapyin the United States are treated using a linac.Radiation is used to kill cancer cells primarily by damaging their DNA but can also kill healthy cells in the same way or cause them to become cancerousthemselves. As a result, the goal of curative radiation therapy is to balance delivery of a sufficiently high dose of radiation to a tumor to kill the cancer cellswhile, at the same time, minimizing damage to healthy cells, particularly those in critical organs. Normal cells are better able to repair themselves afterradiation than tumor cells, so doses of radiation are often fractionated, or delivered in separate sessions with rest periods in between. As a result, standardradiation therapy is often given once a day, five times a week, for one to nine weeks. According to a 2017 IMV report, patients made an estimated 20.2million radiation therapy treatment visits in the United States from March 2016 to March 2017.Radiation Therapy Equipment MarketAccording to a 2015 Markets and Markets report, the global linac market was estimated at approximately $4.6 billion in 2015 and was expected to grow toapproximately $6.3 billion by 2020. According to IAEA Human Health Campus, there are more than 11,500 linacs installed at over 7,800 centers worldwide.In the United States, there are approximately 3,600 linacs installed at approximately 2,100 centers. The annual market for linacs is estimated to be 1,000 unitsper year globally, the majority of which are replacements for older machines.In the radiation therapy market, new technologies have historically been adopted at a rapid rate. According to IMV, the percentage of centers performingintensity modulated radiation therapy, or IMRT, grew from 30% in 2002 to 96% in 2012. The percentage of sites utilizing image-guided radiation therapy, orIGRT, grew even more quickly: from 15% in 2004 to 83% in 2012. The majority of IGRT procedures use on-board X-ray systems. As leading cancer centersadopt and study MRI-guided radiation therapy, we believe that our next-generation linac based MRI system will also follow a rapid adoption curve in thebroader linac replacement market.Radiation Therapy Treatment ProcessFollowing diagnosis of the disease state, radiation treatment generally consists of the following steps: •Imaging and tumor contouring. To design the treatment plan, physicians obtain initial images of the tumor. This is done most commonlyusing a CT scan, often supplemented by an MRI, a positron emission tomography, or PET, scan, or both. These images, also known assimulation scans, are then imported into a treatment planning software system and aligned or “registered” to each other. Based on clinicalexperience, a physician will manually delineate, or “draw”, specific areas on the aligned images to define the location and extent of thetumor highlighting the following: •Gross tumor volume, or GTV, a volumetric region encompassing the visible tumor. •Clinical target volume, or CTV, is the GTV plus a larger, surrounding area where cancer cells are already likely to have spread. •Planning target volume, or PTV, is the CTV plus a further enlarged area to allow for: inexact imaging; patient movement duringtreatment; tumor movement between planning and treatment; and organ motion caused by breathing. The PTV margin unavoidablyincludes only normal, healthy tissues and may be many times larger than the CTV. While the PTV margin is necessary to reduce therisk of local tumor recurrence, it does increase the risk of radiation damage to healthy tissue and critical organs. 8 •Treatment planning and dose prescription. Once the clinician has a three-dimensional map of the tumor, surrounding healthy tissues andnearby critical organs, a physician determines a treatment plan using one of the methods below. Creation of these plans typically takes daysbut can require up to several weeks. A typical curative radiation therapy treatment dose will be delivered over the course of several weekswith 10 to 43 radiation therapy sessions, referred to as fractions, lasting from a few minutes to an hour or more depending on the treatmentplan. •3D-CRT planning. Using a method called three-dimensional conformal radiation therapy, or 3D-CRT, a clinician will choose boththe beam angles and shapes the machine will use to direct the radiation beam towards the tumor, and the time period that each beamwill be delivered. A computer will then calculate a prediction of the radiation dose delivered, and the radiation planning team willadjust the treatment plan on an iterative basis to arrive at a clinically acceptable radiation dose plan. •IMRT planning. Using a method called intensity modulated radiation therapy, or IMRT, a physician will use computer software thatcalculates hundreds or even thousands of beamlets (small radiation beams) to optimize a treatment plan in order to achieve a moreprecise dose distribution than 3D-CRT. IMRT plans often allow better radiation coverage of tumors, while simultaneously sparingmore healthy tissues from high radiation doses. In select cancers, IMRT has been shown to result in better patient outcomes than 3D-CRT. •SRS and SBRT planning. Stereotactic radiosurgery, or SRS, and stereotactic body radiation therapy, or SBRT, are methods ofdelivery using 3D-CRT or IMRT, in a reduced number of sessions. SRS and SBRT deliver precisely targeted radiation in usually oneto five fractions delivered in one treatment session on the same day. SRS is frequently used in brain and spine applications, whileSBRT is used most often in the rest of the body, and has been shown to be particularly effective in early-stage lung cancer. •Alignment. Just prior to radiation delivery, clinicians typically take further images to assist with alignment of the patient’s tumor to theradiation beam. Most systems use a form of on-board CT, called “cone-beam CT” or “CBCT” to create this image and then move the patient sothat the tumor’s location that day matches the prior planning position. However, cone beam CT may suffer from poor soft-tissue contrast,motion artifacts and may use a higher radiation dose than that available from the types of CT used for diagnosis purposes. Cumulatively, whenapplied every day prior to radiation delivery, the radiation exposure from CBCT (or other x-ray based image-guidance technologies) mayincrease the clinically relevant additional radiation dose delivered to the patient and may cause clinicians to adjust the intended radiationtreatment plan.A less commonly used imaging technology is fluoroscopy, a real-time 2D X-ray system. However, fluoroscopy can expose a patient to evenhigher doses of radiation than does cone-beam CT.Because of the limited soft tissue contrast of X-ray-based imaging, clinicians often use registration or fiducial markers to assist withalignment of the patient’s tumor to the treatment beams, such as the patient’s visible bone structures near the tumor or surgically implantedmarkers which identify the tumor’s location. To minimize motion due to breathing or other normal body activity, patients may also beimmobilized by restraining devices, such as abdominal compression or by “respiratory control,” techniques such as cameras that monitory apatient’s breathing during treatments or by asking the patient not to breathe at certain intervals during the treatment delivery. To account forbreathing and other body motions during treatment, specific trackers may be used, through a technique known as “4D radiation therapy. •Delivery. Following an assessment of the tumor location relative to the radiation beam geometry, treatment is initiated, and radiation isdelivered to the patient. In some cases, additional 2D X-ray images are taken intermittently or registration makers are monitored duringtreatment to try to account for tumor movement. However, there is no ability for physicians or other clinicians to see the tumor’s locationthroughout the entire radiation treatment delivery with traditional linacs. 9 •Review. After a treatment session, the physician will review data gathered from the linac system to validate that the treatment it is proceedingaccording to his or her treatment plan. But, traditional linac systems have no ability to record the actual dose that was delivered to the tumorand nearby critical structures. In certain rare types of cancers, where the tumor is visible simply by looking at the patient without imagingequipment, the physician may decide to adjust the treatment plan during the course of the patient’s overall treatment. However, revising atreatment plan may take several days and will delay completion of the patient’s overall treatment.Limitations of Traditional Radiation TherapyLimitations with traditional radiation therapy result from imaging technologies that make accurate visualization of a tumor and its relation to critical organsdifficult or impossible during the treatment delivery. Most current traditional systems take images of the tumor before and after treatments, but, none do socontinuously during the treatments in real time. As a result, treatments may not be delivered with the precision assumed by the physician and may not resultin the necessary efficacy or reduction in local tumor recurrence. Also, healthy tissues may be exposed to radiation levels different from those predicted by theplanning system and can result in patient injury. •Inability to accurately locate a tumor for treatment alignment. To locate a tumor, current radiation therapy systems rely on CT scans takenwhile the patient is on the delivery unit treatment table, or “on-table.” Because it is difficult for differentiate between the tumor and nearbysoft tissues with CT images, clinicians use surrogate registration markers, including existing bone structures, external marks and surgicallyimplanted fiducials, to align a patient’s tumor to the treatment beams prior to commencing treatment. 10 •Comparison of On-Table CT Images to On-Table MRIdian Images 11 However, the spatial relationship between tumors and the registration markers used to locate them often changes between the time of the patient’s initialimaging and the time of his or her first treatment session. This is particularly true for tumors which are located in soft tissue. By relying on a marker as aproxy for the tumor location, rather than on the tumor itself, clinicians risk missing the tumor when they deliver radiation beams into the patient’s body. Inaddition, placement of surgically implanted fiducial markers comes with inherent risks: the procedures are invasive; there is a risk of pain, infection, bleedingand lung collapse; and fiducials may change location and even migrate inside the body. Despite placement of fiducials, physicians are often unable to trackchanges in tumor shape. Also, fiducials made of dense metals, such as gold, may cause artifacts which interfere with imaging. •Inability to adapt treatment on-table. A physician designs a treatment plan and dose prescription based on images that are captured days oreven weeks prior to initiation of radiation therapy. Creating a treatment plan can take up to several weeks in complex cases, and treatmentitself can take up to nine weeks. However, during the course of therapy, tumors often change size, orientation or shape, and patient anatomycan change for reasons such as weight loss or gain. These changes can alter the planned radiation exposure to both the targeted regions andnearby healthy organs; this has the potential to increase the risk of local tumor recurrence and to reduce the safety of the radiation delivery.Adjusting for these changes on conventional delivery units requires re-planning, which includes getting new patient images needed to createa new treatment plan. This process may take several days and is highly resource intensive. As a result of these limitations, re-planning isinfrequently performed.Due to limitations in imaging technologies, physicians may actually be unaware of changes in the tumor and surroundinganatomy. Consequently, they may continue to administer radiation dose according to the original treatment plan, without realizing itspotential to reduce the effectiveness of the tumor treatment and to increase the risk of patient injury. •Inability to track tumor and organ motion accurately. In addition to the difficulty of locating a tumor accurately in a patient’s body at thetime treatment begins, a further challenge is accounting for ongoing tumor movement that takes place during treatment. Tumors have beenshown to move multiple centimeters relative to surrogate registration markers over the course of only a few seconds. Breathing and othernormal bodily functions, such as changes in the bladder or bowel during treatment, can cause significant tumor motion. Although physiciansuse internal markers, external cameras and blocks placed on the patients’ body to track respiratory and other motion, they are typicallyunable to track the tumor itself. As a result, physicians usually enlarge the total region to be irradiated. This limitation increases theprobability of missing the targeted treatment area and exposing healthy tissues to unnecessary radiation. •Inability to record cumulative radiation delivered. In order to determine treatment effectiveness, it is important to track how much radiationhas been delivered to a tumor and its surrounding healthy tissue. Currently, there are no methods to record the actual dose of radiation thatwas delivered to the tumor and nearby critical structures. Therefore, physicians must assume that the radiation is delivered according to plan,rather than making decisions based on actual radiation dose delivered. Each of these limitations increases the risk of missing a tumor and hitting healthy tissue during treatment. If a tumor is insufficiently irradiated, it may notrespond to treatment, resulting in a greater probability of local tumor recurrence and reduced overall survival for the patient. The ability to avoid irradiatinghealthy tissue has been shown to reduce side effects. If healthy tissues, particularly critical organs, are irradiated, the side effects can be severe, including:scarring of lung tissue; fibrosis and cardiotoxicity in lung and breast cancers; incontinence and sexual dysfunction in pelvic and prostate cancers; infertilityin pediatric cancers; memory loss, seizures and necrosis in brain cancer; secondary cancers, and in serious cases, death.Although MR technology is an imaging tool broadly used to differentiate between types of soft tissue in diagnostic settings, MR technology had not beenavailable in the radiation treatment delivery room before the launch of ViewRay’s MRIdian System. In the past, MR was not used with radiation therapybecause the technologies interfered with each other: the magnetic field generated by an MRI interfered with the linac beam, while the radiofrequenciesproduced by the linac distorted the MR images. Current forms of CT have improved over time, but issues with radiation dose and image quality limit theutility of these technologies. Fluoroscopy and cone-beam CT 12 involve the use of X-rays, a form of ionizing radiation, and pose an increased risk of radiation-induced cancer to the patient.Our SolutionWe developed MRIdian to address the key limitations of existing external-beam radiation therapy technologies. MRIdian employs MRI-based technology toprovide real-time imaging that clearly defines the targeted tumor from the surrounding soft tissue and other critical organs, both before and during radiationtreatment delivery. MRIdian also allows physicians to record the level of radiation exposure that the tumor has received and adapt the prescription betweentreatment fractions as needed. We believe this combination of enhanced visualization and accurate dose recording will significantly improve the safety andefficacy of radiation therapy, leading to better outcomes for patients suffering from cancer.We believe that MRIdian provides the following clinical and commercial benefits to physicians, hospitals and patients: •Improved tumor visibility and patient alignment. The soft-tissue contrast of MRIdian’s on-board MRI enables clinicians to locate, target andtrack the tumor and healthy tissues and more accurately align a patient to the treatment beams without the use of X-ray, CT or surrogateregistration markers. If the clinician prefers, the software has the ability to map the patient’s soft tissue anatomy each treatment session in lessthan one minute, and clinicians can use that information to align the patient. •On-table adaptive planning. Due to changes in tumor shape or the patient’s internal anatomy, the clinician may be unable to obtain anoptimal setup of the target location during image-guidance using CT-based systems while a patient is on the treatment table. Further, anearby organ at risk for radiation damage may be exposed to higher radiation doses than anticipated. Using an MR image captured at thebeginning of each therapy session, MRIdian software enables clinicians to map each patient’s soft tissue anatomy in 3D. The software alsoallows for the calculation of the dose that would be delivered to the radiation target and organs at risk using the current treatment plan. If thepredicted radiation exposure is not clinically acceptable to the physician, the system provides software tools for tumor and organ at risk re-contouring based on the setup MR-images. The MRIdian system also provides the ability to recalculate the intended radiation dose andadapt the plan to the changed tumor shape or location, and overall anatomy for the respective day of treatment. Utilizing our proprietaryalgorithm and software, adaptive re-planning can be done with the patient still “on table”. Also, integral to the adaptive planning process arequality assurance protocols, or QA, to enhance the safety of adapted radiation dose delivery. Users in the United States are currentlygenerally reimbursed for the additional time and effort spent by their physicians, medical physicists, dosimetrists and therapists for on-tableadaptive planning. When medically necessary, we believe hospitals and physicians will continue to receive additional reimbursement whenthey perform adaptive radiation therapy. •Ability to track tumors and manage patient motion. MRIdian can capture dedicated or multiple soft-tissue imaging planes concurrentlyduring the radiation treatment delivery, refreshing the image multiple times per second. This real-time imaging enables physicians to see,watch and track the movement of the tumor and its surrounding healthy tissue directly; they do not need to rely on proxies such asregistration markers, existing bones or surgically implanted fiducials. If a tumor or critical organ moves beyond a physician’s definedboundary or allowable range of motion (as individually defined in our dedicated tracking and gating software), MRIdian will automaticallydetect this and pause the treatment beam. This automatic beam control becomes especially important in the situations where a tumor may bein close proximity to a critical organ, such as the heart during lung and breast cancer treatments, or the rectum during prostate cancertreatments. This ability to actually see the tumor location continuously throughout radiation delivery has enabled physicians to treatpatients with greater confidence, including patients who would not have been given radiation therapy for their cancers previously. 13 •Record and evaluate the delivered dose. Using our proprietary algorithm and advanced MR imaging, MRIdian calculates the dose deliveredafter each treatment, enabling the physician to review and re-optimize the patient’s treatment session, if needed. In addition, MRIdian canutilize diagnostic CT images that are fused with the MR images at each treatment in order to more accurately calculate dose. MRIdian alsocaptures and records a video, known as a MRIdian Movie™, of the delivered treatments, which can be evaluated by the physician or sharedwith patients. •Fits into existing treatment paradigms and workflow. MRIdian can treat a broad spectrum of radiation therapy indications and disease sites,because it can perform 3D-CRT, IMRT, IGRT, SBRT and SRS. MRIdian treatments are supported by existing radiation therapyreimbursement codes. In addition, MRIdian fits inside most standard radiation therapy vaults without the need for significant constructioncosts such as wall or ceiling removal to enable it to be placed inside. In addition, we believe MRIdian’s increased tumor target accuracy willallow physicians to treat patients with higher radiation doses over fewer treatment fractions; this potentially enables the clinic to treat morepatients each day and with greater overall efficiency, or patient throughput. We believe the ability to image with MRI and treat cancer patients with radiation simultaneously will lead to improved patient outcomes.Our StrategyOur objective is to make MRI-guided radiation delivery the standard of care for radiation therapy. To achieve this goal, we intend to do the following: •Invest in Commercialization of the MRIdian Linac. The public response to the clinical release of the second generation MRIdian Linac hasbeen positive as it builds upon and improves the capabilities of the first generation MRIdian. We believe the MRIdian Linac has thepotential to broaden our addressable market, accelerate our sales cycle, reduce our backlog conversion time and improve our gross margins.We intend to: •Broaden awareness of MRIdian’s capabilities and clinical benefits to expand our share of the radiation therapy market. We intendto continue to educate radiation oncologists, medical physicists and radiation oncology administrators about the capabilities andresulting benefits of MRIdian over traditional radiation therapy systems. In order to drive awareness and adoption, we also intend tosupport the publication of clinical and scientific data and analysis, work with key opinion leaders, present at leading academicconferences and engage in outreach at leading hospitals worldwide. We also plan to leverage our existing customer network as areference for new potential users to experience our technology in-use in the clinical setting. •Target top-tier hospitals in initial global sales efforts, followed by their community practice networks. We intend to market MRIdianto a broad range of customers worldwide, including university research and teaching hospitals, private practices, community hospitals,government institutions and freestanding cancer centers. We are focusing initially on the leading hospitals worldwide which aretypically early adopters of best-in-class technology, such as MRIdian, and are able to influence and promote adoption by other centersboth locally and globally. We plan to continue to work with these institutions to promote broader market awareness of the benefits ofMRI-guided radiation therapy and then expand into the community practice networks that many of these leading centers havedeveloped. •Commercialize MRIdian with a targeted sales force in the United States and through a sales force-assisted distribution network ininternational markets. We market MRIdian through a combination of direct sales and distributors. We are expanding our sales force forthe United States and Canada and are developing a sales force to assist distributors in international markets. We intend to continue toexpand our presence in key markets to capitalize on the growing international opportunity for MRIdian. 14 •Perform Clinical Trials to Develop Evidence Supporting the Value of the MRIdian. We have launched the ViewRay Clinical CooperativeThink Tank (C2T2), a group of MRIdian clinical users and customers that are gathering evidence to support MR-guided radiation therapy.ViewRay's C2T2 comprises clinicians from leading institutions around the world who are focused on evidence gathering to support MR-guided radiation therapy. This group includes: •Dana-Farber/Brigham and Women's Cancer Center in Boston •Henry Ford Cancer Institute, Detroit •Institut du Cancer de Montpellier, France •Institut Paoli Calmettes, Marseille, France •Loyola Center for Cancer Care and Research at Palos Health South Campus in Illinois •Moffitt Cancer Center in Tampa, Florida •Miami Cancer Institute, Baptist Health South Florida •National Cancer Center (NCC) in Tokyo, Japan •NewYork-Presbyterian Hospital •Orlando Health UF Health Cancer Center •Policlinico Agostino Gemelli, Universita Cattolica del Sacro Cuore, Gemelli ART in Rome, Italy •Seoul National University Hospital (SNUH) in Seoul, South Korea •Sylvester Comprehensive Cancer Center, UHealth - University of Miami Health System •University of California, Los Angeles Health System and Jonsson Comprehensive Cancer Center •University of Heidelberg, Germany •University of Wisconsin Carbone Cancer Center in Madison •VU University Medical Center in Amsterdam, Netherlands •Washington University and Siteman Cancer Center at Barnes-Jewish Hospital, St. LouisAt the inaugural meeting of the C2T2 on September 23, 2017, participants formalized the group's first key initiative – a multi-center,prospective, single-arm clinical trial focused on locally advanced unresectable pancreatic cancer. Pancreatic cancer presents considerableradiation targeting challenges given the known limitations of conventional CT image guidance. The novel abilities provided by live MRIguidance combined with daily online treatment adaptation have enabled a new approach in pancreatic cancer therapy. Through this trial thegroup looks to explore new opportunities to improve survival and quality of life for this deadly disease. •Maintain our competitive lead in MRI-guided radiation therapy through continued innovation. We plan to continue to invest in ourtechnology to maintain our leadership position in the emerging MRI-guided radiation therapy market. We intend to develop and introduceenhancements to the system and software to provide improved capabilities for MRIdian users and patients. In addition, we plan to explorepotential benefits of integrating our MRI technology with alternative beam technologies. We believe we have a strong intellectual propertyportfolio that covers the MRIdian, as well as its critical design elements and key aspects of its subsystem and components. 15 •Continue to work with leading hospitals to optimize efficiency and patient throughput. We strive to maximize the efficiency andeffectiveness of the MRIdian system for our customers. We plan to continue to work closely with key opinion leaders, clinicians andhospitals in a proactive manner to determine how best to refine and improve MRIdian’s features, optimize clinical workflow and maximizepatient throughput while incorporating our advanced features. •Drive cost reductions in the design and manufacture of MRIdian and improve our margins. We plan to continue to explore ways to bringdown our cost of goods to improve margins for MRIdian.The MRIdian SystemThe MRIdian is comprised of four major components, (i) the MRI system, (ii) the radiation delivery system, (iii) integrated treatment planning and deliverysoftware and (iv) a safety and control system. MRIdian Cobalt-60 MRIdian Linac MRI SystemThe MRI system is the component of MRIdian that captures soft tissue images of the patient’s body. To address the technical complications that arise fromcombining an MRI with an external-beam radiation delivery unit, we have designed a proprietary split superconducting magnet that will allow radiationdoses to be delivered through a central gap, which eliminates MRI components from the path of the beam. Our MRI system captures and displays live, high-quality images in one plane, four times per second or in three planes, two times per second. These real-time images automatically track selected structures andcontrol radiation treatment beam delivery.We have engineered our MRI system to be able to produce clear images using a mid-field strength 0.35 Tesla magnet, which enables us to avoid image andradiation dose distortions that result when higher field strength magnets are used. In addition, MRIdian’s 0.35 Tesla field strength prevents over-heating ofthe patient during uninterrupted imaging, which could occur when a higher field strength magnet is used for fast imaging during radiation delivery. Over-heating can require interruption or termination of the imaging or of the overall treatment. 16 MRI System MRIdian Radiation Delivery SystemIn the first-generation MRIdian, radiation is delivered from three Cobalt-60 radiation therapy heads symmetrically mounted on a rotating ring gantry,providing full 360-degree coverage and simultaneous dose delivery. Each head is equipped with a double-focused multi-leaf collimator designed toovercome the wide-beam edge of previous-generation Cobalt-60 systems and to shape the beam for precision radiation therapy treatments. It allows thedelivery of treatment plans for 3D-CRT, IMRT and SBRT that are clinically equivalent to those produced on the most advanced linear accelerators availabletoday. Stereotactic procedures are possible with a positioning accuracy of less than one millimeter. Cobalt-60 was used in the first-generation devicesbecause it does not create any radio frequency, which interferes with the MRI.MRIdian Linear Accelerator Technology Radiation Delivery SystemIn the second generation MRIdian Linac, we developed solutions to two long-standing problems that had prevented compact integration of a linac beam withan MRI system: 1) linac radiofrequency interference with the operation of the MRI; and 2) MRI magnetic interference with the operation of the linac. First,linacs utilize high-powered microwave generators similar to equipment used in radar at airports. These “radar stations” inside the linac create radiofrequencyemissions, or “noise” that can corrupt the delicate signals measured from the patient’s body to generate MR images. ViewRay solved this problem byintroducing technology similar to that used in stealth aircraft. Airplanes built with stealth technology can hide from radar by using a coating that absorbsmicrowaves, thus preventing radar beams that strike the aircraft from bouncing back to the radar station. In a similar manner, we absorb the output of thelinac “radar station” to hide it from the MRI, producing images as noise-free as those created without an integrated linac. Second, MRIs utilize high-powered superconducting magnets required to image the patient’s tissues that must be placed close to the linac components usedfor radiation therapy. But many linac components will not operate properly when placed close to or inside these strong magnetic fields. ViewRay overcamethis challenge by creating magnetic shielding shells that create voids in the magnetic field, without significantly disturbing the magnetic field used forimaging. This allows the linac to operate on the MRIdian gantry as if there were no magnetic field present. MRIdian Linac uses the same split-magnet MRIsystem used in the first generation MRIdian system. It is specifically designed to fit in standard radiotherapy vaults so that customers do not need to buildnew vaults in order to replace an X-ray guided linear accelerator with a MRIdian. Existing MRIdian systems currently in use can be upgraded to the MRIdianLinac in the field.Both MRIdian and MRIdian Linac can provide continuous MR based soft-tissue imaging during radiation beam delivery. Being able to constantly see boththe tumor and surrounding organs means physicians can accurately align the tumor to the treatment beams, adapt or reshape the treatment volume toaccommodate changes in the shape and 17 location of the tumor and healthy tissues, and track soft tissues in real time to avoid missing a moving tumor or irradiating sensitive internal structures.Integrated Treatment Planning and Delivery SoftwareOur proprietary treatment planning and delivery software can create treatment plans and manage the treatment delivery process. It is designed to createoptimized 3D-CRT, IMRT, IGRT, SBRT and SRS plans for delivery by MRIdian. Using this software, the on-table adaptive planning process typically takesfifteen additional minutes on average, depending on the treatment plan and includes: auto-contouring, dose prediction and adaptive treatment planoptimization. For contouring, the software will automatically contour the outline of the tumor and nearby organs by matching the MR images with theimages used in the original treatment plan. The physician will then make refinements as necessary. Dose prediction can be calculated immediately beforetreatment, allowing the current state of the patient’s anatomy to be taken into account. If dose parameters for the radiation target or organs at risk no longermeet goals or safety criteria, the software can then generate an optimized adaptive treatment plan, while the patient is on the treatment table. Followingphysician review and approval, as well as medical physics quality assurance assessment, the adapted plan can be delivered to provide a more accuratetreatment.Independent of the ability to create an adapted treatment plan, the MRIdian system has the ability to use a soft-tissue tracking beam to control or “gate” theradiation beam, by turning it on and off. While the radiation dose is being delivered, our software analyzes images of the patient’s tumor and surroundinganatomy; it can use them to determine tumor or organ location relative to tolerances set by the physician. If the targeted tumor or a critical organ movesbeyond a physician-defined boundary, the treatment beams will automatically pause. When the tumor moves back into the target zone, the treatment willautomatically resume. Physicians can set both spatial and time thresholds for pausing radiation beam delivery. This enables the system to account for tumorand patient motion during treatment.The software archives all the information generated during treatment and builds a database of patient-specific planning, delivery and imaging data. It alsoincludes a review tool which provides clinicians with a visual comparison of the delivered treatment versus the treatment as originally planned. At the end ofeach treatment, the software determines the delivered dose by combining the recorded actions of the radiation delivery system with the daily image and auto-contouring of the patient. With this information, clinicians can fine-tune prescriptions based on the actual dose delivered, rather than estimates. In addition, itprovides a MRIdian Movie™ of each delivered treatment, which can be evaluated by the physician or exported and then shared with the patients or theirfamilies.Safety and Control System for MRIdian with Cobalt-60In addition to complying with the applicable FDA and Nuclear Regulatory Commission, or NRC, requirements, the Cobalt-60 radiation delivery subsystemalso meets a double fault tolerant design standard and has redundant safety systems. If any two components in the Cobalt-60 radiation delivery subsystem failsimultaneously, such as power and pneumatics, the system reverts to a safe state. MRIdian also contains redundant computer control for safety and systemlogging and double encoders on all axes of motion for safety. The control system continuously monitors performance to ensure systems are performing andcommunicating appropriately.Installed Base and Clinical UseAt December 31, 2017, we had installed six units at five leading cancer centers in the United States and installed five units outside the United States. OneMRIdian with Cobalt-60 has been delivered and is expected to be installed in early 2018 at Edogawa Hospital in Japan. Three MRIdian Linacs have beendelivered and are expected to be installed in 2018 at hospitals in Israel, Korea and China.In January 2014, Washington University in St. Louis, a National Cancer Institute Designated Comprehensive Cancer Center, became the first center to treatpatients with MRIdian with Cobalt-60. Washington University in St. Louis has since scaled up its use of MRIdian in its clinical practice. In September 2014,Washington University in St. Louis used MRIdian to perform the first on-table adaptive treatments as part of an ongoing clinical service. Also, in September2014, the University of Wisconsin–Madison treated its first patients with MRIdian with Cobalt-60 and became the first center to employ the soft-tissuetracking and beam gating control capability unique to MRIdian. In 18 July 2017, Henry Ford Health System in Detroit treated the first cancer patients using the second generation MRIdian Linac. We are working with each ofthese centers to determine how best to refine and improve MRIdian’s features, optimize workflow and maximize patient throughput.As of December 31, 2017, over 2,000 patients with over 3000 on-table adapted fractions have been treated by MRIdian systems. These included cancers ofthe prostate, breast, lung, colorectal and bladder, which are among the most prevalent types of cancer in the United States, according to the Centers forDisease Control and Prevention, or CDC. MRIdian has also been used to treat liver, stomach, esophagus and pancreatic cancer.New Orders and BacklogNew orders are defined as the sum of gross product orders, representing MRIdian contract price, recorded during the period. Backlog is the accumulation ofall orders for which revenue has not been recognized and which we consider valid. Backlog includes customer deposits or letters of credit, except when thesale is to a customer where a deposit is not deemed necessary or customary. Deposits received are recorded as a liability on the balance sheet. Orders may berevised or cancelled according to their terms or upon mutual agreement between the parties. Therefore, it is difficult to predict with certainty the amount ofbacklog that will ultimately result in revenue. The determination of backlog includes objective and subjective judgment about the likelihood of an ordercontract becoming revenue. We perform a quarterly review of backlog to verify that outstanding orders in backlog remain valid, and based upon this review,orders that are no longer expected to result in revenue are removed from backlog. Among other criteria we use to determine whether a transaction to be inbacklog, we must possess both an outstanding and effective written agreement for the delivery of a MRIdian signed by a customer with a minimum customerdeposit or a letter of credit requirement, except when the sale is to a customer where a deposit is not deemed necessary or customary (i.e. sale to a governmententity, a large hospital, group of hospitals or cancer care group that has sufficient credit, sales via tender awards, or indirect channel sales that have signedcontracts with end-customers). We decide whether to remove an order from our backlog by evaluating the following criteria: changes in customer ordistributor plans or financial conditions; the customer’s or distributor’s continued intent and ability to fulfill the order contract; changes to regulatoryrequirements; the status of regulatory approval required in the customer’s jurisdiction, if any; and other reasons for potential cancellation of order contracts.We received new orders for MRIdian systems, totaling $113.6 million, $77.0 million and $40.1 million for fiscal years 2017, 2016 and 2015, respectively.We have two cancellations for fiscal year 2017. At December 31, 2017, we had a backlog with a total value of $203.6 million. There can be no assurance thatbacklog will result in revenue in any particular time period or at all.Installation ProcessFollowing execution of a contract, it generally takes nine to 12 months for a customer to prepare an existing facility or construct a new vault, although insome cases customers may request installation for a date later in the future to meet their own clinical or business requirements. After the customer completesits vault customization, it typically takes approximately ninety days to complete the installation and on-site testing of the system, including the completionof acceptance test procedures. MRIdian is designed to fit into a typical radiation therapy vault, similar to other replacement linear accelerators. MRIdian’scomponents all fit through standard hospital vault entrances for assembly. On-site training takes approximately one week and can be conducted concurrentwith installation and acceptance testing.Our customers are responsible for removing any outgoing linear accelerator and preparing the mounting pad, power and support system connections.Additional room modifications required are consistent with those generally required for MRI systems, such as radio frequency shielding of the room andadditional power.Clinical DevelopmentTo date, we have primarily relied on clinical symposia and case studies presented at ASTRO and the European Society for Radiotherapy and Oncology, orESTRO, to raise awareness of MRI-guided radiation therapy and to market MRIdian to leading cancer centers. In order to promote broader adoption rates atother cancer centers and 19 hospitals, we plan to work with our customers to collect and publish data on clinical efficacy, treatment times and clinical results for patients who have beentreated on a MRIdian. Outcomes data presented at the 2017 Annual Meeting of ASTRO highlighted compelling early results using the Company's MRIdiansystem for the treatment of inoperable, locally advanced pancreatic cancer. These early clinical data suggested nearly 2X prolonged median survival withreduced toxicity for inoperable, locally advanced pancreatic cancer. These results will be tested in a multi-center, prospective, single-arm clinical trial forinoperable, locally advanced or borderline resectable pancreatic cancer. The trial will be conducted by ViewRay's Clinical Cooperative Think Tank (C2T2), agroup of MRIdian medical institutions focused on evidence gathering to support MRI-guided radiation therapy. Additionally, Washington University haspublished a prospective study on Magnetic Resonance Image Guided Radiation Therapy for External Beam Accelerated Partial-Breast Irradiation using aone-week course of treatment. This study demonstrated that on-board MR image-guidance allowed for a greater than 50% reduction of margins whilemaintaining the same dose to the tumor with patients reporting 100% Excellent/Good Cosmesis.While we do not currently have statistically significant, prospective evidence that MRIdian improves patient outcomes or decreases healthcare costs relativeto CT-based radiotherapy, we believe supporting studies will demonstrate the benefits of MRI-guided radiation therapy and adaptive treatment planning. Asdata accumulate from the use of MRIdian, we plan to work with professional healthcare organizations to support further global marketing efforts, additionalproduct clearances, approvals and/or registrations and potential improvements in reimbursement.Selling and MarketingWe currently market MRIdian through a direct sales force in the United States and Canada and are developing a sales force to assist distributors in the rest ofthe world. We market MRIdian to a broad range of worldwide customers, including university research and teaching hospitals, community hospitals, privatepractices, government institutions and freestanding cancer centers. As with the traditional linac market, our sales and revenue cycle varies based on theparticular customer and can be lengthy, sometimes lasting up to 18 to 24 months (or more) from initial customer contact to order contract execution.To sell MRIdian globally, we use a combination of sales executives, sales directors and a network of international third-party distributors with internalsupport from sales operations, product management and application specialists. A targeted group of eight senior sales directors are responsible for sellingMRIdian within the United States and Canada. Our product management function helps market MRIdian and works with our engineering group to identifyand develop upgrades and enhancements. We also have a team of application specialists who provide post-sales support.We engage in various physician-targeted advertising efforts, and our selling and marketing practices include participating in trade shows and symposia.CompetitionWe compete directly with companies marketing IGRT devices for the treatment of cancer using CT, ultrasound, optical tracking and X-ray imaging. We alsocompete with companies developing next-generation IGRT devices, specifically those developing MRI-guided devices, amongst others. We expect thefollowing to drive worldwide competitive market dynamics: technological advances, including the ability to provide real-time imaging; clinical outcomes;system size, price, and operational complexity; and operational efficiency.Our major competitors with devices approved for distribution in the United States or globally include Varian Medical Systems, Inc., or Varian, Elekta AB, orElekta, and Accuray Incorporated, or Accuray. Many of our direct competitors have greater financial, sales and marketing, service infrastructure and researchand development capabilities than we do, as well as more established reputations and current market share. The main limitations of currently approveddevices are the lack of real-time, clear images before and during the treatment, as well as the ability to perform on-table adaptive planning.We are also aware of one commercial and two academic ongoing research efforts to develop radiation therapy systems incorporating MRI. Elekta and RoyalPhilips have formed a consortium to develop a commercial Elekta-Philips MRI-linac. The University of Sydney, Ingham Institute and the University ofQueensland have formed a 20 partnership to develop an MRI-linac and the University of Alberta’s Cross Cancer Institute is working on a MRI-linac as well. Although these academicresearch centers may not compete directly with us commercially, if they were to form a partnership or other relationship with one of our competitors, it couldimpact our sales negatively. Of these three, we believe the Elekta-Philips MRI-linac is the most advanced in development, although we believe thiscombined system may not be commercially available for some time because it has not been cleared or approved by regulatory authorities for patienttreatments anywhere in the world. MRIdian is the first and only commercially available MRI-guided radiation therapy device to image and treat cancerpatients simultaneously.The limited capital expenditure budgets of our customers result in all suppliers to these entities competing for a limited pool of funds. Our customers may berequired to select between two items of capital equipment. For example, some of our potential customers are considering expensive proton therapy systems,which could consume a significant portion of their capital expenditure budgets.ManufacturingWe have adopted a model in which we rely on subsystem manufacturing, assembly and testing by our key suppliers. The MRIdian subsystems are then fullyintegrated at the customer site. Through this approach, we avoid the majority of the fixed cost structure of manufacturing facilities. We purchase majorcomponents and subsystems for MRIdian from national and international third-party original equipment manufacturers, or OEM, suppliers and contractmanufacturers. These major components include the magnet, MRI electronics, ring gantry, radiation therapy heads, Cobalt-60 sources, linear accelerator,multi-leaf collimators, patient-treatment table and computers. We also purchase minor components and parts directly ourselves. For sales for which we areresponsible for installation, we assemble and integrate these components with our proprietary software and perform multiple levels of testing andqualification at the customer site. The system undergoes a final acceptance test, which is performed in conjunction with the customer.Many of the major subsystems and components of MRIdian are currently procured through single and sole source suppliers. Among these are the magnet,MRI electronics, MRI coils, ring gantry, Cobalt-60 sources, linear accelerator and the patient-treatment table. We have entered into multi-year supplyagreements for most of our major components and subsystems. Except for the MRI power, control and image reconstruction subsystem, we own the design ofall other major subsystems and components.We manage our supplier relationships with scheduled business reviews and periodic program updates. We closely monitor supplier quality and deliveryperformance to ensure compliance with all MRIdian system specifications. We believe our supply chain has adequate capacity to meet our projected salesover the next several years.Intellectual PropertyThe proprietary nature of, and protection for, MRIdian components, new technologies, processes and know-how are important to our business. Our policy isto seek patent protection in the United States and in certain foreign jurisdictions for our MRIdian systems and other technology where available and whenappropriate. We also in-license technology, inventions and improvements we consider important to the development of our business.We hold a license to four issued U.S. patents, 19 issued foreign patents (eight of which were issued in Great Britain, Germany, France and the Netherlands as aresult of two patent applications filed and allowed through the European Patent Office), one pending U.S. application and five pending foreign applicationsas of January 15, 2018. We own an additional 20 issued U.S. patents, 36 issued foreign patents (13 of which were issued in Great Britain, Germany, France,Italy and the Netherlands as a result of three patent applications filed and allowed through the European Patent Office), 24 pending U.S. applications and 85pending foreign applications as of January 15, 2018. Assuming all required fees are paid, individual patents or patent applications owned or licensed by uswill expire between 2021 and 2037. We also have a joint ownership interest with Case Western Reserve University in one issued patent and one U.S.application.Our portfolio includes patents and patent applications directed to system-wide aspects of MRIdian and to key aspects of its subsystems and components. Theinitial licensed patents for our core technology broadly cover the 21 simultaneous use of MR imaging and isotopic external-beam radiation therapy. These patents have been granted in the United States, Europe, Hong Kong,Australia, China and Japan, and additional related patent applications remain pending in Canada, the United States, Australia and Japan. We have issued U.S.and foreign patents and pending continuation applications of the licensed patents that extend this core technology to alternate beam technologies.Additionally, we have patents and patent applications that cover critical design elements including, among others, our approach to Cobalt IMRT, ourmethods for integrating MRI with the radiation delivery system, and the design of our disassemblable, or “pop apart,” magnet which enables the MRI sub-system to fit into most standard radiation therapy vaults. The U.S. patent application on our approach to Cobalt IMRT has been issued, the patent applicationon our split gradient coil has been issued in the United States, Japan, Australia and China and numerous applications on other design elements are pending inthe United States and foreign jurisdictions. In addition, we have U.S., Chinese, European and Australian patents and U.S. and foreign patent applications thatcover the use of MR- imaging at a frequency sufficient to account for real-time organ motion to provide video-rate tissue tracking in disciplines outside ofradiation therapy. Many of the patents and applications in our portfolio covering aspects of the MRIdian with Cobalt-60 system also cover the MRIdianLinac. In addition, we have patents issued in the U.S., Europe, Australia, Japan and China, and additional applications pending in the U.S. and foreignjurisdictions, specifically directed to technology enabling the MRIdian Linac combination of MRI and linear accelerator technology. We continue to review new technological developments in our system and in the field as a whole, in order to make decisions about what filings would bemost appropriate for us. An additional key component of our intellectual property is our proprietary software used in planning and delivering MRIdian’stherapeutic radiation dose.In December 2004, we entered into a licensing agreement with the University of Florida Research Foundation, Inc., or UFRF, whereby UFRF granted us aworldwide exclusive license to certain of UFRF’s patents in exchange for 33,653 shares of common stock and a royalty from sales of products developed andsold by us utilizing the licensed patents. We were obligated to meet certain product development and commercialization milestones by various dates throughDecember 31, 2014. The significant milestones met prior to December 31, 2013 included: (i) completion of a business plan and Small Business TechnologyTransfer grant application; (ii) securing a minimum of $20.0 million venture financing; (iii) successful relocation and build out of our headquarters;(iv) receipt of the first magnet from an OEM partner; (v) hiring of a chief executive officer with industry experience in developing and commercializingsimilar products; and (vi) filing for FDA approval. The final milestone, which required us to recognize the first commercial sale of the MRIdian system toretail customers by December 31, 2014, was met during the year ended December 31, 2013. If these milestones had not been accomplished, UFRF would havehad the right to terminate the licensing agreement. Royalty payments are based on 1% of net sales, defined as the amount collected on sales of licensedproducts and/or licensed processes after deducting trade and/or quantity discounts, credits on returns and allowances, outbound transportation costs paid andsales tax. Minimum quarterly royalty payments of $50,000 commenced with the quarter ended March 31, 2014 and are payable in advance. Minimumroyalties paid in any calendar year will be credited against earned royalties for that calendar year. The royalty payments continue until the earlier of (i) thedate that no licensed patents remain enforceable; or (ii) the payment of earned royalties, once begun in 2014, cease for more than four consecutive calendarquarters.In addition to our patents, we also rely upon trade secrets, know-how, trademarks, copyright protection and continuing technological and licensingopportunities to develop and maintain our competitive position. We have periodically monitored and continue to monitor the activities of our competitorsand other third parties with respect to their use of intellectual property. We require our employees, consultants and outside scientific collaborators to executeconfidentiality and invention assignment agreements upon commencing employment or consulting relationships with us. Despite these safeguards, any ofour know-how or trade secrets not protected by a patent could be disclosed to, or independently developed by, a competitor.Coverage and ReimbursementWe believe that reimbursement rates in the United States have generally supported a favorable return on investment for the purchase of new radiotherapyequipment, including MRIdian. Payments for standard radiation therapy treatments using MRIdian, including 3D-CRT, IMRT and SBRT, are generallycovered and reimbursed under existing Current Procedural Terminology, or CPT, codes and coverage policies currently in place. User experience 22 to date indicates that our initial customers have treated a wide spectrum of different patients and treatment modalities using MRIdian. Physicians use theMRIdian system’s on-board MRI for distinct procedures which can be billed by physicians using existing CPT codes, including: complex simulation weeklyIMRT or daily for SBRT; special physics consult; and adaptive re-planning. Each of these are distinct procedures which can be billed by physicians usingexisting CPT codes, so long as these procedures are reimbursed, so long as they meet medical necessity and other documentation and coverage criteriaestablished by government or other third-party payors.Third-party payors, including governmental healthcare programs such as Medicare and Medicaid, establish coverage policies and reimbursement rates fordiagnostic examinations and therapeutic procedures performed by physicians in hospitals and free-standing clinics. Private insurers often model theirpayment rates and coverage policies based on those established by the government. The U.S. Congress from time to time considers various Medicare andother healthcare reform proposals that could affect both private and public third-party payor coverage and reimbursement for healthcare services provided inhospitals and clinics. In addition, third-party payors regularly update reimbursement amounts, including annual updates to payments to physicians, hospitalsand clinics for medical procedures, including radiation treatments using MRIdian.By way of example, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, ended the use of the statutory formula, and provided for a 0.5%annual increase in payment rates under the Medicare Physician Fee Schedule through 2019, but with no annual update from 2020 through 2025. MACRAalso introduced a quality payment program under which individual providers with Medicare billings of $30,000 or 100 patient visits per year will be subjectto certain incentives or penalties based on new program quality standards. The quality payment program has two tracks, one known as the “merit-basedincentive payment system” for providers in the fee-for service Medicare program, and the advanced alternative payment model for providers in specific caremodels, such as accountable care organizations. Payment adjustments for the Medicare quality payment program will begin in 2019.The Centers for Medicare & Medicaid Services, or CMS, also publishes annual updates to the hospital outpatient prospective payment system, or HOPPS.These payments are bundled amounts received by our hospital customers for hospital outpatient services, including conventional radiation therapy andIMRT, which may result in lower reimbursement to our customers for procedures performed using MRIdian.We plan to work with our customers to collect and publish data on clinical results for patients who have undergone procedures on MRIdian. We will supporta multi-center, prospective, single-arm clinical trial for inoperable, locally advanced or borderline resectable pancreatic cancer. We plan to continue tosupport this and further studies to demonstrate the benefits of MRI-guided radiation therapy and adaptive treatment planning. As data accumulate from theuse of our system, we plan to work with professional healthcare organizations to further support global marketing efforts, additional product clearances,approvals and/or registrations and potential improvements in reimbursement. Additionally, we currently provide reimbursement support to our customersthrough a third-party vendor.Foreign Reimbursement RegulationsInternationally, reimbursement and healthcare payment systems vary from country to country and include single-payor, and government managed systems aswell as systems in which private payors and government-managed systems exist side-by-side. In general, the process of obtaining coverage approvals isslower outside of the United States. Our ability to achieve adoption of MRIdian, as well as significant sales volume in international markets we enter willdepend in part on the availability of reimbursement for procedures performed using MRIdian.Research and Development Continued innovation and development of advanced technologies is critical to our goal of making MRI-guided radiation therapy the standard of care forcancer treatment. Our current development activities include improvements in and expansion of product capabilities, continued clinical workflowrefinements, design improvements to reduce system costs and improvements in reliability. 23 The modular design of MRIdian enables the development of new capabilities and performance enhancements by generally allowing each subsystem toevolve within the overall platform design. Access to regular MRIdian upgrades protects customer investment in MRIdian and facilitates the adoption of newfeatures and capabilities among existing installed base customers.In March 2016, we announced the development of a linear accelerator version of our MRIdian technology. This technology has been used to treat patients atHenry Ford Hospital in Detroit since July 2017 and is being readied for treatment in several other sites. Significant technology incorporated into the MRIdianLinac includes radio frequency “cloaking” technology to preserve the integrity of the MR image quality in the presence of radio frequencies emitted by thelinear accelerator, magnetic shielding technology to enable undistorted delivery of radiation, double- focused multi-leaf collimator technology for thedelivery of sharp radiation beams and incorporation of the existing MRIdian proprietary “pop-apart” magnet design. We have designed the linac technology such that our MRIdian with Cobalt-60 systems are able to be modified to incorporate the linac technology. InSeptember 2016, we received CE mark approval in the European Union, and in February 2017, we received 510(k) clearance from the FDA to market theMRIdian Linac system in the United States. MRIdian Linac is now commercially available in the key markets of the EU and the United States.We believe the MRIdian Linac will broaden our addressable market, accelerate our sales cycle, reduce our backlog conversion time and improve our grossmargins.In addition, we believe our existing and expanding IP portfolio will enable us to continuously develop innovative technologies to further strengthen thedifferentiation of MRIdian in the marketplace. Magnetic resonance imaging is a powerful and versatile measurement technique and is widely usedthroughout radiology and medicine because of its ability to generate information about tissues and disease states.At December 31, 2017, we had a total of 41 employees in our research and development departments. Research and development expenses were $14.7million, $11.4 million and $10.4 million during the years ended December 31, 2017, 2016 and 2015, respectively. We plan to continue to increase ourinvestment in research and development in future periods.Government RegulationU.S. Medical Device Regulation and Nuclear Materials RegulationAs a manufacturer and seller of medical devices and devices that deliver radiation, we and some of our suppliers and distributors are subject to extensive andrigorous regulation by the FDA, the NRC, other federal, state and local authorities in the United States and foreign regulatory authorities. Regulationspromulgated by the FDA relating to medical devices and radiation-producing devices govern, among other things, the following activities that we perform orthat are performed on our behalf, and that we will continue to perform or have performed on our behalf: •product design, development and testing; •manufacturing; •approval or clearance; •packaging, labeling and storage; •marketing, advertising and promotion, sales; •distribution, including importing and exporting; •installation; •possession and disposal; •record keeping; •service and surveillance, including post-approval monitoring and reporting; 24 •complaint handling; and •repair or recall of products and issuance of field safety corrective actions.FDA Clearance and Approval of Medical DevicesThe FDA regulates the research, testing, manufacturing, safety, labeling, storage, recordkeeping, promotion, distribution, and production of medical devicesin the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. Unless an exemption applies, theFDA requires that all new medical devices and all marketed medical devices that have been significantly changed, or that will be marketed with a newindication for use, obtain either clearance via a 510(k) pre-market notification or approval via a Premarket Approval, or PMA, application before themanufacturer may commercially distribute the product in the United States. The type of marketing authorization necessary is generally linked to theclassification of the device. The FDA classifies medical devices into one of three classes. Devices deemed to pose the lowest risk are placed in Class I, andmost Class I devices are exempt from premarket notification requirements. Class I devices are those for which safety and effectiveness can be reasonablyassured by adherence to a set of regulations referred to as General Controls, which require compliance with the applicable portions of the FDA’s QualitySystem Regulation, or QSR, and regulations regarding facility registration and product listing, reporting of adverse events and malfunctions, and appropriate,truthful and non-misleading labeling and promotional materials. However, some Class I devices, called Class I reserved devices, also require premarketclearance by the FDA through the 510(k) premarket notification process described below.Moderate risk devices are placed in Class II and are subject to General Controls as well as Special Controls, which can include performance standards,guidelines and post-market surveillance. Most Class II devices are subject to premarket review and clearance by the FDA pursuant to Section 510(k) of theFederal Food, Drug, and Cosmetic Act, or FDCA.Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantiallyequivalent to a previously cleared 510(k) devices are placed in Class III. Class III devices require FDA approval of a PMA prior to marketing.Both generations of the MRIdian System have been classified as Class II medical devices subject to the 510(k) clearance process.510(k) clearance process. Most Class II devices are subject to premarket review and clearance by the FDA. Premarket review and clearance by theFDA for Class II devices is accomplished through the 510(k) premarket notification process. Under the 510(k) process, the manufacturer must submit to theFDA a premarket notification, demonstrating that the device is “substantially equivalent” to either •a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted; or •another commercially available, similar device that was cleared through the 510(k) process.To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device and either have the same technologicalcharacteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than thepredicate device. Clinical data are sometimes required to support substantial equivalence.The process of obtaining 510(k) clearance usually takes from three to 12 months from the date the application is filed and generally requires submittingsupporting design and test data, which can be extensive and can prolong the process for a considerable period of time. If the FDA agrees that the device issubstantially equivalent, it will grant clearance to commercially market the device. We received 510(k) clearances for the treatment planning and deliverysoftware system in January 2011 and for MRIdian in May 2012.After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or majorchange in the intended use of the device, may require a new 510(k) 25 clearance or, depending on the modification, could require approval of a PMA. The FDA requires each manufacturer to make this determination in the firstinstance, but the FDA can review any such decision. If the FDA disagrees with the manufacturer’s decision, it may retroactively require the manufacturer tosubmit a request for 510(k) clearance or PMA approval and can require the manufacturer to cease marketing and/or recall the product until 510(k) clearanceor PMA approval is obtained. Since obtaining 510(k) clearances in 2011 and 2012, we have made changes to MRIdian that we believe do not require new510(k) clearance.In the fall of 2016, we submitted an application for 510(k) clearance by the FDA for MRIdian Linac, and in February 2017, we received 510(k) clearance fromthe FDA to market the MRIdian Linac system. An additional 510(k) clearance application for a modification of the MRIdian Linac system was submitted inMarch 2017, and we received 510(k) clearance from the FDA for that modification in June 2017.Premarket application approval process. Submission and approval of a PMA is required before marketing of a Class III product may proceed. Underthe PMA application process, the applicant must generally conduct at least one clinical investigation and submit extensive data and clinical informationdemonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction. Accordingly, a PMAapplication typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trialdata, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies. The PMA process is much moredemanding than the 510(k) premarket notification process.Following receipt of a PMA application, the FDA conducts an administrative review to determine whether the application is sufficiently complete to permit asubstantive review. If it is not, the agency will refuse to file the PMA. If it is, the FDA will accept the application for filing and begin the review. The FDA, bystatute and by regulation, has 180 days to review a filed PMA application, although the review of an application more often occurs over a significantlylonger period of time. During this review period, the FDA may request additional information or clarification of information already provided, and the FDAmay issue a major deficiency letter to the applicant, requesting the applicant’s response to deficiencies communicated by the FDA. Before approving ordenying a PMA, an FDA advisory committee may review the PMA at a public meeting and provide the FDA with the committee’s recommendation onwhether the FDA should approve the submission, approve it with specific conditions, or not approve it. Overall, the PMA application process typically takesbetween one to three years, but may take significantly longer. The FDA may approve a PMA application with post-approval conditions intended to ensurethe safety and effectiveness of the device including, among other things, restrictions on labeling, user training requirements, restrictions on promotion, saleand distribution, and requirements for the collection of long-term follow-up data.None of our products have been subject to the PMA approval process, and we have no plans for any indication, system improvements or extensions that webelieve would require a PMA.Clinical trials. Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials requiresubmission of an investigational device exemption, or IDE, application to the FDA for a specified number of patients and study sites (unless the product isdeemed a non-significant risk device eligible for more abbreviated IDE requirements). If an IDE is required, the FDA and the appropriate institutional reviewboards, or IRBs, at the clinical sites must approve the study before clinical trials may begin. If the device is considered a non-significant risk device, IDEsubmission to FDA is not required. Instead, only approval from the IRB overseeing the clinical trial is required. Clinical trials are subject to extensivemonitoring, record keeping and reporting requirements. Clinical trials must be conducted under the oversight of an IRB for the relevant clinical trial sites andmust comply with FDA regulations, including but not limited to those relating to good clinical practices. To conduct a clinical trial, the patient’s informedconsent must be obtained in form and substance that complies with both FDA requirements and state and federal privacy and human subject protectionregulations. The clinical trial sponsor, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that thesubjects are being exposed to an unacceptable health risk. Even if a trial is completed, the results of clinical testing may not adequately demonstrate thesafety and effectiveness of the device or may otherwise not be sufficient to obtain FDA clearance or approval to market the product. 26 Continuing FDA regulation. Any devices we manufacture or distribute pursuant to 510(k) clearance or PMA approval by the FDA are subject topervasive and continuing regulation by the FDA and certain state agencies. These include product listing and establishment registration requirements, whichhelp facilitate FDA inspections and other regulatory actions.In addition, our manufacturing operations for medical devices and those of our suppliers must comply with the FDA’s Quality System Regulations, or QSR.The QSR requires that each manufacturer, including third party manufacturers, establish and implement a quality system by which the manufacturer monitorsthe manufacturing process and maintains records that show compliance with FDA regulations and the manufacturer’s written specifications and procedures.Among other things, the QSR requires that manufacturers establish performance requirements before production and follow stringent requirements applicableto the device design, testing, production, control, record keeping, documentation, labeling and installation, as well as supplier/contractor selection,complaint handling and other quality assurance procedures during all aspects of the manufacturing process. Compliance with the QSR is necessary to be ableto continue to market medical devices that have received FDA approval or clearance, and to receive FDA clearance or approval to market new or significantlymodified medical devices. The FDA makes announced and unannounced inspections of medical device manufacturers, and these inspections may include themanufacturing facilities of subcontractors. Following an inspection, the FDA may issue reports, known as FDA Form 483 reports, listing the investigator’sobservations of conditions or practices which indicate the possibility that an FDA-regulated product may be in violation of FDA’s requirements. FDA mayalso issue warning letters documenting regulatory violations observed during an inspection. The manufacturer’s failure to adequately respond to such reportsor warning letters may result in FDA enforcement action against the manufacturer and related consequences, including, among other things, fines,injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, FDA refusal to grant 510(k) clearance or PMA approvalto new devices, withdrawal of existing clearances or approvals, and criminal prosecution.Manufacturers must also comply with post-market surveillance regulations, including medical device reporting regulations, which require that manufacturersreview and report to the FDA any incident in which their device may have caused or contributed to a death or serious injury, or malfunctioned in a way thatwould likely cause or contribute to a death or serious injury if it were to recur. In addition, corrections and removal reporting regulations require thatmanufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy aviolation of the Federal Food, Drug, and Cosmetic Act that may present a risk to health. The FDA may also order a mandatory recall if there is a reasonableprobability that the device would cause serious adverse health consequences or death.The FDA and the Federal Trade Commission, or FTC, also regulate the promotion and advertising of MRIdian. In general, we may not promote or advertiseMRIdian for uses not within the scope of our clearances or approvals or make unsupported safety and effectiveness claims.Failure to comply with applicable FDA requirements, including delays in or failures to report incidents to the FDA or off-label promotion, can result inenforcement action by the FDA, which can include any of the following sanctions: •warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; •customer notifications or repair, replacement, refunds, recall, administrative detention or seizure of our MRIdian systems; •operating restrictions or partial suspension or total shutdown of production; •refusing or delaying requests for 510(k) clearance or PMA approval of new or modified products; •withdrawing 510(k) clearances or PMA approvals that have already been granted; •refusal to grant export approval for products; or •criminal prosecution.Radiological health. We are also regulated by the FDA under the Electronic Product Radiation Control provisions of the FDCA because MRIdiancontains radiation producing components, and because we assemble these 27 components during manufacturing and service activities. The Electronic Product Radiation Control provisions require radiation producing products tocomply with certain regulations and applicable performance standards. Manufacturers are required to certify in product labeling and reports to the FDA thattheir products comply with all necessary standards as well as maintain manufacturing, testing and sales records for their products. The Electronic ProductRadiation Control provisions also require manufacturers to report product defects and affix appropriate labeling to covered products. Failure to comply withthese requirements could result in enforcement action by the FDA, which can include any of the sanctions described above.Nuclear Regulatory Commission and U.S. State AgenciesIn the United States, as a manufacturer of medical devices and devices utilizing radioactive byproduct material (i.e. depleted uranium shielding and Cobalt-60 sources), we are subject to extensive regulation by not only federal governmental authorities, such as the NRC, but also by state and local governmentalauthorities, such as the Ohio Department of Health, to ensure such devices are safe and effective. In Ohio, the Department of Health, by agreement with theNRC, regulates the possession, use, and disposal of radioactive byproduct material as well as the manufacture of devices containing radioactive sealedsources to ensure compliance with state and federal laws and regulations. We have received sealed source device approval from the Ohio Department ofHealth for MRIdian and have entered into a standby letter of credit with PNC for $103,000 to provide certification of financial assurance fordecommissioning Cobalt-60 radioactive materials in accordance with Ohio Department of Health regulations. We and/or our supplier of radiation sourcesmust also comply with NRC and U.S. Department of Transportation regulations on the labeling and packaging requirements for shipment of radiation sourcesto hospitals or other users of MRIdian. Compliance with NRC, state and local requirements is required for distribution, installation, use and service withineach state that we intend to install MRIdian systems.Existing radiation therapy facilities practicing nuclear medicine, brachytherapy or Gamma Knife therapy are already required to have necessary NRC and/orstate licenses and a radiation safety program requiring compliance to various provisions under NRC regulations at Part 35 of Title 10 of the Code of FederalRegulations (“Medical uses of byproduct material”). Use of MRIdian is regulated under Section 35.1000 of the NRC’s regulations (“Other medical uses ofbyproduct material or radiation from byproduct material”). In 2013, the NRC released licensing guidance under its regulations to guide our customers in theNRC requirements applicable to the use of MRIdian. We believe that this guidance is favorable in that it is consistent with clinical use of existing image-guided radiation therapy devices.Moreover, our use, management, and disposal of certain radioactive substances and wastes are subject to regulation by several federal and state agenciesdepending on the nature of the substance or waste material. We believe that we are in compliance with all federal and state regulations for this purpose.Outside the United States, various laws apply to the import, distribution, installation and use of MRIdian, in consideration of the nuclear materials withinMRIdian. Upon 510(k) clearance and commercialization, we do not expect that the MRIdian Linac would fall under this regulation.U.S. Privacy and Security LawsWe may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. The federalHealth Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology and Clinical Health Act, orHITECH, and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirementsrelating to the privacy, security and transmission of individually identifiable health information. Further, “business associates,” defined as independentcontractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for oron behalf of a covered entity are also subject to certain HIPAA privacy and security standards. HITECH also increased the civil and criminal penalties thatmay be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actionsfor damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civilactions. In addition, state laws govern the privacy and security of health information in certain circumstances, many 28 of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.U.S. Fraud and Abuse Laws and RegulationsThe healthcare industry is also subject to a number of fraud and abuse laws and regulations, including physician anti-kickback, false claims and physicianpayment transparency laws. Violations of these laws can lead to civil and criminal penalties, including exclusion from participation in federal healthcareprograms and significant monetary penalties, among others. These laws, among other things, constrain the sales, marketing and other promotional activitiesof manufacturers of medical products, such as us, by limiting the kinds of financial arrangements we may have with hospitals, physicians and other potentialpurchasers of medical products who may seek reimbursement from a federal or state health care program such as Medicare or Medicaid.Anti-kickback laws. The federal Anti-Kickback Statute makes it a criminal offense to knowingly and willfully solicit, offer, receive or pay anyremuneration in exchange for, or to induce, the referral of business, including the purchase, order, lease of any good, facility, item or service, that arereimbursable by a state or federal health care program, such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted to includeanything of value. The Anti-Kickback Statute has been interpreted to apply to the purchase of medical devices from a particular manufacturer or the referralof patients to a particular supplier of diagnostic services utilizing such devices. Although, there are established statutory exceptions and regulatory safeharbors that define certain financial transactions and practices that are not subject to the Anti-Kickback Statute, the exceptions and safe harbors are drawnnarrowly. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per seillegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of allits facts and circumstances.Generally, courts have taken a broad interpretation of the scope of the Anti-Kickback Statute, holding that the statute may be violated if merely one purposeof a payment arrangement is to induce referrals or purchases. Further, a person or entity does not need to have actual knowledge of the statute or specificintent to violate it in order to have committed a violation.Violations of this law are punishable by up to five years in prison, and can also result in criminal fines, administrative civil money penalties and exclusionfrom participation in federal healthcare programs. In addition, a claim including items or services resulting from a violation of the federal Anti-KickbackStatute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. Many states have also adopted statutes similar to the federal Anti-Kickback Statute, some of which apply to payments in connection with the referral of patients for healthcare items or services reimbursed by any source, notonly governmental payor programs.False Claims Act. The federal civil False Claims Act prohibits anyone from knowingly and willfully presenting, or causing to be presented, claimsfor payment, that are false or fraudulent, for services not provided as claimed. In addition to actions initiated by the government itself, the statute authorizesactions to be brought on behalf of the federal government by a private party having knowledge of the alleged fraud. Because the complaint is initially filedunder seal, the action may be pending for some time before the defendant is even aware of the action. If the government is ultimately successful in obtainingredress in the matter or if the plaintiff succeeds in obtaining redress without the government’s involvement, then the plaintiff will receive a percentage of therecovery. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by thegovernment, plus civil penalties ranging from $10,781 to $21,563 for each separate false claim, and may be excluded from participation in federal health careprograms, and, although the federal False Claims Act is a civil statute, violations may also implicate various federal criminal statutes. Several states have alsoadopted comparable state false claims act, some of which apply to all payors.Civil monetary penalties laws. The civil monetary penalties statute imposes penalties against any person or entity that, among other things, isdetermined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service thatwas not provided as claimed or is false or fraudulent. 29 Other fraud and abuse laws. HIPAA also created new federal criminal statutes that prohibit among other actions, knowingly and willfully executing,or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling orstealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying,concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment forhealthcare benefits, items or services. Like the federal Anti-Kickback Statute, the intent standard for certain healthcare fraud statutes under HIPAA wasamended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the AffordableCare Act, such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed aviolation.Physician payment transparency laws. There has been a recent trend of increased federal and state regulation of payments made to physicians andother healthcare providers and entities. The Affordable Care Act, among other things, imposed new reporting requirements on certain manufacturers,including certain device manufacturers, for payments provided to physicians and teaching hospitals, as well as ownership and investment interests held byphysicians and their immediate family members. Failure to submit timely, accurately, and completely the required information may result in civil monetarypenalties of up to an aggregate of $165,786 per year and up to an aggregate of $1,105,241 per year for “knowing failures.” Device manufacturers must submitreports by the 90th day of each calendar year.Certain states also mandate implementation of compliance programs, impose restrictions on device manufacturer marketing practices and/or require thetracking and reporting of gifts, compensation and other remuneration to healthcare providers and entities.The laws and regulations and their enforcement are constantly undergoing change, and we cannot predict what effect, if any, changes may have on ourbusiness. In addition, new laws and regulations may be adopted which adversely affect our business. There has been a trend in recent years, both in the UnitedStates and internationally, toward more stringent regulation and enforcement of requirements applicable to medical device manufacturers and requirementsregarding protection and confidentiality of personal data.State Certificate of Need LawsIn some states, a certificate of need, or CON, or similar regulatory approval is required by hospitals and other healthcare providers prior to the acquisition ofhigh-cost capital items, including MRIdian, or the provision of new services. These laws generally require appropriate state agency determination of publicneed and approval prior to the acquisition of such capital items or addition of new services. CON requirements may preclude our customers from acquiring, orsignificantly delay acquisition of, MRIdian and/or from performing treatments using MRIdian. CON laws are the subject of ongoing legislative activity, anda significant increase in the number of states regulating the offering and use of MRIdian through CON or similar requirements could adversely affect us.Healthcare ReformIn the United States and foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to thehealthcare system seeking, among other things, to reduce healthcare costs that could affect our results of operations. 30 By way of example, in the United States, the Affordable Care Act was signed into law in March 2010, which is expected to substantially change the wayhealthcare is delivered and financed by both governmental and private insurers. Among other things, the Affordable Care Act: •imposed an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States which,due to subsequent legislative amendments, was suspended from January 1, 2016 to December 31, 2017. This exercise tax was suspended foranother two years after the stopgap bill was signed by the President in January 2018; •established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectivenessresearch in an effort to coordinate and develop such research; •implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and otherproviders to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and •created an independent payment advisory board that will submit recommendations to reduce Medicare spending if projected Medicarespending exceeds a specified growth rate.We expect that the new presidential administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all or certain provisions of, theAffordable Care Act. Since taking office, President Trump has continued to support the repeal of all or portions of the Affordable Care Act. In January 2017,the House and Senate passed a budget resolution that authorizes congressional committees to draft legislation to repeal all or portions of the Affordable CareAct and permits such legislation to pass with a majority vote in the Senate. President Trump also issued an executive order in which he stated that it is hisadministration’s policy to seek the prompt repeal of the Affordable Care Act and directed executive departments and federal agencies to waive, defer, grantexemptions from, or delay the implementation of the provisions of the Affordable Care Act to the maximum extent permitted by law. There is still uncertaintywith respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, andcould have an impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the Affordable Care Act.In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include the Budget ControlAct of 2011, which resulted in reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will stay ineffect through 2025 unless additional Congressional action is taken, as well as, the American Taxpayer Relief Act of 2012, which, among other things, furtherreduced Medicare payments to several types of providers, including hospitals and imaging centers, and increased the statute of limitations period for thegovernment to recover overpayments to providers from three to five years.We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal andstate governments will pay for healthcare products and services, which could result in reduced demand for MRIdian or additional pricing pressure.Foreign Regulation of Medical DevicesOur activities outside the United States are subject to regulatory requirements that vary from country to country and frequently differ significantly from thosein the United States. Failure to obtain and maintain regulatory approval or clearance in any foreign country in which we market or plan to market MRIdianand MRIdian Linac may have a negative effect on our ability to generate revenue and harm our business.In general, MRIdian and MRIdian Linac are regulated outside the United States as medical devices by foreign governmental agencies similar to the FDA andthe FTC. In addition, in foreign countries where we have operations or sell MRIdian, we are subject to laws and regulations applicable to manufacturers ofmedical devices, radiation producing devices and to the healthcare industry, and laws and regulation of general applicability relating to environmentalprotection, safe working conditions, manufacturing practices and other matters. These laws and regulations are often comparable to, or more stringent thanU.S. laws and regulations. Our sales of MRIdian in foreign countries are also subject to regulation of matters such as product standards, packagingrequirements, 31 labeling requirements, import restrictions, tariff regulations, duties and tax requirements. We rely in some countries on our foreign distributors to assist us incomplying with applicable regulatory requirements.Regulation in the EUIn the European Union, or EU, we are required under the European Medical Device Directive (Council Directive 93/42/EEC) to affix the CE mark to ourMRIdian systems in order to sell the MRIdian systems in member countries of the EU. The CE mark is an international symbol that represents adherence tocertain essential principles of safety and effectiveness mandated in the European Medical Device Directive (the so-called “essential requirements”). Onceaffixed, the CE mark enables a product to be sold within the EEA, which is composed of the 28 Member States of the EU plus Norway, Iceland andLiechtenstein.To demonstrate compliance with the essential requirements, we must undergo a conformity assessment procedure which varies according to the type ofmedical device and its classification. Except for certain low risk medical devices where the manufacturer can issue an EC Declaration of Conformity based ona self-assessment of the conformity of its products with the essential requirements of the Medical Devices Directive, a conformity assessment procedurerequires the intervention of an organization accredited by a Member State of the EEA to conduct conformity assessments, or a Notified Body. Depending onthe relevant conformity assessment procedure, the Notified Body would typically audit and examine the technical file and the quality system for themanufacture, design and final inspection of our devices. The Notified Body issues a CE Certificate of Conformity following successful completion of aconformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements. ThisCertificate entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity.We received the CE Certificate of Conformity from our Notified Body in November 2014, allowing us to affix the CE mark to MRIdian in order to sell itthroughout the EEA. In September 2016, we received approval for CE mark in the European Union for our MRIdian Linac.If we modify MRIdian we may need to undergo a new conformity assessment procedure to be able to affix the CE mark to the modified product. Additionally,we will need to undergo new conformity assessments for any new products that we may develop in the future before we are able to affix the CE mark to thesenew products. We cannot be certain that the outcome of these conformity assessments will be positive and that we will be able to affix the CE mark formodified or new products or that we will continue to meet the quality and safety standards required to maintain the CE marks that we already have or mayhave in the future. In addition, if we are unable to affix the CE mark to our future products, we would be unable to sell them in EU member countries.In September 2012, the European Commission published proposals for the revision of the EU regulatory framework for medical devices. The proposals wouldreplace the Medical Devices Directive and the Active Implantable Medical Devices Directive with two new regulations: the Medical Devices Regulation andthe In-Vitro Diagnostic Medical Devices Regulation. Unlike directives, which must be implemented into the national laws of the EU Member States, theregulations would be directly applicable, i.e., without the need for adoption of EU Member State laws implementing them, in all EEA Member States and areintended to eliminate current differences in the regulation of medical devices among EEA Member States.The Medical Devices Regulation will apply to ViewRay starting on May 26, 2020. Once applicable, the new regulation will among other things: •strengthen the rules on placing devices on the market and reinforce surveillance once they are available; •establish explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and safety of devices placed onthe market; •improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;and 32 •set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products availablein the EU.Regulation in Other CountriesWe will be subject to additional regulations in foreign countries in which we intend to market, sell and import MRIdian. We or our distributors must receiveall necessary approvals or clearance prior to marketing and importing MRIdian in those international markets. We received a license and permission toimport MRIdian into the United Arab Emirates in December 2014. We received regulatory approval for MRIdian with Cobalt-60 in Italy in January 2015,Korea in September 2015, as well as Japan and China in August 2016. We also received regulatory approval for MRIdian Linac in Israel in November 2017.We will seek approvals in other countries as may be required in the future.The International Standards Organization promulgates internationally recognized standards, including those for the requirements of quality systems. We arecertified to the ISO 13485:2003 standard, which specify the quality system requirements for medical device manufacturers. To support our ISO certifications,we are subject to surveillance audits by a Notified Body yearly and recertification audits every three years that assess our continued compliance with therelevant ISO standards. Our most recent recertification audit occurred in March 2017.The ISO 13485:2003 standard is being replaced by a new version, the ISO 13485:2016 with a required conformance date of March 31, 2019. We aremodifying our quality system to meet the requirements of the 13485:2016 standard, undergo audits by the Notified Body and to meet the conformance dateof March 31, 2019.EmployeesAt December 31, 2017, we had 139 full-time employees. Within our workforce at December 31, 2017, 41 employees were engaged in research anddevelopment and 98 employees in business development, finance, human resources, facilities and general management and administration. We have nocollective bargaining agreements with our employees, and we have not experienced any work stoppages. We consider our relations with our employees to begood. 33 Item 1A. RISK FACTORSYou should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-Kand other filings we have made and make in the future with the Securities and Exchange Commission, or the SEC. If any of the following risks are realized,our business, financial condition, results of operations and prospects could be materially and adversely affected. The risks described below are not the onlyrisks facing the Company.Risks Related to Our Business and StrategyWe have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. Thesefactors may raise substantial doubt about our ability to continue as a going concern.We have historically incurred substantial net losses, including net losses of $72.2 million, $50.6 million and $45.0 million during the years ended December31, 2017, 2016 and 2015, respectively. At December 31, 2017, we had an accumulated deficit of $319.9 million. We expect our net losses to continue as aresult of ongoing investments in product development and expansion of our commercial operations, including increased manufacturing, and sales andmarketing. These net losses have had, and will continue to have, a negative impact on our working capital, total assets and stockholders’ equity. Because ofthe numerous risks and uncertainties associated with our development and commercialization efforts, we are unable to predict when we will becomeprofitable, and we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly orannual basis. Our inability to achieve and then maintain profitability would harm our business, financial condition, results of operations and cash flows.Further, the net losses we incur may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of our results ofoperations may not be a good indication of our future performance quarter-to-quarter and year-to-year, due to factors including the timing of productapproval, commercial ramp, clinical trials, any litigation that we may file or that may be filed against us, the execution of collaboration, licensing or otheragreements and the timing of any payments we make or receive under them. These factors may raise substantial doubt about our ability to continue as a goingconcern.If clinicians do not widely adopt MRI-guided radiation therapy or MRIdian Linac fails to achieve and sustain sufficient market acceptance, we will notgenerate sufficient revenue and our growth prospects, financial condition and results of operations could be harmed.Our MRI-guided radiation therapy system, MRIdian, may never gain significant acceptance in the marketplace and, therefore, may never generate substantialrevenue or allow us to achieve or maintain profitability. Widespread adoption of MRI-guided radiation therapy depends on many factors, including:acceptance by clinicians that MRI-guided radiation therapy is clinically-effective and cost-effective in treating a wide range of cancers; demand by patientsfor MRI-guided treatment; successful education of clinicians on the various aspects of this therapeutic approach; and coverage and adequate reimbursementfor procedures performed using MRI-guided radiation therapy. If we are not successful in conveying to clinicians and hospitals that MRI-guided radiationtherapy provides equivalent or superior radiation therapy compared to existing technologies, we may experience reluctance or refusal on the part ofclinicians and hospitals to order, and third-party payors to pay for, performing a treatment in which MRIdian is utilized. Our ability to achieve commercialmarket acceptance for MRIdian or any other future products also depends on the strength of our sales, marketing and distribution organizations. In addition,our expectations regarding clinical benefits and cost savings from using MRIdian may not be accurate. These hurdles may make it difficult to demonstrate tophysicians, hospitals and other healthcare providers that MRIdian is an appropriate option for radiation therapy, and may be both superior to availableradiation therapy systems and more cost-effective than alternative technologies.Furthermore, we may encounter difficulty in gaining inclusion in cancer treatment guidelines and gaining broad market acceptance by healthcare providers,third-party payors and patients. Healthcare providers may have difficulty in obtaining adequate reimbursement from government and/or third-party payors forcancer treatment, which may negatively impact adoption of MRIdian. 34 We may not be able to generate sufficient revenue from the commercialization of MRIdian Linac and MRIdian with Cobalt-60 to achieve and maintainprofitability.We rely entirely on the commercialization of MRIdian Linac and MRIdian with Cobalt-60 to generate revenue. During the year ended December 31, 2017,we recognized revenue of $34.0 million from product revenue recognized from installation or delivery of six MRIdian Linac systems, service revenue atcertain customer sites and distribution rights revenue from Itochu. In order to successfully commercialize MRIdian Linac and MRIdian with Cobalt-60, wewill need to: continue to expand our marketing efforts to develop new relationships and expand existing relationships with customers; receive clearance orapproval for MRIdian systems in additional countries; achieve and maintain compliance with all applicable regulatory requirements; and develop andcommercialize new features for MRIdian systems. We cannot assure you that we will be able to achieve or maintain profitability. If we fail to successfullycommercialize MRIdian systems, we may never receive a return on the substantial investments in product development, sales and marketing, regulatorycompliance, manufacturing and quality assurance that we have made, as well as further investments we intend to make, which may cause us to fail to generaterevenue and gain economies of scale from such investments.In addition, potential customers may decide not to purchase MRIdian systems, or our customers may decide to cancel orders due to changes in treatmentofferings, research and product development plans, difficulties in obtaining coverage or reimbursement for MRI-guided radiation therapy treatment,complications with facility build-outs, utilization of MRI-guided radiation therapy or other cancer treatment methods developed by other parties, lack offinancing or the inability to obtain or delay in obtaining a certificate of need from state regulatory agencies or zoning restrictions, all of which arecircumstances outside of our control.In addition, demand for MRIdian systems may not increase as quickly as we predict, and we may be unable to increase our revenue levels as we expect. Evenif we succeed in increasing adoption of MRIdian systems by hospitals and other healthcare providers, maintaining and creating relationships with ourexisting and new customers and developing and commercializing new features for MRIdian systems, we may not be able to generate sufficient revenue toachieve or maintain profitability.We are an early, commercial-stage company and have a limited history commercializing MRIdian, which may make it difficult to evaluate our currentbusiness and predict our future performance.We are an early, commercial-stage company and have a limited operating history. We commenced operations as a Florida corporation in 2004 andsubsequently reincorporated in Delaware in 2007. However, we did not begin commercial operations until 2013. Our limited history commercializingMRIdian may make it difficult to evaluate our current business and predict our future performance. Any assessment as to if or when we may become profitableor predictions about our future success or viability, are subject to significant uncertainty. We have encountered and will continue to encounter risks anddifficulties frequently experienced by early, commercial-stage companies in rapidly evolving industries. If we do not address these risks successfully, ourbusiness could be harmed.If MRIdian does not perform as expected, or if we are unable to satisfy customers’ demands for additional product features, our reputation, business andresults of operations will suffer.Our success depends on the market’s confidence that MRIdian can provide reliable, high-quality MRI-guided radiation therapy. At December 31, 2017, therewere only nine MRIdian with Cobalt-60 and six MRIdian Linacs installed or delivered. Consequently, we have limited statistics regarding the efficacy orreliability of MRIdian. We believe that our customers are likely to be particularly sensitive to product defects and errors, including functional downtime thatlimits the number of patients that can be treated using the system or a failure that is costly to repair. For example, in January 2014, we initiated a correction ofthe system at Washington University in St. Louis due to a defect we identified in an advanced software feature in the treatment planning system of MRIdian.We promptly updated our software to resolve this defect and notified the FDA of this correction. We cannot assure that similar product defects or other errorswill not occur in the future. This could also include the mistreatment of a patient with MRIdian caused by human error on the part of MRIdian’s operators orprescribing physicians or as a result of a machine malfunction. We may be subject to regulatory enforcement action or legal claims arising from any defects orerrors that may occur. Any failure of MRIdian to perform as expected could harm our reputation, business and results of operations. 35 Furthermore, the Cobalt-60 radioactive materials used in MRIdian with Cobalt-60 decay over time, which eventually leads to longer treatment times and mayhave a negative impact on the number of patients a hospital can treat during a day. U.S. regulations require inspection of Cobalt-60 every five years, at whichtime customers may consider replacing the Cobalt-60 source. This natural decay or a customer’s failure to replace the Cobalt-60 may have a negative impacton MRIdian performance.In addition, our customers are technologically well informed and at times have specific demands or requests for additional functionality. If we are unable tomeet those demands through the development of new features for MRIdian or future products, or those new features or products do not function at the levelthat our customers expect, or we are unable to increase patient throughput as expected or we are unable to obtain regulatory clearance or approval of thosenew features or products, where applicable, our reputation, business and results of operations could be harmed.The safety and efficacy of MRIdian with Cobalt-60 and MRIdian Linac for certain uses is not currently supported by long-term clinical data, andMRIdian with Cobalt-60 and MRIdian Linac may therefore be less safe and effective than initially anticipated.MRIdian with Cobalt-60 and MRIdian Linac have received premarket clearance by the FDA under Section 510(k) of the Federal Food, Drug and CosmeticAct, or FDCA. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market,known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing.This process is typically shorter and generally requires the submission of less supporting documentation than the FDA’s premarket approval process and doesnot always require long-term clinical studies. Additionally, to date, we have not been required to complete long-term clinical studies in connection with thesale of MRIdian with Cobalt-60 or MRIdian Linac outside the United States. As a result, we currently lack the breadth of published long-term clinical datasupporting the efficacy of MRIdian with Cobalt-60 or MRIdian Linac and the benefits each offers that might have been generated in connection with othermarketing authorization processes. In addition, because only a few MRIdian systems have been installed at customer sites, we have limited complication orpatient survival rate data with respect to treatments using the systems. If future patient studies or clinical testing do not support our belief that MRIdian withCobalt-60 or MRIdian Linac offers a more advantageous treatment for a wide variety of cancer types, market acceptance of these systems could fail toincrease or could decrease and our business could be harmed.If we choose to, or are required to, conduct additional studies, the results of these studies or experience could reduce the rate of coverage and reimbursementby both public and private third-party payors for procedures that are performed with MRIdian with Cobalt-60 or MRIdian Linac, slow the market adoption ofour product by physicians, significantly reduce our ability to achieve expected revenues and prevent us from becoming profitable. In addition, if futurestudies and experience indicate that MRIdian with Cobalt-60 or MRIdian Linac causes unexpected or serious complications or other unforeseen negativeeffects, we could be subject to mandatory product recalls or suspension or withdrawal of FDA clearance, and our reputation with physicians, patients andhealthcare providers may suffer.There have been instances of patients’ severe injury or death due to a variety of factors, including operator error, misuse, radiation therapy product orcustomer system malfunctions, and others. If our redundant safety systems do not operate as we expect, or any of these or other causes arose in the use of ourproducts, MRIdian with Cobalt-60 or MRIdian Linac could severely injure or kill a patient. This could result in lawsuits, fines or damage to our reputation.We may be delayed or prevented from implementing our long-term sales strategy if we fail to educate clinicians and patients about the benefits ofMRIdian.In order to increase revenue, we must increase awareness of the range of benefits that we believe MRIdian offers to both existing and potential customers,primarily cancer clinicians. An important part of our sales strategy involves educating and training clinicians to utilize the entire functionality of MRIdian.In addition, we must further educate clinicians about the ability of MRIdian to treat a wide range of cancer types effectively and efficiently. If clinicians arenot properly educated about the use of MRIdian for radiation therapy, they may be unwilling or unable to take 36 advantage of the full range of functionality that we believe MRIdian offers, which could have a negative impact on MRIdian sales. Clinicians may decidethat certain tumors can be adequately treated using traditional radiation therapy systems, notwithstanding the benefits of MRIdian. We must also succeed ineducating customers about the potential for reimbursement for procedures performed using MRIdian. In addition, we need to increase awareness of MRIdianamong potential patients, who are increasingly educated about cancer treatment options and therefore impact adoption of new technologies by clinicians. Ifour efforts to expand sales of MRIdian in the long-term are not successful, our business and results of operations will be harmed.We may not be able to gain the support of leading hospitals and key opinion leaders, or to publish the results of our clinical trials in peer-reviewedjournals, which may make it difficult to establish MRIdian as a standard of care and achieve market acceptance.Our strategy includes developing relationships with leading hospitals and key opinion leaders in our industry. If these hospitals and key industry thoughtleaders determine that MRIdian is not clinically effective or that alternative technologies are more effective, or if we encounter difficulty promoting adoptionor establishing MRIdian as a standard of care, our ability to achieve market acceptance of MRIdian could be significantly limited.We believe that publication of scientific and medical results in peer-reviewed journals and presentation of data at leading conferences are critical to the broadadoption of MRIdian. Publication in leading medical journals is subject to a peer-review process, and peer reviewers may not consider the results of studiesinvolving MRIdian sufficiently novel or worthy of publication.We have a limited history of manufacturing, assembling and installing MRIdian in commercial quantities and may encounter related problems or delaysthat could result in lost revenue.The pre-installation manufacturing processes for MRIdian include sourcing components from various third-party suppliers, subassembly, assembly, systemintegration and testing. We must manufacture and assemble MRIdian in compliance with regulatory requirements and at an acceptable cost in order toachieve and maintain profitability. We have only a limited history of manufacturing, assembling and installing MRIdian and, as a result, we may havedifficulty manufacturing, assembling and installing MRIdian in sufficient quantities in a timely manner. To manage our manufacturing and operations withour suppliers, we forecast anticipated product orders and material requirements to predict our inventory needs up to a year in advance and enter into purchaseorders on the basis of these requirements. Our limited manufacturing history may not provide us with sufficient data to accurately predict future componentdemand and to anticipate our costs effectively.Further, we have experienced and may in the future experience delays in obtaining components from suppliers and installing our systems at customer sitesassociated with contractor timing delays, which could impede our ability to manufacture, assemble and install MRIdian on our expected timeline.Alternatively, delays or postponements of scheduled customer installations could lead to excess inventory due to our limited flexibility to postpone or delaycomponent shipments from suppliers. Accordingly, we may encounter difficulties in production of MRIdian, including problems with quality control andassurance, component supply shortages or surpluses, increased costs, shortages of qualified personnel and difficulties associated with compliance with local,state, federal and foreign regulatory requirements. In addition, if we are unable to maintain larger-scale manufacturing capabilities, our ability to generaterevenue will also be limited and our reputation could be harmed. If we cannot achieve the required level and quality of production, we may need to makechanges in our supply chain or enter into licensing and other arrangements with third parties who possess sufficient manufacturing facilities and capabilitiesin compliance with regulatory requirements. Even if we outsource necessary production or enter into licensing or other third-party arrangements, theassociated cost could reduce our gross margin and harm our financial condition and results of operations.We have limited experience in marketing and selling MRIdian, and if we are unable to adequately address our customers’ needs, it could negativelyimpact sales and market acceptance of MRIdian and we may never generate sufficient revenue to achieve or sustain profitability.We have limited experience in marketing and selling MRIdian. We have only been selling MRIdian since 2013 and have only nine MRIdian with Cobalt-60and six MRIdian Linac installed or delivered at December 31, 2017. We have only treated patients since early 2014. MRIdian is a new technology in theradiation therapy systems sector and 37 our future sales will largely depend on our ability to increase our marketing efforts and adequately address our customers’ needs. We believe it is necessary tomaintain a sales force that includes sales representatives with specific technical backgrounds that can address those needs as part of the sales cycle. We willalso need to attract and develop sales and marketing personnel with industry expertise. Competition for these types of employees is intense and we may notbe able to attract and retain sufficient personnel to maintain an effective sales and marketing force. If we are unable to adequately address our customers’needs, it could negatively impact sales and market acceptance of MRIdian and we may never generate sufficient revenue to achieve or sustain profitability.The long sales cycle and low unit volume sales of MRIdian, as well as other factors, may contribute to substantial fluctuations in our operating results andstock price and make it difficult to compare our results of operations to prior periods and predict future financial results.Because of the relatively small number of systems we expect to install in any period, each installation of a MRIdian will represent a significant percentage ofour revenue for a particular period. Additionally, customer site construction, certificate of need and additional zoning and licensing permits are oftenrequired in connection with the sale of a MRIdian, any of which may further delay the installation process. When we are responsible for installing a system,we only recognize revenue from the sale of a MRIdian after the system has been installed and accepted by the customer. When a qualified third party isresponsible for the installation, we recognize revenue when title is transferred. Therefore, if we do not install a MRIdian or transfer title when anticipated, ouroperating results will vary significantly from our expectations. We have had experiences with customers postponing installation of MRIdian systems due todelays in facility build-outs, which are often lengthy and costly processes for our existing and potential customers. In addition, if our customers delay orcancel purchases, we may be required to modify or terminate contractual arrangements with our suppliers, which may result in the loss of deposits. Due tofuture fluctuations in revenue and costs, as well as other potential fluctuations, you should not rely upon our operating results in any particular period as anindication of future performance. In addition to the other risks described, the following factors may also contribute to these fluctuations: •timing of when we are able to recognize revenue associated with sales of MRIdian; •actions relating to regulatory matters, including regulatory requirements in some states for a certificate of need prior to the installation of aMRIdian; •delays in shipment due to, for example, unanticipated construction delays at customer locations where MRIdian is to be installed, labordisturbances or natural disasters; •delays in our manufacturing processes or unexpected manufacturing difficulties; •timing of the announcements of contract executions or other customer and commercial developments; •timing of the announcement, introduction and delivery of new products or product features by us and by our competitors; •timing and level of expenditures associated with expansion of sales and marketing activities and our overall operations; •fluctuations in our gross margins and the factors that contribute to such fluctuations, as described in “Management’s Discussion and Analysisof Financial Condition and Results of Operations” elsewhere in this Annual Report; •our ability to effectively execute on our strategic and operating plans; •the extent to which MRIdian gains market acceptance and the timing of customer demand for MRIdian; •our ability to protect our proprietary rights and defend against third-party challenges; •disruptions in the supply or changes in the costs of raw materials, labor, product components or transportation services; and •changes in third-party coverage and reimbursement, government regulation or in a customer’s ability to obtain financing. 38 These factors are difficult to forecast and may contribute to fluctuations in our reported revenue and results of operations and variation from our expectations,particularly during the periods in which our sales volume is low. Any fluctuations in our financial results may cause volatility in our stock price.Each MRIdian is a major capital equipment item and is subject to a lengthy sales cycle. The time from initial customer contact to execution of a contract cantake 18 to 24 months or more. Following execution of a contract, it generally takes nine to 12 months for a customer to customize an existing facility orconstruct a new vault, which is inclusive of the time from when a customer places the order to when the system is delivered. During this time, facilitiessupport and transitioning, as well as permitting, are typically required, which can take several months. The time required to customize an existing facilityprior to installation, including modifications of a standard vault to accommodate an MRI, is typically currently two to three months. If a customer does nothave an existing vault available, it may take longer to construct a new vault. In some cases, customers may request installation for a date later in the future tomeet their own clinical or business requirements. Upon the commencement of installation at a customer’s facility, it typically takes approximately 90 days tocomplete the installation and on-site testing of the system, including the completion of acceptance test procedures. If a small number of customers deferinstallation of a MRIdian for even a short period, recognition of a significant amount of revenue may be deferred to a subsequent period. Because ouroperating costs are relatively fixed, our inability to recognize revenue in a particular period may impact our profitability in that period. As a result, theinability to recognize revenue in a particular period may make it difficult to compare our operating results with prior periods. The price of a MRIdian requiresa portion of our target customers to obtain outside financing before committing to purchase a MRIdian. This financing may be difficult for our customers toobtain in any given period, if at all. The requirement of site-specific modifications or construction may also delay adoption or overall demand. In addition,while we believe that our backlog of orders provides a better measure at any particular point in time of the long-term performance prospects of our businessthan our operating results for a particular period, investors may attribute significant weight to our operating results for a particular period, which may bevolatile and as a result, cause fluctuations in our stock price.A large portion of our revenue in any given reporting period will be derived from a small number of contracts.Given that a significant portion of the purchase price for MRIdian will generally be recognized as revenue in a single reporting period, we expect a smallnumber of contracts in any given reporting period to account for a substantial portion of our revenue in any period, and we expect this trend to continue. Anydecrease in revenue from these contracts could harm our operating results. Accordingly, our revenue and results of operations may vary from period to period.We are also subject to credit risk associated with the concentration of our accounts receivable from our customers. If one or more of our customers at anygiven time were either to terminate their contracts with us, cease doing business with us or fail to pay us on a timely basis, our business, financial conditionand results of operations could be harmed.The payment structure we use in our customer arrangements may lead to fluctuations in operating cash flows in a given period.While our customers typically provide a deposit upon entering into a sales contract with us, the substantial majority of the payment owed for a MRIdian isnot due until the time of shipment of a MRIdian or following final acceptance by the customer upon installation. If we miss targeted shipments or ourcustomers do not actively work towards completing installation, our receipt of payments and our operating cash flows could be impacted. In addition, ifcustomers do not adhere to our payments terms, our operating cash flows could be impacted in any given period. Due to these fluctuations in operating cashflows and other potential fluctuations, you should not rely upon our operating results in any particular period as an indication of future performance.Amounts included in backlog may not result in actual revenue and are an uncertain indicator of our future earnings.We define backlog as the accumulation of all orders for which revenue has not been recognized and we consider valid. The determination of backlogincludes, among other factors, our subjective judgment about the likelihood of an order becoming revenue and the regulatory approval required in thecustomer’s jurisdiction, if any. Our judgments in this area have been, and in the future, may be, incorrect and we cannot assure you that, for any orderincluded in backlog, we will recognize revenue with respect to it. In addition, orders can be delayed for a number of 39 reasons, many of which are beyond our control, including supplier delays, which may cause delays in our manufacturing process, customer delays incommencing or completing construction of its facility, delays in obtaining zoning or other approvals and delays in obtaining financing. We may not beaware of these delays affecting our suppliers and customers and as a result may not consider them when evaluating the contemporaneous effect on backlog.Moreover, orders generally do not have firm dates by when a customer must take delivery or accept our systems, and certain customers may not provide adeposit or letter of credit with the contract, either of which could allow a customer greater flexibility to delay the order without canceling the contract. Webelieve the introduction of MRIdian Linac will increase the number of orders we receive and accelerate the conversion of orders in backlog; however,customers with orders in backlog currently may delay their installations until MRIdian Linac becomes available in their jurisdiction, or is proven to performwell after installation. Further, our backlog could be reduced due to cancellation of orders by customers. Should a cancellation occur, our backlog andanticipated revenue would be reduced unless we were able to replace it. Reductions in our backlog could negatively impact our future results of operations orthe price of our common stock.We evaluate our backlog at least quarterly to determine if the orders continue to meet our criteria for inclusion in backlog. We may adjust our reportedbacklog to account for any changes in: customer or distributor plans or financial conditions; the customer’s or distributor’s continued intent and ability tofulfill the order contract; regulatory requirements; the status of regulatory approval required in the customer’s jurisdiction (or other factors); or due to changesin our judgment about the likelihood of completing an order contract. In addition, one or more of our contracts have in the past and may in the futurecontribute to a material portion of our backlog in any one year. Because revenue will not be recognized until we have fulfilled our obligations to a customer,there may be a significant amount of time from signing a contract with a customer or shipping a system and revenue recognition. We cannot assure you thatour backlog will result in revenue on a timely basis or at all, or that any canceled contracts will be replaced.Our ability to achieve profitability depends substantially on increasing our gross margins by reducing costs of MRIdian and improving our economies ofscale, which we may not be able to achieve.We are not, and never have been, profitable. The MRIdian purchase contracts we have entered into to date have been at a range of selling prices. Generally,earlier contracts have been at lower prices and more recent contracts have been at higher prices. Our earlier contracts resulted in negative gross margins. Ourability to enter into contracts at higher selling prices depends on a number of factors including: •our ability to achieve commercial market acceptance for our system; •the pricing of competitors’ systems; •availability of coverage and adequate reimbursement by commercial and government payors; and •our ability to manufacture and install our systems in a timely and cost-effective manner.We bear the risk of warranty claims on all products we supply, including equipment and component parts manufactured by third parties. We cannot assureyou that we will be successful in claiming recovery under any warranty or indemnity provided to us by our suppliers or vendors in the event of a successfulwarranty claim against us by a customer or that any recovery from the vendor or supplier would be adequate. In addition, warranty claims brought by ourcustomers related to third-party components may arise after our ability to bring corresponding warranty claims against the suppliers expires, which couldresult in additional costs to us. There is a risk that warranty claims made against us will exceed our warranty reserve and our business, financial condition andresults of operations could be harmed.Our customer contracts provide that our customers commit to purchase a MRIdian system for a fixed price, and a MRIdian system will generally not bedelivered for 11 to 15 months. In some circumstances, delivery can be postponed several months due to customer delays related to construction, vaultpreparation or concurrent facility expansion, and the cost of product supplies may increase significantly in the intervening time period. In addition, inflationmay generally reduce the real value of the purchase price payable upon the achievement of future progress payment milestones. Either of these occurrencescould cause our gross margins to decline or cause us to lose money on the sale of a MRIdian. 40 Moreover, our gross margins may decline in a given period due in part to significant replacement rates for components, resulting in increased warrantyexpense, negative profit margins on service contracts and customer dissatisfaction. If we are unable to reduce our product costs and improve or maintainquality and reliability, our gross margin may be negatively impacted. Additionally, we may face increased demands for compensation from customers whoare not satisfied with the quality and reliability of MRIdian, which could increase our service costs or require us to issue credits against future servicepayments and negatively impact future product sales. For example, we may have to extend a warranty period due to our failure to meet up-time requirements.We are currently implementing programs to reduce the cost of our MRIdian product; however, we may be unable to reduce our product cost as quickly as weanticipate and in some instances may experience increases in costs from our suppliers. Even if we are able to implement cost reduction and quality improvement efforts successfully, our service operations may remain unprofitable given therelatively small size and geographic dispersion of our installed base, which prevents us from achieving significant economies of scale for the provision ofservices. If we are unable to achieve increasingly higher gross margins on our MRIdian systems, we may never become profitable.We may not be able to develop new products or enhance the capabilities of MRIdian to keep pace with our industry’s rapidly changing technology andcustomer requirements.Our industry is characterized by rapid technological changes, new product introductions and enhancements and evolving industry standards. Our businessprospects depend on our ability to develop new products and applications for our technology in new markets that develop as a result of technological andscientific advances, while improving the performance and cost-effectiveness of MRIdian. New technologies, techniques or products could emerge that mightoffer better combinations of price and performance than MRIdian systems. The market for radiation therapy treatment products is characterized by rapidinnovation and advancement in technology. It is important that we anticipate changes in technology and market demand, as well as physician, hospital andhealthcare provider practices to successfully develop, obtain clearance or approval, if required, and successfully introduce new, enhanced and competitivetechnologies to meet our prospective customers’ needs on a timely and cost-effective basis. Nevertheless, we must carefully manage our introduction of newproducts. If potential customers believe that new products will offer enhanced features or be sold for a more attractive price, they may delay purchases untilthey are available. We may also have excess or obsolete inventory as we transition to new products, and we have no experience in managing producttransitions. If we do not successfully innovate and introduce new technology into our anticipated product lines, or effectively manage the transitions of ourtechnology to new product offerings, our business, financial condition and results of operations could be harmed.We face competition from numerous companies, many of whom have greater resources than we do or offer alternative technologies at lower prices thanour MRIdian systems, which may make it more difficult for us to achieve significant market penetration and profitability.The market for radiation therapy equipment is characterized by intense competition and pricing pressure. In particular, we compete with a number of existingtherapy equipment companies, including Elekta AB, Varian Medical Systems, Inc. and Accuray Incorporated. Many of these competitors are large, well-capitalized companies with significantly greater market share and resources than we have. As a result, these companies may be better positioned than we areto spend more aggressively on marketing, sales, intellectual property and other product initiatives and research and development activities. In addition, wemay compete with certain MRI-linear accelerator research projects that are currently in development and may be commercialized, including projects by theUniversity of Alberta’s Cross Cancer Institute and a partnership of the University of Sydney, Ingham Institute and the University of Queensland.Existing technologies may offer certain advantages compared to the MRI technology used by our MRIdian system. For example, computed tomography, orCT, is known to hold certain potential advantages over MRI technology for use in radiation therapy. Diagnostic CT is currently the most widely adoptedimaging modality for treatment planning, and can be used to directly measure the electron density of patient tissues, which enables more accurate dosecomputation. In addition, CT imaging provides superior imaging of bones and boney anatomy than MRI, which is advantageous when imaging thosestructures for planning and alignment for treatment. Finally, CT is a less expensive technology than MRI and might be preferred by customers seeking alower cost solution. 41 Our current competitors or other potential competitors may develop new products at any time. In addition, competitors may be able to respond more quicklyand effectively than we can to new or changing opportunities, technologies, standards or customer requirements. If we are unable to develop products thatcompete effectively against the products of existing or future competitors, our future revenue could be negatively impacted. Some of our competitors maycompete by changing their pricing model or by lowering the price of their therapy systems. If these competitors’ pricing techniques are effective, it couldresult in downward pressure on the price of all therapy systems. If we are unable to maintain or increase our selling prices in the face of competition, we maynot improve our gross margins.In addition to the competition that we face from technologies performing similar functions to MRIdian, competition also exists for the limited capitalexpenditure budgets of our customers. A potential purchaser may be forced to choose between two items of capital equipment. Our ability to compete mayalso be negatively impacted when purchase decisions are based largely upon price, because MRIdian is a premium-priced system relative to other capitalexpenditures and alternative radiation therapy technologies. In certain circumstances, a purchaser may decide that an alternative radiation therapy systempriced below MRIdian may be sufficient for its patient population given the relative upfront cost savings.Negative press regarding MRI-guided radiation therapy for the treatment of cancer could harm our business.The comparative efficacy and overall benefits of MRI-guided radiation therapy are not yet well understood, particularly with respect to certain types ofcancer. These types of reports could negatively impact the market’s acceptance of MRI-guided radiation therapy, and therefore our ability to generaterevenue could be negatively impacted.We may acquire other businesses, form joint ventures or make investments in other companies or technologies that could negatively affect our operatingresults, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.We may pursue acquisitions of businesses and assets. We also may pursue strategic alliances and joint ventures that leverage our proprietary technology andindustry experience to expand our offerings or distribution. We have no experience with acquiring other companies and limited experience with formingstrategic partnerships. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions onfavorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we couldassume unknown or contingent liabilities. Any future acquisitions also could result in the incurrence of debt, contingent liabilities or future write-offs ofintangible assets or goodwill, any of which could have a negative impact on our cash flows, financial condition and results of operations. Integration of anacquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existingbusiness. We may experience losses related to investments in other companies, which could harm our financial condition and results of operations. We maynot realize the anticipated benefits of any acquisition, strategic alliance or joint venture.Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different culturesand languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.To finance any acquisitions or joint ventures, we may choose to issue shares of common stock as consideration, which could dilute the ownership of ourstockholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our common stock is low or volatile, we may notbe able to acquire other companies or fund a joint venture project using our stock as consideration. 42 Risks Related to Our Reliance on Third PartiesWe rely on a limited number of third-party suppliers and, in some cases, sole suppliers, for the majority of our components, subassemblies and materialsand may not be able to find replacements or immediately transition to alternative suppliers.We rely on several sole suppliers, including Japan Superconductor Technology, Inc., Siemens AG, Best Theratronics Ltd., Tesla Engineering Limited andQuality Electrodynamics, LLC, for certain components of MRIdian. These sole suppliers, and any of our other suppliers, may be unwilling or unable tosupply components of MRIdian to us reliably and at the levels we anticipate or are required by the market. For us to be successful, our suppliers must be ableto provide us with products and components in substantial quantities, in compliance with regulatory requirements, in accordance with agreed uponspecifications, at acceptable costs and on a timely basis. An interruption in our commercial operations could occur if we encounter delays or difficulties insecuring these components, and if we cannot then obtain an acceptable substitute. Any such interruption could harm our reputation, business, financialcondition and results of operations.If we are required to transition to new third-party suppliers for certain components of MRIdian, we believe that there are only a few other manufacturers thatare currently capable of supplying the necessary components. In addition, the use of components or materials furnished by these alternative suppliers couldrequire us to alter our operations. Furthermore, if we are required to change the manufacturer of a critical component of MRIdian, we will be required to verifythat the new manufacturer maintains facilities, procedures and operations that comply with our quality and applicable regulatory requirements, which couldfurther impede our ability to manufacture MRIdian in a timely manner. Transitioning to a new supplier could be time-consuming and expensive, may resultin interruptions in our operations and product delivery, could affect the performance specifications of MRIdian or could require that we modify the design ofMRIdian. If the change in manufacturer results in a significant change to MRIdian, a new 510(k) clearance from the FDA or similar international regulatoryauthorization may be necessary, which could cause substantial delays. The occurrence of any of these events could harm our ability to meet the demand forMRIdian in a timely manner or cost-effectively.We cannot assure you that we will be able to secure alternative equipment and materials and utilize it without experiencing interruptions in our workflow. Ifwe should encounter delays or difficulties in securing, reconfiguring or revalidating the equipment and components we require for MRIdian, our reputation,business, financial condition and results of operations could be negatively impacted.In addition, we are in early stages of developing suppliers for components that are specific to MRIdian Linac. The inability of these suppliers to producereliable components and to sufficiently scale up manufacturing could harm our ability to install MRIdian Linac systems in a timely or cost-effective manner.We depend on third-party distributors to market and distribute MRIdian in international markets.A significant portion of our backlog is composed of international sales, and we expect a significant amount of our revenue to come from international sales.We depend on a number of distributors for sales in these international markets. We cannot control the efforts and resources our third-party distributors willdevote to marketing MRIdian. Our distributors may not be able to successfully market and sell MRIdian and may not devote sufficient time and resources tosupport the marketing and selling efforts that enable the product to develop, achieve or sustain market acceptance. In some jurisdictions, we rely on ourdistributors to manage the regulatory process, and we are dependent on their ability to do so effectively. In addition, if a dispute arises with a distributor or ifa distributor is terminated by us or goes out of business, it may take time to locate an alternative distributor, to seek appropriate regulatory approvals and totrain that distributor’s personnel to market MRIdian; our ability to sell and service MRIdian in the region formerly serviced by the terminated distributorcould be harmed. Any of our distributors could become insolvent or otherwise become unable to pay amounts owed to us when due. Any of these factorscould reduce our revenue from affected international markets, increase our costs in those markets or damage our reputation. In addition, if we are unable toattract additional international distributors, our international revenue may not grow. 43 Failures by our third-party distributors to deliver or install MRIdian properly and on time could harm our reputation.We rely on arrangements with third-party distributors for sales and installation of MRIdian in international markets. As a result of our reliance on third-partydistributors, we may be subject to disruptions and increased costs due to factors beyond our control, including labor strikes, third-party error and other issues.If the services of any of these distributors become unsatisfactory, including their failure to properly install MRIdian, we may experience delays in meetingour customers’ product demands and we may not be able to find a suitable replacement on a timely basis or on commercially reasonable terms. Any failure todeliver, install or service products in a timely manner may damage our reputation and could cause us to lose current or potential customers.We rely on third parties to store our inventory and to perform spare parts shipping and other logistics functions on our behalf. A failure or disruption withour logistics providers could harm our business.Customer service is a critical element of our sales strategy. Third-party logistics providers store most of our spare parts inventory in depots around the worldand perform a significant portion of our spare parts logistics and shipping activities. If any of our logistics providers suffers an interruption in its business orexperiences delays, disruptions or quality control problems in its operations or we have to change and qualify alternative logistics providers for our spareparts, shipments of spare parts to our customers may be delayed and our reputation, business, financial condition and results of operations could benegatively harmed.If third-party payors do not provide coverage and adequate reimbursement to our customers, it could negatively impact sales of MRIdian.In the United States, hospitals and other healthcare providers who purchase MRIdian generally rely on third-party payors to reimburse all or part of the costsand fees associated with the treatments performed with our system. Accordingly, sales of MRIdian depend, in part, on whether coverage and adequatereimbursement for standard planning methodologies are available to our customers from third-party payors, such as government healthcare insuranceprograms, including the Medicare and Medicaid programs, private insurance plans, health maintenance organizations and preferred provider organizations.In general, third-party payors in the United States have become increasingly cost-conscious, which has limited coverage for, and reimbursement of, certainprocedures such as MRI-guided radiation therapy. Third-party payors have also increased utilization controls related to the use of products such as ours byhealthcare providers.Furthermore, there is no uniform policy on coverage and reimbursement for MRI-guided radiation therapy among third-party payors. Payors continue toreview their coverage policies carefully for existing and new therapies and can, without notice, deny coverage for treatments that include the use of MRIdian. 44 The Medicare program is increasingly used as a model for how private payors and other governmental payors develop their coverage and reimbursementpolicies for medical services and procedures. Medicare coverage of advanced and conventional radiation therapies using MRIdian currently variesdepending upon the geographic location in which the services are provided. The Centers for Medicare & Medicaid Services, or CMS has not adoptednational coverage determination for such therapies that would determine coverage nationally. In the absence of a national coverage determination, MedicareAdministrative Contractors, or MACs, with jurisdiction over specific geographic regions have the discretion to determine whether and when the use of MRI-guided radiation therapy will be considered medically necessary and covered in their respective regions. A number of MACs have adopted or proposed localcoverage determinations covering MRI-guided radiation therapy. However, these local coverage determinations do not ensure that coverage will be availablefor MRI-guided radiation therapy for all types of cancer, as the coverage policies may limit coverage to only certain types of cancer.Even if MRI-guided radiation therapy is covered and reimbursed by third-party payors, adverse changes in payors’ coverage and reimbursement policies thataffect MRIdian could harm our ability to market and sell MRIdian. We cannot be sure that third-party payors will reimburse our customers for proceduresusing MRIdian at a level that will enable us to achieve or maintain adequate sales and price levels for MRIdian. Without coverage and adequatereimbursement from third-party payors, the market for MRIdian may be limited.Third-party payors regularly update reimbursement amounts and also, from time to time, revise the methodologies used to determine reimbursement amounts.This includes annual updates to payments to physicians, hospitals and ambulatory surgery centers for the radiation treatments performed with MRIdian.Generally, because the cost of MRIdian is recovered by the healthcare provider as part of the payment for performing the treatment and not separatelyreimbursed, these updates could directly impact the demand for MRIdian. An example of payment updates is the Medicare program’s updates to hospital andphysician payments, which are done on an annual basis using a prescribed statutory formula.Historically, under the Medicare Physician Fee Schedule, or MPFS, when the application of the formula resulted in lower payment, Congress passed interimlegislation to prevent the reductions. In April 2015, however, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, was signed into law,which repealed and replaced the statutory formula for Medicare payment adjustments to physicians. MACRA provided a permanent end to the annual interimlegislative updates that had previously been necessary to delay or prevent significant reductions to payments under the Medicare Physician Fee Schedule.MACRA provided for a 0.5% update from July 1, 2015 through December 31, 2015, and for each calendar year through 2019, after which there will be a 0%annual update each year through 2025. In addition, MACRA required the establishment of the Merit-Based Incentive Payment System, beginning in 2019,under which physicians may receive performance-based payment incentives or payment reductions based on their performance with respect to clinicalquality, resource use, clinical improvement activities and meaningful use of electronic health records. MACRA also required CMS, beginning in 2019, toprovide incentive payments for physicians and other eligible professionals that participate in alternative payment models, such as accountable careorganizations, that emphasize quality and value over the traditional volume-based fee-for-service model. It is unclear what impact, if any, MACRA will haveon our business and operating results, but any resulting decrease in payment may result in reduced demand for our services.CMS also publishes annual updates to HOPPS. These payments are bundled amounts received by our hospital customers for hospital outpatient services,including conventional radiation therapy and IMRT, which may result in lower reimbursement to our customers for procedures performed using MRIdian.In addition, in 2016, CMS implemented changes to the reimbursement of certain services performed in the freestanding center setting which, to date, have nothad any material impact on the services delivered with our products.Any significant cuts in reimbursement rates or changes in reimbursement methodology or administration for MRI-guided radiation therapy, or concerns orproposals regarding further cuts or changes in methodology or administration, could further increase uncertainty, influence our customers’ decisions, reducedemand for MRIdian, cause customers to cancel orders and impact our revenue and harm our business. 45 Foreign governments also have their own healthcare reimbursement systems, which vary significantly by country and region, and we cannot be sure thatadequate reimbursement will be made available with respect to MRIdian under any foreign reimbursement system.Our employees, consultants and commercial partners may engage in misconduct or other improper activities, including insider trading and non-compliance with regulatory standards and requirements.We are exposed to the risk that our employees, consultants, distributors, and commercial partners may engage in fraudulent or illegal activity. Misconduct bythese parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates the regulations of the FDAand non-U.S. regulators, including those laws requiring the reporting of true, complete and accurate information to such regulators, manufacturing standards,healthcare fraud and abuse laws and regulations in the United States and abroad or laws that require the true, complete and accurate reporting of financialinformation or data. In particular, sales, marketing and business arrangements in the healthcare industry, including the sale of medical devices, are subject toextensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations mayrestrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other businessarrangements. It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect andprevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or otheractions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us and we are not successful indefending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition ofcivil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federalhealthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment of operations, any of which couldadversely affect our ability to operate our business and our results of operations. Whether or not we are successful in defending against such actions orinvestigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of theseclaims or investigations.Risks Related to Our Financial Condition and Capital RequirementsWe may need to raise additional capital to fund our existing commercial operations, develop and commercialize new features for MRIdian and newproducts and expand our operations. Based on our current business plan, we expect that our existing cash and cash equivalents will enable us to conduct our planned operations for at least thenext 12 months. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements because oflower demand for MRIdian as a result of lower than currently expected rates of reimbursement from commercial third-party payors and government payors ordue to other risks described in this Annual Report, we may, from time to time, seek to raise capital through a variety of sources, including the public equitymarket, private equity financing, and/or public or private debt.We may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunitiesor for other reasons, including to: •increase our sales and marketing efforts to increase market adoption of MRIdian and address competitive developments; •provide for supply and inventory costs associated with plans to accommodate potential increases in demand for MRIdian systems; •fund development and marketing efforts of any future products and technologies, including MRIdian Linac, or additional features to then-current products; •acquire, license or invest in new technologies; •acquire or invest in complementary businesses or assets; and •finance capital expenditures and general and administrative expenses. 46 Our present and future funding requirements will depend on many factors, including: •our ability to achieve revenue growth and improve gross margins; •our rate of progress in establishing coverage and reimbursement arrangements with domestic and international commercial third-party payorsand government payors; •the cost of expanding our operations and offerings, including our sales and marketing efforts; •our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of MRIdian; •the cost of research and development activities; •the effect of competing technological and market developments; •costs related to international expansion; and •the potential cost of and delays in product development as a result of any regulatory oversight applicable to MRIdian.The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our stockholders couldresult. Any equity securities issued also could provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds byissuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our common stock. The terms of debtsecurities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborationsand licensing arrangements, we might be required to relinquish significant rights to certain components contained within MRIdian, or grant licenses on termsthat are not favorable to us.We have incurred, and will continue to incur significant costs as a result of operating as a public company and our management expects to continue todevote substantial time to public company compliance programs.As a public company, we have incurred, and will continue to incur significant legal, accounting and other expenses due to our compliance with regulationsand disclosure obligations applicable to us, including compliance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rulesimplemented by the SEC, and the NASDAQ Stock Market. Stockholder activism, the current political environment and the current high level of governmentintervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs andimpact, in ways we cannot currently anticipate, the manner in which we operate our business. Our management and other personnel have devoted, and willcontinue to devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and as a result of thenew corporate governance and executive compensation related rules, regulations and guidelines prompted by the Dodd-Frank Wall Street Reform andConsumer Protection Act, or the Dodd-Frank Act, and further regulations and disclosure obligations expected in the future, we will likely need to devoteadditional time and costs to comply with such compliance programs and rules. These rules and regulations will continue to cause us to incur significant legaland financial compliance costs and will make some activities more time-consuming and costly.To comply with the requirements of being a public company, we may need to undertake various actions, including implementing new internal controls andprocedures and hiring additional accounting or internal audit staff. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls andprocedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that aredesigned to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reportedwithin the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Securities Exchange Act of 1934,or the Exchange Act, is accumulated and communicated to our principal executive and financial officers. Our current controls and any new controls that wedevelop may become inadequate and weaknesses in our internal control over financial reporting may be discovered in the future. Any failure to develop ormaintain effective controls could negatively impact the results of periodic management evaluations and annual independent registered public accountingfirm attestation reports regarding the effectiveness of our internal control over financial reporting that we may be required to include 47 in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley Act, harm our operating results, cause us to fail to meet ourreporting obligations or result in a restatement of our prior period financial statements. In the event that we are not able to demonstrate compliance with theSarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate or that we are unable to produce timely or accurate financialstatements, investors may lose confidence in our operating results and the price of our common stock could decline. In addition, if we are unable to continueto meet these requirements, our common stock may not be able to remain eligible for quotation on The NASDAQ Global Market. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reportinguntil the first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company” as defined in the JOBS Act.If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable toexpress an opinion on the effectiveness of our internal control over financial reporting, we could lose investor confidence in the accuracy and completenessof our financial reports, which could harm our business.Compliance with recently adopted rules of the SEC relating to “conflict minerals” may require us and our suppliers to incur substantial expense and mayresult in disclosure by us that certain minerals used in products we manufacture or contract to manufacture are not “DRC conflict free.”Section 1502 of the Dodd-Frank Act required the SEC to promulgate rules requiring disclosure by a public company of any “conflict minerals” (tin, tungsten,tantalum and gold) necessary to the functionality or production of a product manufactured or contracted to be manufactured by the public company. TheSEC adopted final rules in 2012 that took effect at the end of January 2013. Because we manufacture or contract to manufacture a product that contains tin,tungsten, tantalum or gold, we will be required under these rules to determine whether those minerals are necessary to the functionality or production ofMRIdian and, if so, conduct a country of origin inquiry with respect to all such minerals. If any such minerals may have originated in the DemocraticRepublic of the Congo, or DRC, or any of its adjoining countries, or covered countries, then we must conduct diligence on the source and chain of custody ofthose conflict minerals to determine if they originated in one of the covered countries and, if so, whether they financed or benefited armed groups in thecovered countries. Disclosures relating to the products that may contain conflict minerals, the country of origin of those minerals and whether they are “DRCconflict free” must be provided in a Form SD (and accompanying conflict minerals report, if required, to disclose the diligence undertaken by us in sourcingthe minerals and our conclusions relating to such diligence). Compliance with this disclosure rule may be very time-consuming for management and oursupply chain personnel (as well as time-consuming for our suppliers) and could involve the expenditure of significant amounts of money by us and them.Disclosures, mandated by this new rule, which can be perceived by the market to be “negative,” may cause customers to refuse to purchase MRIdian. Wecannot assure you that the cost of compliance with the rule will not harm our business, financial condition or results of operations.Our loan and security agreement with Capital Royalty Partners II L.P., Capital Royalty Partners II - Parallel Fund “A” L.P., Capital Royalty Partners II(Cayman) L.P. and Parallel Investment Opportunities Partners II L.P., or together with their successors by assignment, CRG, contains operating andfinancial covenants that may restrict our business and financing activities. At December 31, 2017, we had $45.0 million in outstanding debt to CRG. Borrowings under our loan and security agreement with CRG are secured bysubstantially all of our personal property, including our intellectual property. Our loan and security agreement restricts our ability to, among other things: •dispose of or sell our assets; •make material changes in our business; •merge with or acquire other entities or assets; •incur additional indebtedness; •create liens on our assets; •pay dividends; 48 •make investments; and •pay off subordinated indebtedness.The operating and financial restrictions and covenants in our loan and security agreement, as well as any future financing agreements into which we mayenter, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies. Our ability to complywith these covenants may be affected by events beyond our control, and future breaches of any of these covenants could result in a default under our loan andsecurity agreement. If not waived, future defaults could cause all of the outstanding indebtedness under our loan and security agreement to becomeimmediately due and payable and terminate all commitments to extend further credit.If we do not have or are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, either upon maturity orin the event of a default, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively impact ourability to operate and continue our business as a going concern.Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.At December 31, 2017, we had federal net operating loss carryforwards, or NOLs, of $266.3 million, which begin to expire in the year ending December 31,2024, and $144.8 million related to state net operating loss carryforwards, which begin to expire in the year ending December 31, 2019. We also had federaland state research and development tax credit carryforwards of $3.8 million and $1.3 million, respectively, which begin to expire in the year endingDecember 31, 2024. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change”is subject to limitations on its ability to utilize its NOLs to offset future taxable income. We believe we have experienced at least one ownership change inthe past. We are currently analyzing the tax impacts of such ownership change on our federal NOLs and credit carryforwards. Future changes in our stockownership, including this or future offerings, as well as other changes that may be outside of our control, could result in additional ownership changes underSection 382 of the Code. Our NOLs may also be limited under similar provisions of state law. We have recorded a full valuation allowance related to ourNOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future tax benefits of such assets.We face risks related to the current global economic environment, which could delay or prevent our customers from obtaining financing to purchaseMRIdian and implement the required facilities, which could harm our business, financial condition and results of operations.The state of the global economy continues to be uncertain. The current global economic conditions and uncertain credit markets and concerns regarding theavailability of credit pose a risk that could impact customer demand for MRIdian, as well as our ability to manage normal commercial relationships with ourcustomers, suppliers and creditors, including financial institutions. If the current global economic environment deteriorates, our business could be negativelyaffected.Risks Related to Administrative, Organizational and Commercial Operations and GrowthWe may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.We anticipate growth in our business operations. This future growth could create a strain on our organizational, administrative and operational infrastructure,including manufacturing operations, quality control, technical support and customer service, sales force management and general and financialadministration. We may not be able to maintain the quality of or installation timelines of MRIdian or satisfy customer demand as it grows. Our ability tomanage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems andprocedures. We may implement new enterprise software systems in a number of areas affecting a broad range of business processes and functional areas. Thetime and resources required to implement these new systems is uncertain and failure to complete this in a timely and efficient manner could harm ourbusiness. 49 If we are unable to support demand for MRIdian and our future products, including ensuring that we have adequate resources to meet increased demand,or we are unable to successfully manage the evolution of our MRI-guided radiation technology, our business could be harmed.As our commercial operations and sales volume grow, we will need to continue to increase our workflow capacity for manufacturing, customer service, billingand general process improvements and expand our internal quality assurance program, among other things. We will also need to purchase additionalequipment, some of which can take several months or more to procure, set up and validate, and increase our manufacturing, maintenance, software andcomputing capacity to meet increased demand. We cannot assure you that any of these increases in scale, expansion of personnel, purchase of equipment orprocess enhancements will be successfully implemented.The loss of our President and Chief Executive Officer or Chief Scientific Officer or our inability to attract and retain highly skilled scientists andsalespeople could negatively impact our business.Our success depends on the skills, experience and performance of our President and Chief Executive Officer, Chris A. Raanes, and our Chief Scientific Officerand founder, James F. Dempsey, Ph.D. The individual and collective efforts of these employees will be important as we continue to develop MRIdian and aswe expand our commercial activities. The loss or incapacity of existing members of our executive management team could negatively impact our operationsif we experience difficulties in hiring qualified successors. Our executive officers have employment agreements; however, the existence of an employmentagreement does not guarantee the retention of the executive officer for any period of time.Our commercial, manufacturing and research and development programs and operations depend on our ability to attract and retain highly skilled engineers,scientists and technicians. We may not be able to attract or retain qualified managers, engineers, scientists and technicians in the future due to thecompetition for qualified personnel among medical device businesses, particularly in California and Ohio. We also face competition from universities andpublic and private research institutions in recruiting and retaining highly qualified scientific personnel. Recruiting and retention difficulties can limit ourability to support our commercial, manufacturing and research and development programs. All of our employees are at-will, which means that either we or theemployee may terminate his or her employment at any time.If we were sued for product liability or professional liability, we could face substantial liabilities that exceed our resources.The marketing, sale and use of MRIdian could lead to the filing of product liability claims were someone to allege that MRIdian did not effectively treat theconditions its users were intending to target, caused serious medical conditions or injury, or failed to perform as designed. We may also be subject to liabilityfor errors in, a misunderstanding of or inappropriate reliance upon the information we provide in the ordinary course of our business activities, such ascustomer support or operating instructions. A product liability claim could result in substantial damages and be costly and time-consuming for us to defend. 50 We maintain product liability insurance, but the amounts of insurance coverage may not fully protect us from the financial impact of defending againstproduct liability claims (and we have significant deductibles). Any product liability claim brought against us, with or without merit, could increase ourinsurance rates or prevent us from securing insurance coverage in the future. Additionally, any product liability lawsuit could lead to regulatoryinvestigations, product recalls or withdrawals, damage our reputation or cause current vendors, suppliers and customers to terminate existing agreements andpotential customers and partners to seek other suppliers of radiation therapy systems, any of which could negatively impact our results of operations.Sanctions against Russia, and Russia’s response to those sanctions, could harm our business, financial condition and results of operations.Due to Russia’s military intervention in Ukraine and annexation of Crimea, the United States and the European Union, or EU, have imposed sanctions oncertain individuals and institutions in Russia and the Ukraine, and have proposed the use of broader economic sanctions. In response, Russia has imposedentry bans on certain U.S. lawmakers and officials. We have engaged a third-party distributor and are currently in discussions with potential customers inRussia. If the United States or the EU were to impose sanctions on Russian businesses, or if Russia were to take retaliatory action against U.S. companiesoperating in Russia, our sales and marketing efforts in Russia could be harmed.The results of the United Kingdom’s referendum on withdrawal from the EU may have a negative effect on global economic conditions, financial marketsand our business.In June 2016, a majority of voters in the United Kingdom, or the U.K., elected to withdraw from the EU in a national referendum, also known as Brexit. InMarch 2017, the U.K. Prime Minister began the process for the U.K. to withdraw from the EU. Negotiations are expected to commence to determine the futureterms of the U.K.’s relationship with the EU, including, among other things, the terms of trade between the U.K. and the EU. The effects of Brexit will dependon any agreements the U.K. reaches to retain access to EU markets either during a transitional period or more permanently. Nevertheless, the referendum hascreated significant uncertainty about the future relationship between the U.K. and the EU, including with respect to the laws and regulations that will applyas the U.K. determines which EU laws to replace or replicate in the event of a withdrawal, including those governing manufacturing, labor, environmental,data protection/privacy, competition, medical sales and advertising and other matters applicable to the medical device industry. The referendum has alsogiven rise to calls for the governments of other EU member states to consider withdrawal. These developments, or the perception that any of them couldoccur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and maysignificantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factorscould depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and resultsof operations and reduce the price of our securities.We face risks associated with our international business.In addition to our marketing and sales of MRIdian in the United States, we also market MRIdian in North America, Europe and the Pacific Rim, with contractssigned with customers and distributors in Taiwan, Turkey, Korea, China, the United Arab Emirates, Hong Kong, Japan, Italy, Israel, Germany, Denmark andRussia. Our international business operations are subject to a variety of risks, including: •difficulties in staffing and managing foreign and geographically dispersed operations; •effective compliance with various U.S. and international laws, including export control laws and the U.S. Foreign Corrupt Practices Act of1977, or the FCPA, and anti-money laundering laws; •differing regulatory requirements for obtaining clearances or approvals to market MRIdian and future product enhancements for MRIdianincluding but not limited to, MRIdian Linac; •changes in uncertainties relating to foreign rules and regulations that may impact our ability to sell MRIdian, perform services or repatriateprofits to the United States; 51 •tariffs, export or import restrictions, restrictions on remittances abroad, imposition of duties or taxes that limit our ability to move MRIdianout of these countries or interfere with the import of essential materials into these countries; •limitations on our ability to enter into cost-effective arrangements with distributors of MRIdian, or at all; •fluctuations in foreign currency exchange rates; •imposition of limitations on production, sale or export of MRI-guided radiation therapy systems in foreign countries; •imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries or jointventures; •differing multiple payor reimbursement regimes, government payors or patient self-pay systems; •imposition of differing labor laws and standards; •economic, political or social instability in foreign countries and regions; •an inability, or reduced ability, to protect our intellectual property, including any effect of compulsory licensing imposed by governmentaction; and •availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us.We expect that we will begin expanding into more target markets; however, we cannot assure you that our expansion plans will be realized, or if realized, besuccessful. We expect each market to have particular regulatory and funding hurdles to overcome and future developments in these markets, including theuncertainty relating to governmental policies and regulations, could harm our business. If we expend significant time and resources on expansion plans thatfail or are delayed, our reputation, business and financial condition may be harmed.Our results may be impacted by changes in foreign currency exchange rates.Currently, the majority of our international sales contracts are denominated in U.S. dollars. We pay certain of our suppliers in a foreign currency under theterms of their supply agreements, and we may pay other suppliers in the future in foreign currency. As a result, an increase in the value of the U.S. dollarrelative to foreign currencies could require us to reduce our selling price or risk making MRIdian less competitive in international markets or our costs couldincrease. Also, if our international sales increase, we may enter into a greater number of transactions denominated in non-U.S. dollars, which could expose usto foreign currency risks, including changes in currency exchange rates. We do not currently engage in any hedging transactions. If we are unable to addressthese risks and challenges effectively, our international operations may not be successful and our business could be harmed.We could be negatively impacted by violations of applicable anti-corruption laws or violations of our internal policies designed to ensure ethical businesspractices.We operate in a number of countries throughout the world, including in countries that do not have as strong a commitment to anti-corruption and ethicalbehavior that is required by U.S. laws or by corporate policies. We are subject to the risk that we, our U.S. employees or our employees located in otherjurisdictions or any third parties such as our sales agents and distributors that we engage to do work on our behalf in foreign countries may take actiondetermined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the FCPA and the Bribery Act of 2010, orthe U.K. Anti-Bribery Act. In addition, we operate in certain countries in which the government may take an ownership stake in an enterprise and suchgovernment ownership may not be readily apparent, thereby increasing potential anti-corruption law violations. Any violation of the FCPA and U.K. Anti-Bribery Act or any similar anti-corruption law or regulation could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment ofoperations in certain jurisdictions and might harm our business, financial condition or results of operations. In addition, we have internal ethics policies withwhich we require our employees to comply in order to ensure that our business is conducted in a manner that our management 52 deems appropriate. If these anti-corruption laws or internal policies were to be violated, our reputation and operations could also be substantially harmed.Further, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our seniormanagement.We are subject to export restrictions and laws affecting trade and investments, and the future sale of our MRIdian system may be further limited orprohibited in the future by a government agency or authority.As a global company headquartered in the United States, our MRIdian system is subject to U.S. laws and regulations that may limit, restrict or require alicense to export (and re-export from other countries) our MRIdian system and related product and technical information due to MRIdian’s use of hazardousmaterials, including MRIdian with Cobalt’s use of Cobalt-60, lead and depleted uranium. We are also subject to the export and import laws of those foreignjurisdictions to which we sell or from which we re-export our MRIdian system. Compliance with these laws and regulations could significantly limit ouroperations and our sales in the future and failure to comply, even indirectly, could result in a range of penalties, including restrictions on exports of ourMRIdian system for a specified time period, or forever, and severe monetary penalties. In certain circumstances, these restrictions may affect our ability tointeract with any of our future foreign subsidiaries and otherwise limit our trade with third parties, including suppliers and customers, operating inside andoutside the United States. In addition, if we introduce new products, we may need to obtain licenses or approvals from the United States and othergovernments to ship them into foreign countries. Failure to receive the appropriate approvals may mean that our commercial efforts and expenses related tosuch efforts may not result in any revenue, which could harm our business.We depend on our information technology systems, and any failure of these systems could harm our business.We depend on information technology and telecommunications systems for significant elements of our operations. We have developed proprietary softwarefor the management and operation of MRIdian by our customers. We have installed, and expect to expand, a number of enterprise software systems that affecta broad range of business processes and functional areas, including for example, systems handling human resources, financial controls and reporting, contractmanagement, regulatory compliance and other infrastructure operations. In addition to the aforementioned business systems, we intend to extend thecapabilities of both our preventative and detective security controls by augmenting the monitoring and alerting functions, the network design and theautomatic countermeasure operations of our technical systems. These information technology and telecommunications systems support a variety offunctions, including sales and marketing, manufacturing operations, customer service support, billing and reimbursement, research and developmentactivities and general administrative activities.Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or networkfailures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerableto physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautionary measures we have taken to preventunanticipated problems that could affect our information technology and telecommunications systems, failures or significant downtime of our informationtechnology or telecommunications systems or those used by our third-party service providers could prevent us from providing maintenance and supportservices to our customers, conducting research and development activities and managing the administrative aspects of our business. Any disruption or loss ofinformation technology or telecommunications systems on which critical aspects of our operations depend could harm our business.Our operations are vulnerable to interruption or loss due to natural or other disasters, power loss, strikes and other events beyond our control.We conduct a significant portion of our activities, including administration and data processing, at facilities located in California, Ohio and other areas thathave experienced major earthquakes, tornadoes and other natural disasters. A major earthquake, tornado or other disaster (such as a major fire, hurricane,flood, tsunami, volcanic eruption or terrorist attack) affecting our facilities, or those of our suppliers, could significantly disrupt our operations, and delay orprevent product shipment or installation during the time required to repair, rebuild or replace our suppliers’ damaged manufacturing facilities; these delayscould be lengthy and costly. If any of our customers’ facilities are negatively impacted by a disaster, shipments of MRIdian could be delayed. Additionally,customers may delay purchases of MRIdian until operations return to normal. Even if we are able to quickly respond to a disaster, the 53 ongoing effects of the disaster could create some uncertainty in the operations of our business. In addition, our facilities may be subject to a shortage ofavailable electrical power and other energy supplies. Any shortages may increase our costs for power and energy supplies or could result in blackouts, whichcould disrupt the operations of our affected facilities and harm our business. Further, MRIdian is typically shipped from a limited number of ports, and anydisaster, strike or other event blocking shipment from these ports could delay or prevent shipments and harm our business. In addition, concerns aboutterrorism, the effects of a terrorist attack, political turmoil or an outbreak of epidemic diseases, such as Ebola or influenza, could have a negative effect on ouroperations, those of our suppliers and customers and the ability to travel, which could harm our business, financial condition and results of operations.The recently enacted tax reform bill could adversely affect our business and financial condition.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act,” or the TCJA, which significantly amends the Internal Revenue Code of1986. The TCJA, among other things, reduces the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limits the tax deduction for interestexpense to 30% of adjusted earnings, eliminates net operating loss carrybacks, imposes a one-time tax on offshore earnings at reduced rates regardless ofwhether they are repatriated, allows immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifiesor repeals many business deductions and credits. We continue to examine the impact these changes may have on our business. Notwithstanding the reductionin the corporate income tax rate, the overall impact of the TCJA is uncertain and our business and financial condition could be adversely affected. The impactof the TCJA on holders of our common stock is also uncertain and could be adverse.Risks Related to Intellectual PropertyLitigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and couldprevent us from selling MRIdian or impact our stock price.There is considerable intellectual property litigation and contested patent disputes in the medical device area. Third parties may, in the future, assert claimsthat we are employing their proprietary technology without authorization, including claims from competitors or from non-practicing entities that have norelevant product revenue and against whom our own patent portfolio may have no deterrent effect. As we continue to commercialize MRIdian in its current oran updated form, launch new products and enter new markets, we expect that competitors may claim that MRIdian infringes their intellectual property rightsas part of business strategies designed to impede our successful commercialization and entry into new markets. Although we are presently unaware of anybasis by which a third-party would be justified in making such claims, in the future, we may receive letters or other threats or claims from third partiesinviting us to take licenses under, or alleging that we infringe, their patents. Third parties may have obtained, and may in the future obtain, patents underwhich such third parties may claim that the use of our technologies constitutes patent infringement.Moreover, we may become party to future adversarial proceedings regarding our patent portfolio or the patents of third parties. Such proceedings couldinclude contested post-grant proceedings such as oppositions, inter parties review, reexamination, interference or derivation proceedings before the U.S.Patent and Trademark Office or foreign patent offices. The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits orproceedings with a low probability of success might be initiated. Litigation and contested proceedings can also be expensive and time-consuming, and ouradversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. 54 We could incur substantial costs and divert the attention of our management and technical personnel in defending ourselves against any of these claims or inany of such proceedings. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a negative impact onour cash position and stock price. Furthermore, parties making claims against us may be able to obtain injunctive or other relief, which could block ourability to develop, commercialize and sell products, and could result in the award of substantial damages against us. In the event of a successful claim ofinfringement or misappropriation against us, we may be required to pay damages, obtain one or more licenses from third parties or be prohibited from sellingcertain products, all of which could have a negative impact on our cash position, business and financial condition.In addition, we may be unable to obtain these licenses at a reasonable cost, if at all. We could therefore incur substantial costs related to royalty payments forlicenses obtained from third parties, which could negatively affect our gross margins. Moreover, we could encounter delays in product introductions while weattempt to develop alternative methods or products. Defense of any lawsuit or adversarial proceeding or failure to obtain any of these licenses on favorableterms could prevent us from commercializing products, and the prohibition of sale of MRIdian or future products could impact our ability to grow andmaintain profitability and could harm our business.If we are unable to adequately protect our proprietary technology or maintain issued patents that are sufficient to protect MRIdian, others could competeagainst us more directly, which could harm our business, financial condition and results of operations.Our commercial success will depend in part on our success in obtaining and maintaining issued patents and other intellectual property rights in the UnitedStates and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology,competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability toachieve profitability.Specifically, we hold a license to four issued U.S. patents, 19 issued foreign patents (eight of which were issued in Great Britain, Germany, France and theNetherlands as a result of two patent applications filed and allowed through the European Patent Office), one pending U.S. patent application and fivepending foreign patent applications as of January 15, 2018. We own an additional 20 issued U.S. patents, 36 issued foreign patents (13 of which were issuedin Great Britain, Germany, France, Italy and the Netherlands as a result of three patent applications filed and allowed through the European Patent Office), 24pending U.S. patent applications and 85 pending foreign patent applications as of January 15, 2018. Assuming all required fees are paid, individual patentsor patent applications owned or licensed by us will expire between 2021 and 2037. We also have a joint ownership interest with Case Western ReserveUniversity in one issued patent and one U.S. patent application. We cannot provide any assurances that any of our patents have, or that any of our pendingpatent applications that mature into issued patents will include, claims with a scope sufficient to protect MRIdian, any additional features we develop forMRIdian or any new products. Other parties may have developed technologies that may be related or competitive to our platform, may have filed or may filepatent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methodsor devices or by claiming subject matter that could dominate our patent position. The patent positions of medical device companies, including our patentposition, involve complex legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that we may obtaincannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented. U.S. patents and patentapplications may also be subject to supplemental examination or contested post-grant proceedings such as inter parties review, reexamination, interference orderivation proceedings before the U.S. Patent and Trademark Office and challenges in district court. Patents may be subjected to opposition, post-grantreview or comparable proceedings lodged in various foreign, both national and regional, patent offices. These proceedings could result in either loss of thepatent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, suchproceedings may be costly. Thus, any patents that we may own or exclusively license may not provide any protection against competitors. Furthermore, anadverse decision in an interference proceeding can result in a third-party receiving the patent right sought by us, which in turn could affect our ability tocommercialize MRIdian.Furthermore, though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may notprovide us with adequate proprietary protection or competitive 55 advantages against competitors with similar products. Competitors may also be able to design around our patents. Other parties may develop and obtainpatent protection for more effective technologies, designs or methods. We may not be able to prevent the unauthorized disclosure or use of our technicalknowledge or trade secrets by consultants, agents, distributors, suppliers, vendors, former employees and current employees. The laws of some foreigncountries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protectingour proprietary rights in these countries. If any of these developments were to occur, they each could have a negative impact on our results of operations andbusiness.Our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the componentsthat are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’sproduct. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attentionof our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remediesawarded if we were to prevail may not be commercially meaningful.In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Suchproceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid orotherwise unenforceable. If any of our patents covering MRIdian are invalidated or found unenforceable, our financial position and results of operationscould be negatively impacted. In addition, if a court found that valid, enforceable patents held by third parties covered MRIdian, our financial position andresults of operations could be harmed.The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: •any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect MRIdian orany other products; •any of our pending patent applications will issue as patents; •we will be able to successfully commercialize MRIdian on a substantial scale before our relevant patents expire; •we were the first to make the inventions covered by each of our patents and pending patent applications; •we were the first to file patent applications for these inventions; •others will not develop similar or alternative technologies that do not infringe our patents; •any of our patents will be found to ultimately be valid and enforceable; •any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with anycompetitive advantages or will not be challenged by third parties; •we will develop additional proprietary technologies or products that are separately patentable; or •our commercial activities or products will not infringe upon the patents of others.We rely, in part, upon unpatented trade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitiveposition, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. We also have agreementswith our employees and selected consultants that obligate them to assign their inventions to us and have non-compete agreements with some, but not all, ofour consultants. It is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement.Furthermore, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, we may not have adequateremedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could otherwisebecome known or be independently discovered by our competitors. 56 If we are not able to meet the requirements of our license agreement with the University of Florida Research Foundation, Inc., we could lose access to thetechnologies licensed thereunder and be unable to manufacture, market or sell MRIdian.We license patents and patent applications from the UFRF, covering our combination of MRI and radiation therapy, and other key technologies, incorporatedinto MRIdian under a license agreement that requires us to pay royalties to UFRF. In addition, the license agreement obligates us to pursue an agreeddevelopment plan and to submit periodic reports and restricts our ability to take actions to defend the licensed patents. The license agreement terminateswhen the underlying patents expire in 2025, although UFRF has the right to unilaterally terminate the agreement if we do not meet our royalty paymentobligations, including minimum royalty payments of $50,000 per quarter, or if we fail to satisfy other development and commercialization obligationsrelated to our utilization of the technology. If UFRF were to terminate the agreement or if we were to otherwise lose the ability to exploit the licensed patents,our competitive advantage could be reduced, we may not be able to find a source to replace the licensed technology and we may be prevented from sellingMRIdian. The license agreement reserves to UFRF the initial right to defend or prosecute any claim arising with respect to the licensed technology. If UFRFdoes not vigorously defend the patents, we may be required to engage in expensive patent litigation to enforce our rights and any competitive advantage wehave based on the licensed technology may be hampered. Any of these events could harm our business, financial condition and results of operations.Changes in U.S. patent laws may limit our ability to obtain, defend or enforce our patents.Past or future patent reform legislation or precedent could increase the uncertainties and costs surrounding the prosecution of our patent applications and theenforcement or defense of our issued patents. For example, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, includes a number of significantchanges to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also affect patent litigation. The first to fileprovisions of the Leahy-Smith Act limit the rights of an inventor to patent an invention if not the first to file an application for patenting that invention, evenif such invention was the first invention.The Leahy-Smith Act also created an administrative tribunal known as the Patent Trial and Appeal Board, or PTAB, that provides a venue for companies tochallenge the validity of a competitor’s patents at a cost that is much lower than district court litigation and on timelines that are much faster. Although it isnot clear what, if any, long-term impact the PTAB proceedings will have on the operation of our business, the initial results of patent challenge proceedingsbefore the PTAB since its inception in 2013 have resulted in the invalidation of many U.S. patent claims. The availability of the PTAB as a lower-cost, fasterand potentially more potent tribunal for challenging patents could therefore increase the likelihood that our own patents will be challenged, therebyincreasing the uncertainties and costs of maintaining and enforcing them. Moreover, if such challenges occur with regard to our UFRF-licensed patents, asindicated above, we have only limited rights to control the defense.If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.In addition to patent protection, we also rely upon copyright and trade secret protection, as well as non-disclosure agreements and invention assignmentagreements with our employees, consultants and third parties, to protect our confidential and proprietary information. For example, significant elements ofMRIdian are based on unpatented trade secrets and know-how that are not publicly disclosed. In addition to contractual measures, we try to protect theconfidential nature of our proprietary information using physical and technological security measures. Such measures may not, for example, in the case ofmisappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Oursecurity measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse wetake against such misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed ormisappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, trade secrets may beindependently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as ourtrade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive positioncould be harmed. 57 We may not be able to enforce our intellectual property rights throughout the world.The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies haveencountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. This could make it difficult for usto stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countrieshave compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability ofpatents against certain third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes.Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of ourbusiness. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legaldecisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement ofintellectual property.Third parties may assert ownership or commercial rights to inventions we develop.Third parties may, in the future, make claims challenging the inventorship or ownership of our intellectual property. We have written agreements withcollaborators that provide for the ownership of intellectual property arising from our collaborations. These agreements provide that we must negotiate certaincommercial rights with collaborators with respect to joint inventions or inventions made by our collaborators that arise from the results of the collaboration.In some instances, there may not be adequate written provisions to address clearly the resolution of intellectual property rights that may arise from acollaboration. If we cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from our use of a third-partycollaborator’s materials where required, or if disputes otherwise arise with respect to the intellectual property developed with the use of a collaborator’stechnology, we may be limited in our ability to capitalize on the market potential of these intellectual property rights. In addition, we may face claims bythird parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective or in conflictwith prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developedor will develop and interfere with our ability to capture the commercial value of such intellectual property. Litigation may be necessary to resolve anownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in thatintellectual property. Either outcome could harm our business.Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.We employ individuals who were previously employed at universities or other medical device companies, including our competitors or potentialcompetitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us,we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectualproperty, including trade secrets or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend againstthese claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and otheremployees.A network or data security incident may allow unauthorized access to our products, our network or our data and also that of our customers, resulting indisruption of critical information systems, harm to our reputation and creation of additional liability that could adversely impact our financial results. 58 Increasingly, companies are subject to a wide variety of attacks on their products, networks and systems on an ongoing basis. In addition to traditionalcomputer “hackers,” malicious code (such as viruses and worms), employee theft or misuse, and denial-of-service attacks, sophisticated nation-state andnation-stated supported actors now engage in attacks (including advanced persistent threat intrusions). Despite significant efforts to create security barriers tosuch threats, it is virtually impossible to entirely mitigate these risks. If we do not allocate and effectively manage the resources necessary to build andsustain the proper infrastructure in our business technology or in our product design, we could be subject to, among other things: transaction errors;processing inefficiencies; the loss of customers; business disruptions; the loss of or damage to intellectual property through a security breach; or the inabilityto comply with applicable laws.If a breach of data security were to occur at a customer site through one of our products as a result of third-party action, employee error, malfeasance orotherwise, and the confidentiality, integrity or availability of our customers’ data, including patient health information (PHI) and personally identifiableinformation (PII) were disrupted, we could incur significant liability to our customers and to individuals or businesses whose information was being stored byour customers. Our systems may be perceived as less desirable, which could negatively affect our business and damage our reputation. In addition, a networkor security breach could result in the loss of customers and make it more challenging to acquire new customers. Because techniques used to obtainunauthorized access to, or to sabotage, systems change frequently and generally are not recognized until launched against a target, we may be unable toanticipate these techniques or to implement adequate preventive measures. In addition, security breaches impacting our network could result in a risk of lossor unauthorized disclosure of customers’ data, which, in turn, could lead to litigation, governmental audits and investigations and possible liability, damageour relationships with our existing customers, and have a negative impact on our ability to attract and retain new customers. In addition, the costs associatedwith the investigation, remediation and potential notification of the breach to customers and counter-parties could be material.Third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or otherinformation or otherwise compromise the security of our internal networks, electronic systems and/or physical facilities in order to gain access to our data orour customers’ data, which could result in significant legal and financial exposure, interruptions or malfunctions in our operations, and, ultimately, harm toour future business prospects and revenue. We may be required to expend significant capital and financial resources to protect against threats such as these, orto alleviate problems caused by breaches in security.Risks Related to Regulatory MattersMRIdian and our operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to complywith applicable requirements could harm our business.MRIdian is a medical device that is subject to extensive regulation in the United States and elsewhere, including by the FDA and its foreign counterparts.The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices: •design, development and manufacturing; •testing, labeling, content and language of instructions for use and storage; •clinical trials; •product safety; •marketing, sales and distribution; •premarket clearance and approval; •record keeping procedures; •advertising and promotion; •recalls and field safety corrective actions; •post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death orserious injury; 59 •post-market approval studies; and •product import and export.The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions onour ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.In the United States, before we can market a new medical device, or a new use of, new claim for or significant modification to an existing product, we mustfirst receive either clearance under Section 510(k) of the FDCA or approval of a premarket approval, or PMA, application from the FDA, unless an exemptionapplies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market,known as a “predicate” device, in order to clear the proposed device for marketing. To be “substantially equivalent,” the proposed device must have the sameintended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technologicalcharacteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to supportsubstantial equivalence. In the PMA process, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, onextensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data. The PMA process is typically required fordevices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices.Modifications to products that are approved through a PMA application generally require FDA approval. Similarly, certain modifications made to productscleared through a 510(k) may require a new 510(k) clearance, or possible PMA approval. Both the PMA approval and the 510(k) clearance process can beexpensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes from three to 12 months, but can last longer. The process of obtaining aPMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or even longer, from the time theapplication is filed with the FDA. In addition, PMA generally requires the performance of one or more clinical trials. Despite the time, effort and cost, wecannot assure you that any particular device will be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory approvals couldharm our business.In the United States, we have obtained 510(k) premarket clearance from the FDA to market MRIdian for the provision of stereotactic radiosurgery andprecision radiotherapy for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated. An element of our strategy is tocontinue to upgrade MRIdian to incorporate new software and hardware enhancements. We expect that such upgrades, as well as other future modifications,may require new 510(k) clearance; however, future upgrades may be subject to the substantially more costly, time-consuming and uncertain PMA process. Ifthe FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected,product introductions or modifications could be delayed or canceled, which could cause our sales to decline. In August 2016, we filed for FDA 510(k)clearance for the MRIdian Linac and received FDA clearance in February 2017. In June 2017, we received 510(k) clearance to market RayZR, our high-resolution MLC.The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: •we may not be able to demonstrate to the FDA’s satisfaction that MRIdian is substantially equivalent to the proposed predicate device or safeand effective for its intended use; •the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; and •the manufacturing process or facilities we use may not meet applicable requirements.In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, whichmay prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared product on atimely basis. For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) clearanceprocess, the FDA initiated an evaluation, and in January 2011, announced several proposed actions 60 intended to reform the clearance process. The FDA intends these reform actions to improve the efficiency and transparency of the clearance process, as well asbolster patient safety. In addition, as part of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, Congressreauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several “Medical Device RegulatoryImprovements” and miscellaneous reforms, which are further intended to clarify and improve medical device regulation both pre- and post-clearance andapproval. More recently, the FDA issued guidance (“Deciding When to Submit a 510(k) for a Change to an Existing Device” and “Deciding When to Submita 510(k) for a Software Change to an Existing Device”) on October 25, 2017 to assist industry in determining when a change to a previously 510(k)-clearedproduct requires a new premarket notification to be submitted to the FDA. These guidance documents replaced the 1997 guidance on the same topic. Thesenew guidance documents could impose additional regulatory requirements upon us that could: increase the costs of compliance; restrict our ability tomaintain our current clearances; and delay our ability to obtain 510(k) clearances.Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations. Thefailure to comply with applicable regulations could jeopardize our ability to sell MRIdian and result in enforcement actions such as: •warning letters; •fines; •injunctions; •civil penalties; •termination of distribution; •recalls or seizures of products; •delays in the introduction of products into the market; •total or partial suspension of production; •refusal to grant future clearances or approvals; •withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of MRIdian; and •in the most serious cases, criminal penalties.Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, financial condition andresults of operations.We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action,either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trumpadministration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, orotherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking,issuance of guidance, and review and approval of marketing applications. Notably, on January 23, 2017, President Trump ordered a hiring freeze for allexecutive departments and agencies, including the FDA, which prohibits the FDA from filling employee vacancies or creating new positions. This freeze waslater lifted in May 2017. Uncertainty at the FDA or if the FDA were under-staffed, could result in delays in FDA’s responsiveness or in its ability to reviewsubmissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA, that requires that foreach notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to berepealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes a budget neutralityprovision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed 61 regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identifyregulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealedregulation. In interim guidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicatesthat the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. In addition, on February 24,2017, President Trump issued an executive order directing each affected agency to designate an agency official as a “Regulatory Reform Officer” andestablish a “Regulatory Reform Task Force” to implement the two-for-one provisions and other previously issued executive orders relating to the review offederal regulations, however it is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s abilityto exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities inthe normal course, our business may be negatively impacted.In order to sell MRIdian in member countries of the European Economic Area, or EEA, MRIdian must comply with the essential requirements of the EUMedical Devices Directive (Council Directive 93/42/EEC). Compliance with these requirements is a prerequisite to be able to affix the CE mark to MRIdian,without which they cannot be sold or marketed in the EEA. To demonstrate compliance with the essential requirements we must undergo a conformityassessment procedure, which varies according to the type of medical device and its classification. Except for low-risk medical devices, where themanufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the essential requirements of theEU Medical Devices Directive, a conformity assessment procedure requires the intervention of an organization accredited by a Member State of the EEA toconduct conformity assessments, or a Notified Body. Depending on the relevant conformity assessment procedure, the Notified Body would typically auditand examine the technical file and the quality system for the manufacture, design and final inspection of our devices. The Notified Body issues a CECertificate of Conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and itsmanufacturer and their conformity with the essential requirements. This certificate entitles the manufacturer to affix the CE mark to its medical devices afterhaving prepared and signed a related EC Declaration of Conformity.As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things,on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically, a manufacturer mustdemonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events,are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety ofthe device (e.g., product labeling and instructions for use) are supported by suitable evidence. We have the right to affix the CE mark to MRIdian withCobalt-60 since November 2014 and MRIdian Linac since September 2016. If we fail to remain in compliance with applicable European laws and directives,we would not be able to continue to affix the CE mark to MRIdian with Cobalt-60 and MRIdian Linac, which would prevent us from selling MRIdian withCobalt-60 or MRIdian Linac within the EEA. We will also need to obtain regulatory approval in other foreign jurisdictions in which we plan to market andsell MRIdian with Cobalt-60 and MRIdian Linac.Modifications to MRIdian and our future products may require new 510(k) clearances or PMA approvals, or may require us to cease marketing or recallthe modified products until clearances are obtained.In the United States, we have obtained 510(k) premarket clearance from the FDA to market MRIdian for the provision of stereotactic radiosurgery andprecision radiotherapy for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated. Any modification to a 510(k)-cleareddevice that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires anew 510(k) clearance or, possibly, approval of a PMA.In February 2017, we received a 510(k) premarket clearance from the FDA to market the MRIdian system that contains MRIdian Linac. As we make otherchanges or enhancements to our MRIdian system, we will need to determine whether additional FDA clearance is required or not. However, the FDA may notagree with our decisions regarding whether new clearances or approvals are necessary. We have made modifications to MRIdian in the past and havedetermined based on our review of the applicable FDA regulations and guidance that in certain instances new 510(k) clearances or PMA approvals were notrequired. We may make similar modifications or add additional features in the future that we believe do not require a new 510(k) clearance or approval of aPMA. If the FDA 62 disagrees with our determination and requires us to submit new 510(k) notifications or PMA applications for modifications to our previously cleared productsfor which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product untilwe obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.Furthermore, the FDA’s ongoing review of the 510(k) clearance process may make it more difficult for us to make modifications to our previously clearedproducts, either by imposing more strict requirements on when a new 510(k) notification for a modification to a previously cleared product must besubmitted, or applying more onerous review criteria to such submissions. For example, the FDA is currently reviewing its guidance describing when itbelieves a manufacturer is obligated to submit a new 510(k) for modifications or changes to a previously cleared device and issued draft guidance in August2016 to assist device manufacturers in making this determination. When finalized, this guidance will replace the FDA’s long-standing guidance issued in1997 on the same topic. We cannot guarantee whether the FDA’s approach in future guidance will result in substantive changes to existing policy andpractice regarding the assessment of whether a new 510(k) is required for changes or modifications to existing devices. The FDA continues to review its510(k) clearance process, which could result in additional changes to regulatory requirements or guidance documents, which could increase the costs ofcompliance or restrict our ability to maintain current clearances.If treatment guidelines for cancer radiation therapies change or the standard of care evolves, we may need to redesign and seek new marketingauthorization from the FDA for MRIdian.If treatment guidelines for cancer radiation therapies or the standard of care evolves, we may need to redesign MRIdian and seek new clearances or approvalsfrom the FDA for MRIdian. Our 510(k) clearance from the FDA is based on current treatment guidelines. If treatment guidelines change so that differenttreatments become desirable, the clinical utility of MRIdian could be diminished and our business could suffer. For example, competition by other forms ofcancer treatment, in particular personalized medicine approaches in targeting drugs and biologics, could reduce the use of radiation therapy as a standard ofcare in certain indications.The misuse or off-label use of MRIdian with Cobalt-60 or MRIdian Linac may harm our reputation in the marketplace, result in injuries that lead toproduct liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of theseuses, any of which could be costly to our business.Clinicians or physicians may misuse MRIdian with Cobalt-60 or MRIdian Linac or use improper techniques if they are not adequately trained or otherwise,potentially leading to injury and an increased risk of product liability. If MRIdian with Cobalt-60 or MRIdian Linac is misused or used with impropertechnique, we may become subject to costly litigation by our customers or their patients. Product liability claims could divert management’s attention fromour core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance. In addition, any of theevents described above could harm our business and lead to regulatory action. 63 In addition, MRIdian with Cobalt-60 and MRIdian Linac have been cleared by the FDA for specific treatments. We train our marketing and direct sales forceto not promote MRIdian with Cobalt-60 and MRIdian Linac for uses outside of the FDA-cleared indications for use, known as “off-label uses.” For example,MRIdian with Cobalt and MRIdian Linac have not been indicated for diagnostic use. We cannot, however, prevent a physician from using MRIdian withCobalt-60 or MRIdian Linac off-label, when in the physician’s independent professional medical judgment, he or she deems it appropriate. There may beincreased risk of injury to patients if physicians attempt to use MRIdian with Cobalt-60 or MRIdian Linac off-label. Furthermore, the use of MRIdian withCobalt-60 or MRIdian Linac for indications other than those cleared by the FDA or authorized by any foreign regulatory body may not effectively treat suchconditions, which could harm our reputation in the marketplace among physicians and patients.If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request thatwe modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter,which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal,state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activitiesto constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrativepenalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.Our MRIdian systems may cause or contribute to adverse medical events that we are required to report to regulatory bodies outside of the U.S. and to theFDA, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations. Thediscovery of serious safety issues with our MRIdian systems, or a recall of our MRIdian systems either voluntarily or at the direction of the FDA or anothergovernmental authority, could have a negative impact on us.We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA when we receive orbecome aware of information that reasonably suggests that MRIdian may have caused or contributed to a death or serious injury or malfunctioned in a waythat, if the malfunction were to recur, it could cause or contribute to a death or serious injury. The timing of our obligation to report is triggered by the datewe become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribedtimeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event orif it is an adverse event that is unexpected or removed in time from the use of MRIdian. If we fail to comply with our reporting obligations, the FDA couldtake action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of ourdevice clearance, seizure of MRIdian or delay in clearance of future products.The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects indesign or manufacture of a product or in the event that a product poses an unacceptable risk to health. The FDA’s authority to require a recall must be basedon a finding that there is reasonable probability that the device could cause serious injury or death. We may also choose to voluntarily recall a product if anymaterial deficiency is found. A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures,malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects, repeated misuse or other deficiencies or failures to comply withapplicable regulations. For example, in January 2014, we initiated a correction of the system at Washington University in St. Louis due to a defect weidentified in an advanced software feature in the treatment planning system of MRIdian. We promptly updated our software to resolve this defect and notifiedthe FDA of this correction, but the FDA has not formally classified this correction as a recall. We cannot assure you that similar or more significant productdefects or other errors will not occur in the future. Recalls involving MRIdian could be particularly harmful to our business, financial condition and results ofoperations because it is currently our only product.Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA or other regulatory bodies. We mayinitiate voluntary withdrawals or corrections for MRIdian in the future that we determine do not require notification of the FDA or other regulators in the USand around the world. If the FDA 64 disagrees with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action. A future recallannouncement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales.Any actual or perceived failure by us to comply with legal or regulatory requirements in one or multiple jurisdictions could result in proceedings, actionsor penalties against us.Many jurisdictions have enacted or are considering enacting privacy and/or data security legislation, including laws and regulations applicable to thecollection, use, storage, transfer, disclosure and/or processing of personal information. For example, the U.S. Department of Health and Human Services haspromulgated rules governing the privacy and security of individually identifiable health information under the Health Insurance Portability andAccountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH. These privacyand security rules protect medical records and other patient health information (PHI) by limiting their use and disclosure, giving individuals the right toaccess, amend and seek accounting of their own health information, limiting most uses and disclosures of health information to the minimum amountreasonably necessary to accomplish the intended purpose, and requiring administrative, technical and physical safeguards. Although we are not a coveredentity under HIPAA, we have entered into agreements with certain covered entity customers, such as health care providers, under which we are considered tobe a “business associate” under HIPAA. As a business associate, we are contractually bound and may also be directly responsible under HIPAA, as amendedby HITECH, to implement policies, procedures and reasonable and appropriate security measures to protect any individually identifiable health informationwe may create, receive, maintain or transmit on behalf of covered entities. We may also be subject to state laws protecting the confidentiality of medicalrecords where those state laws have stricter provisions than HIPAA.The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to the businesses of our customers may limit theuse and adoption of our products and reduce overall demand for it. These privacy and data security related laws and regulations are evolving and may resultin increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. Although we are working to comply with those federal,state, and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations,standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and mayconflict with one another, other requirements or legal obligations, our practices or the features of our platform. Any failure or perceived failure by us tocomply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspectedsecurity incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal information or other data, may result ingovernmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust inus, which could have an adverse effect on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded,or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations could result in additional costand liability to us, damage our reputation, inhibit sales, and adversely affect our business.We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and informationsecurity in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standardsmay have on our business. For example, in the E.U., increasingly stringent data protection and privacy rules that may have substantial impact on the use ofpatient data across the healthcare industry are scheduled to go into effect in May 2018. In addition to government activity, privacy advocacy groups andtechnology and other industries are considering various new, additional or different self-regulatory standards that my place additional burdens on us. Newlaws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual obligations and other obligations may require us toincur additional costs and restrict our business operations. Such laws and regulations may require companies to implement privacy and security policies,inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use personal information forcertain purposes. If we fail to comply with federal, state and international data privacy laws and regulations, our ability to successfully operate our businessand pursue our business goals could be harmed. 65 Our failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement action against us, including fines and publiccensure, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existingcustomers and prospective customers), any of which could harm our business, results of operations and financial condition.If we or our distributors do not obtain and maintain international regulatory registrations or approvals for MRIdian, we will not be able to market andsell MRIdian outside of the United States.Sales of our devices outside the United States are subject to foreign regulatory requirements that vary widely from country to country. In addition, the FDAregulates exports of medical devices from the United States. While the regulations of some countries may not impose barriers to marketing and sellingMRIdian or only require notification, others require that we or our distributors obtain the approval of a specified regulatory body. We have applied for andreceived regulatory approval in Europe, the United Arab Emirates, Taiwan, Korea, Japan, China and Italy, where regulatory approval is required in addition tothe CE mark. We currently have orders to deliver MRIdian to customers in the United States, Taiwan, China, Korea, Italy, Germany, Belgium, theNetherlands, the United Kingdom, France and the United Arab Emirates, which we include in our backlog due to the status of each sales order and ourregulatory approval processes in these countries. Complying with foreign regulatory requirements, including obtaining registrations or approvals, can beexpensive and time-consuming, and we cannot be certain that we or our distributors will receive regulatory approvals in each country in which we plan tomarket MRIdian or that we will be able to do so on a timely basis. The time required to obtain registrations or approvals, if required by other countries, maybe longer than that required for FDA clearance, and requirements for such registrations or approvals may significantly differ from FDA requirements. If wemodify MRIdian, we or our distributors may need to apply for additional regulatory approvals before we are permitted to sell the modified product. Inaddition, we may not continue to meet the quality and safety standards required to maintain the authorizations that we or our distributors have received. If weor our distributors are unable to maintain our authorizations in a particular country, we will no longer be able to sell MRIdian in that country, which couldharm our business.Regulatory clearance or approval by the FDA does not ensure marketing authorization by regulatory authorities in other countries, and authorization formarketing by one or more foreign regulatory authorities does not ensure marketing authorization will be granted by regulatory authorities in other foreigncountries or by the FDA. However, a failure or delay in obtaining marketing authorization in one country may have a negative effect on the regulatoryprocess in others.We must manufacture MRIdian in accordance with federal and state regulations, and we could be forced to recall our installed systems or terminateproduction if we fail to comply with these regulations.The methods used in, and the facilities used for, the manufacture of MRIdian must comply with the FDA’s QSR, which is a complex regulatory scheme thatcovers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage,distribution, installation, servicing and shipping of MRIdian. Furthermore, we are required to verify that our suppliers maintain facilities, procedures andoperations that comply with our quality and applicable regulatory requirements. The FDA enforces the QSR through periodic announced or unannouncedinspections of medical device manufacturing facilities, which may include the facilities of subcontractors. MRIdian is also subject to similar state regulationsand various laws and regulations of foreign countries governing manufacturing.We cannot guarantee that we or any subcontractors will take the necessary steps to comply with applicable regulations, which could cause delays in thedelivery of MRIdian. In addition, failure to comply with applicable FDA requirements or later discovery of previously unknown problems with MRIdian ormanufacturing processes could result in, among other things: •warning letters or untitled letters; •fines, injunctions or civil penalties; •suspension or withdrawal of approvals or clearances; 66 •seizures or recalls of MRIdian; •total or partial suspension of production or distribution; •administrative or judicially imposed sanctions; •FDA’s refusal to grant pending or future clearances or approvals for MRIdian; •clinical holds; •refusal to permit the import or export of MRIdian; and •criminal prosecution of us or our employees.Any of these actions could significantly and negatively impact supply of MRIdian. If any of these events occurs, our reputation could be harmed, we couldbe exposed to product liability claims and we could lose customers and suffer reduced revenue and increased costs.Legislative or regulatory reforms in the United States or the EU may make it more difficult and more costly for us to obtain regulatory clearances orapprovals for MRIdian or to produce, market or distribute MRIdian after clearance or approval is obtained.From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulation ofmedical devices or the reimbursement thereof. In addition, the FDA or NRC, regulations and guidance are often revised or reinterpreted by the FDA or NRC inways that may significantly affect our business and our MRIdian systems. For example, in response to industry and healthcare provider concerns regardingthe predictability, consistency and rigor of the 510(k) clearance process, the FDA initiated an evaluation, and in January 2011, announced several proposedactions intended to reform the clearance process. In addition, as part of FDASIA, Congress reauthorized the Medical Device User Fee Amendments withvarious FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms, which are furtherintended to clarify and improve medical device regulation both pre- and post-clearance or approval. Any new statutes, regulations or revisions orreinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to manufacture,market or distribute MRIdian or future products. For example, the FDA issued draft guidance in August 2016 intended to assist the industry in determiningwhen a change to a previously 510(k)-cleared product requires a new premarket notification to the FDA. Once finalized, this guidance will replace the 1997guidance on the same topic. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated,enacted or adopted may have on our business in the future. Such changes could, among other things, require: •additional testing prior to obtaining clearance or approval; •changes to manufacturing methods; •recall, replacement or discontinuance of MRIdian or future products; or •additional record keeping.Any of these changes could require substantial time and cost and could harm our business and our financial results.On April 5, 2017, the European Parliament passed the Medical Devices Regulation, which repealed and replaced the Medical Devices Directive. Unlikedirectives, which must be implemented into the national laws of the EEA member States, the regulations would be directly applicable, i.e., without the needfor adoption of EEA member State laws implementing them, in all EEA member States and are intended to eliminate current differences in the regulation ofmedical devices among EEA member States. The Medical Devices Regulation, among other things, is intended to establish a uniform, transparent,predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supportinginnovation.The Medical Devices Regulation will, however, only become applicable three years after publication. Once applicable, the new regulations will among otherthings: 67 •strengthen the rules on placing devices on the market and reinforce surveillance once they are available; •establish explicit provisions on manufacturers' responsibilities for the follow-up of the quality, performance and safety of devices placed onthe market; •improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; •set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products availablein the EU; •strengthened rules for the assessment of certain high-risk devices, which may have to undergo an additional check by experts before they areplaced on the market.These modifications may have an impact on the way we conduct our business in the EEA.Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations,which may be expensive and restrict how we do business.Our third-party manufacturers’ activities and our own activities involve the controlled storage, use and disposal of hazardous materials, including Cobalt-60,lead and depleted uranium. We and our manufacturers are subject to federal, state, local and foreign laws and regulations governing the use, generation,manufacture, storage, handling and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claimsrelating to the use of hazardous materials, but we do reserve funds to address these claims at both the federal and state levels. Although we believe that oursafety procedures for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, wecannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of an accident,state or federal or other applicable authorities may curtail our use of these materials and interrupt our business operations. In addition, if an accident orenvironmental discharge occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties weacquire, we could be liable for cleanup obligations, damages and fines. If such unexpected costs are substantial, this could significantly harm our financialcondition and results of operations.We are subject to federal and state fraud and abuse laws and health information privacy and security laws, which, if violated, could subject us tosubstantial penalties. Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly torespond to, and thus could harm our business.There are numerous U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback, false claims and physician transparencylaws. Our relationships with providers and hospitals are subject to scrutiny under these laws. We may also be subject to patient privacy regulation by both thefederal government and the states in which we conduct our business. The laws that may affect our ability to operate include: •the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receivingor providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arrangingfor a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare andMedicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed aviolation. Moreover, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; •federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities fromknowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false orfraudulent; •HIPAA, which created federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefitprogram and making false statements relating to healthcare matters. 68 Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent toviolate it to have committed a violation; •the federal physician sunshine requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care andEducation Reconciliation Act, collectively referred to as the Affordable Care Act, which requires certain manufacturers of drugs, devices,biologics and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments andother transfers of value to physicians, which is defined broadly to include other healthcare providers and teaching hospitals and ownershipand investment interests held by physicians and their immediate family members; •state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or servicesreimbursed by any third-party payor, including commercial insurers; •state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the relevant complianceguidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and otherpotential referral sources; and •state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and otherhealthcare providers or marketing expenditures.These laws, among other things, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, includingsales programs, we may have with hospitals, physicians or other potential purchasers of medical devices. We have a variety of arrangements with ourcustomers that could implicate these laws. Due to the breadth of these laws, the narrowness of statutory exceptions and safe harbors available, and the rangeof interpretations to which they are subject, it is possible that some of our current or future practices might be challenged under one or more of these laws.Even an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to respond to, and thus could harm ourbusiness, financial condition and results of operations.If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject topenalties, including administrative, civil and criminal penalties, damages, fines, exclusion from participation in government healthcare programs, such asMedicare and Medicaid, imprisonment and the curtailment or restructuring of our operations, any of which could negatively impact our ability to operate ourbusiness and our results of operations.Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, could harm our cash flows, financial conditionand results of operations.In March 2010, the Affordable Care Act was enacted in the United States, which made a number of substantial changes in the way healthcare is financed byboth governmental and private insurers. Among other things, the Affordable Care Act: •requires each medical device manufacturer to pay a sales tax equal to 2.3% of the price for which such manufacturer sells its medical devices,which, due to subsequent legislative amendments, has been suspended from January 1, 2016 to December 31, 2017. This exercise tax wassuspended for another two years after the stopgap bill was signed by the President in January 2018; •establishes a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectivenessresearch in an effort to coordinate and develop such research; •implements payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and otherproviders to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and •establishes an Independent Payment Advisory Board that will submit recommendations to reduce Medicare spending if projected Medicarespending exceeds a specified growth rate.We expect that the current presidential administration and U.S. Congress will continue to seek to modify, repeal, or otherwise invalidate all or certainprovisions of, the Affordable Care Act. Since taking office, President Trump has 69 continued to support the repeal of all or portions of the Affordable Care Act. In January 2017, the House and Senate passed a budget resolution thatauthorizes congressional committees to draft legislation to repeal all or portions of the Affordable Care Act and permits such legislation to pass with amajority vote in the Senate. President Trump also recently issued an executive order in which he stated that it is his administration’s policy to seek theprompt repeal of the Affordable Care Act and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay theimplementation of the provisions of the Affordable Care Act to the maximum extent permitted by law. There is still uncertainty with respect to the impactPresident Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and could have an impact oncoverage and reimbursement for healthcare items and services covered by plans that were authorized by the Affordable Care Act.In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include the Budget ControlAct of 2011, which resulted in reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due tosubsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken, as well as the AmericanTaxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancertreatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal andstate governments will pay for healthcare products and services, which could result in reduced demand for MRIdian or additional pricing pressure.Risks Related to Ownership of Our Common StockThe price of our common stock may be volatile and may be influenced by numerous factors, some of which are beyond our control.Factors that could cause volatility in the market price of our common stock include, but are not limited to: •actual or anticipated fluctuations in our financial condition and operating results; •actual or anticipated changes in our growth rate relative to our competitors or market expectations; •commercial success and market acceptance of MRIdian; •success of our competitors in discovering, developing or commercializing products; •ability to commercialize or obtain regulatory approvals for MRIdian, or delays in commercializing or obtaining regulatory approvals; •strategic transactions undertaken by us; •additions or departures of key personnel; •product liability claims; •prevailing economic conditions; •disputes concerning our intellectual property or other proprietary rights; •FDA or other U.S. or foreign regulatory actions affecting us or the healthcare industry; •healthcare reform measures in the United States; •sales of our common stock by our officers, directors or significant stockholders; •future sales or issuances of equity or debt securities by us; •business disruptions caused by earthquakes, tornadoes or other natural disasters; and •changes in the manner that investors and securities analysts who provide research on us to the marketplace analyze the value of our commonstock. 70 In addition, the stock markets in general, and the markets for medical device companies in particular, have experienced extreme volatility that have beenoften unrelated to the operating performance of the issuer. These broad market fluctuations may negatively impact the price or liquidity of our commonstock. In the past, when the price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against theissuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of ourmanagement would be diverted from the operation of our business.We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies willmake our common stock less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act, and may take advantage of certain exemptions from various reporting requirements thatare applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestationrequirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxystatements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of anygolden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on theseexemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stockprice may be more volatile.In addition, Section 102 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided inSection 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. An “emerginggrowth company” can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.However, we chose to “opt out” of such extended transition period, and as a result, we comply with new or revised accounting standards on the relevant dateson which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out ofthe extended transition period for complying with new or revised accounting standards is irrevocable.Future sales of our common stock or securities convertible or exchangeable for our common stock may cause our stock price to decline.If our existing stockholders or option holders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after anyapplicable legal restrictions on resale lapse, the price of our common stock could decline. The perception in the market that these sales may occur could alsocause the price of our common stock to decline. At December 31, 2017, we have outstanding a total of 67,653,974 shares of common stock. 71 In addition, based on the number of shares subject to outstanding awards under our 2008 Stock Option and Incentive Plan, or 2008 Plan, the number of sharessubject to outstanding awards or available for issuance under our 2015 Equity Incentive Award Plan, or 2015 Plan, and our 2015 Employee Stock PurchasePlan, or 2015 ESPP, at December 31, 2017, 3,077,923 shares, 6,634,243 shares and 1,103,481 shares, respectively, of common stock that are either subject tooutstanding options, outstanding but subject to vesting or reserved for future issuance under the 2008 Plan, 2015 Plan and 2015 ESPP will become eligiblefor sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act,which includes, for shares held by directors, executive officers and other affiliates, volume limitations under Rule 144 under the Securities Act. The 2015Plan contains provisions for the annual increase of the number of shares reserved for issuance under such plan. If the shares we may issue from time to timeunder the 2008 Plan, 2015 Plan or 2015 ESPP are sold, or if it is perceived that they will be sold, by the award recipients in the public market, the price of ourcommon stock could decline.You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or othersecurities that are convertible into or exercisable for our common or preferred stock.In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our presentstockholders and the purchasers of our common stock. We are authorized to issue an aggregate of 300,000,000 shares of common stock and 10,000,000shares of “blank check” preferred stock. We may issue additional shares of our common stock or other securities that are convertible into or exercisable forour common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for otherbusiness purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the commonstock. We may need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance that we will not be requiredto issue additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts, including at a price (orexercise prices) below the price you paid for your stock. Our operating results for a particular period may fluctuate significantly or may fall below the expectations of investors or securities analysts, each ofwhich may cause our stock price to fluctuate or decline.We expect our operating results to be subject to fluctuations. Our operating results will be affected by numerous factors, including: •variations in the level of expenses related to MRIdian with Cobalt-60, MRIdian Linac or future development programs; •level of underlying demand for MRIdian and any other products we develop; •addition or termination of clinical trials or funding support; •receipt, modification or termination of government contracts or grants, and the timing of payments we receive under these arrangements; •our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under thesearrangements; •any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved; and •regulatory developments affecting MRIdian with Cobalt-60, MRIdian Linac or our competitors.If our operating results for a particular period fall below the expectations of investors or securities analysts, the price of our common stock could declinesubstantially. Furthermore, any fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially. We believethat comparisons of our financial results from various reporting periods are not necessarily meaningful and should not be relied upon as an indication of ourfuture performance. 72 Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject tostockholder approval.Based on the beneficial ownership of our common stock at December 31, 2017, our officers and directors, together with holders of 5% or more of ouroutstanding common stock and their respective affiliates, beneficially own approximately 63% of our common stock. Accordingly, these stockholders willcontinue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, merger,consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. Further, pursuant to one of the Securities PurchaseAgreements related to the October 2017 Direct Registered Offering discussed elsewhere in this Report, we agreed to (a) appoint a representative of FosunInternational Limited (“Fosun”) as a non-voting observer to our board of directors and (b) after the date, if ever, that Fosun beneficially owns at least 15% ofour then-outstanding shares of common stock, appoint a representative of Fosun as a director upon Fosun’s request. Fosun’s rights expire on the first date thatFosun ceases to own at least 90% of the shares it purchased in the October 2017 Direct Registered Offering discussed elsewhere in this Report. The interestsof these stockholders may not be the same as or may even conflict with your interests. For example, these stockholders could delay or prevent a change incontrol of the Company, even if such a change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity toreceive a premium for their common stock as part of a sale of the Company or our assets and might affect the prevailing price of our common stock. Thesignificant concentration of stock ownership may negatively impact the price of our common stock due to investors’ perception that conflicts of interest mayexist or arise.Provisions of our charter documents or Delaware law could delay or prevent an acquisition of the Company, even if such an acquisition would bebeneficial to our stockholders, which could make it more difficult for you to change management.Provisions in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control thatstockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, theseprovisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace orremove our board of directors. These provisions include: •a classified board of directors so that not all directors are elected at one time; •a prohibition on stockholder action through written consent; •no cumulative voting in the election of directors; •the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or theresignation, death or removal of a director; •a requirement that special meetings of stockholders be called only by the board of directors, the chairman of the board of directors, the chiefexecutive officer or, in the absence of a chief executive officer, the president; •an advance notice requirement for stockholder proposals and nominations; •the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine; and •a requirement of approval of not less than 66 2/3% of all outstanding shares of our capital stock entitled to vote to amend any bylaws bystockholder action, or to amend specific provisions of our certificate of incorporation.In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generallya person who, together with its affiliates, owns, or within the last three years has owned, 15% or more of our voting stock, for a period of three years after thedate of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.Accordingly, Delaware law may discourage, delay or prevent a change in control of the Company. Furthermore, our certificate of incorporation specifies thatthe Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving actions brought against us bystockholders. We believe 73 this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolvingcorporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forumlitigation. However, the provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice offorum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with anyapplicable action brought against us, a court could find the choice of forum provisions contained in our certificate of incorporation to be inapplicable orunenforceable in such action.Provisions in our charter documents and other provisions of Delaware law could limit the price that investors are willing to pay in the future for shares of ourcommon stock.We do not anticipate paying any cash dividends on our common stock in the foreseeable future; therefore, capital appreciation, if any, of our commonstock will be your sole source of gain for the foreseeable future.We have never declared or paid cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in theforeseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition,our current loan and security agreement with CRG contains, and our future loan arrangements may contain, terms prohibiting or limiting the amount ofdividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gainfor the foreseeable future.If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and tradingvolume could decline.The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business.If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our stock pricecould decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price could decline. If one or more of these analysts ceasecoverage of the Company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price andtrading volume to decline.* * *The risks above do not necessarily comprise all of those associated with an investment in the Company. This Annual Report contains forward-lookingstatements that involve unknown risks, uncertainties and other factors that may cause the actual results, financial condition, performance or achievements ofthe Company to be materially different from any future results, performance or achievements expressed or implied by such forward-lookingstatements. Factors that might cause such a difference include, but are not limited to, those set out above. Item 1B. UNRESOLVED STAFF COMMENTSNot applicable.Item 2. PROPERTIESFacilitiesOur corporate headquarters are located in Oakwood Village, Ohio, where we lease and occupy approximately 19,800 square feet of office space. The currentterm of our Oakwood Village lease expires on October 31, 2019, with an option to extend the term through October 31, 2021. We also maintain an office inMountain View, California, where we lease and occupy approximately 25,500 square feet of office space. The current term of our Mountain View leaseexpires on November 30, 2019. In connection with our Mountain View, California lease, we entered into a standby letter of credit with PNC Bank, NationalAssociation for $0.8 million, which is still outstanding at December 31, 2017. 74 We have analyzed our current facilities in light of our anticipated requirements and have determined to increase our existing space in California to meet theneeds of our operations; we are currently seeking additional space on commercially reasonable terms.Item 3. LEGAL PROCEEDINGSFrom time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation issubject to inherent uncertainties, and one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for theperiod in which they are resolved and on our business generally. In addition, regardless of their merits or their ultimate outcomes, lawsuits and legalproceedings are costly, divert management attention and may materially adversely affect our reputation, even if resolved in our favor. The information under the caption “Contingencies” in Note 7 of the consolidated financial statements of this Annual Report on Form 10-K is incorporatedherein by referenceItem 4. MINE SAFETY DISCLOSURES Not applicable. 75 PART IIItem 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES Our common stock is traded on the NASDAQ Global Market under the symbol “VRAY”, which listing was completed on March 30, 2016. Prior to that, ourcommon stock was quoted on the OTCQB, and there was a limited trading market for our common stock and there were few trades in our common stock.Because our common stock was thinly traded for that period, any reported sale prices may not be a true market-based valuation of our common stock.The following table sets forth the high and low sale prices per share of our common stock as reported on the NASDAQ Global Market during fiscal 2017 and2016. The stock prices in the following table prior to March 30, 2016 are based on the high and low bid quotations for our common stock as reported byQTCQB. Common Stock High Low 2017: First Quarter $9.47 $3.04 Second Quarter $7.97 $5.80 Third Quarter $6.72 $4.60 Fourth Quarter $9.90 $5.60 2016: First Quarter $5.50 $3.83 Second Quarter $4.86 $3.71 Third Quarter $5.31 $2.75 Fourth Quarter $4.47 $2.68 StockholdersAt February 12, 2017, we had 6,790 holders of record of our common stock.Dividend PolicyWe have never paid cash dividends on our capital stock and do not anticipate paying cash dividends in the foreseeable future. We intend to retain futureearnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our board ofdirectors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deemsrelevant.Recent Sales of Unregistered SecuritiesDuring the year ended December 31, 2017, there were no sales of unregistered equity securities by the Company. Purchases of Equity Securities by the Issuer and Affiliated PurchasersThe Company does not have a stock repurchase program and did not make any share repurchase during the year ended December 31, 2017. 76 Item 6. SELECTED FINANCIAL DATAThe following selected financial data are qualified in their entirety by, and should be read in conjunction with, the more detailed information contained inthe consolidated financial statements, the notes thereto and the information set forth in “Management’s Discussion and Analysis of Financial Condition andResults of Operations” included elsewhere in this Annual Report on Form 10-K. Year Ended December 31, 2017 2016 2015 2014 2013 (in thousands, except share and per share amounts) Consolidated Statement of Operations Data: Revenue: Product $30,458 $20,555 $9,620 $5,988 $2,253 Service 3,109 1,504 530 411 12 Distribution rights 475 178 — — — Grant — — 240 — 894 Total revenue 34,042 22,237 10,390 6,399 3,159 Cost of revenue: Product 25,488 23,897 12,673 8,176 8,173 Service 2,222 1,969 1,871 975 14 Total cost of revenue 27,710 25,866 14,544 9,151 8,187 Gross margin 6,332 (3,629) (4,154) (2,752) (5,028)Operating expenses: Research and development(1) 14,709 11,442 10,449 9,404 8,780 Selling and marketing(1) 8,412 5,601 5,139 4,681 3,781 General and administrative(1) 31,375 23,503 21,685 14,742 9,508 Total operating expenses 54,496 40,546 37,273 28,827 22,069 Loss from operations (48,164) (44,175) (41,427) (31,579) (27,097)Interest income 5 2 2 1 4 Interest expense (7,247) (5,951) (3,452) (2,243) (97)Other (expense) income, net (16,770) (512) (117) 21 (32)Loss before provision for income taxes $(72,176) $(50,636) $(44,994) $(33,800) $(27,222)Provision for income taxes — — 1 — — Net loss $(72,176) $(50,636) $(44,995) $(33,800) $(27,222)Cumulative dividends on convertible preferred stock — — — — (2,898)Deemed capital conversion of Series C convertible preferred stock into common stock — — — — 8,783 Deemed dividend on convertible preferred stock extinguishment — — — — (6,863)Deemed capital contribution on repurchase of Series A preferred stock — — — 9 — Net loss attributable to common stockholders $(72,176) $(50,636) $(44,995) $(33,791) $(28,200)Net loss per share attributable to common stockholders, basic and diluted(2) $(1.23) $(1.26) $(2.58) $(37.87) $(34.59)Weighted-average common shares used in computing net loss per share attributable to common stockholders, basic and diluted(2) 58,457,868 40,068,307 17,432,434 892,315 815,340 77 (1)Includes stock-based compensation expense as follows: Year Ended December 31, 2017 2016 2015 2014 2013 (in thousands) Research and development $952 $593 $262 $85 $29 Selling and marketing 303 120 50 15 9 General and administrative 4,064 2,194 754 218 181 Total stock-based compensation expense $5,319 $2,907 $1,066 $318 $219 (2)See Note 17 to our consolidated financial statements for an explanation of the method used to calculate our basic and diluted net loss per shareattributable to common stockholders. At December 31, 2017 2016 2015 (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $57,389 $14,198 $20,667 Total assets 135,711 48,764 52,157 Deferred revenue, current and noncurrent portion 23,389 10,433 5,961 Long-term debt 44,504 44,290 29,016 Total liabilities 133,724 92,417 59,114 Total stockholders' equity (deficit) 1,987 (43,653) (6,957) 78 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes theretocontained in this Annual Report. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans,objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words“believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,”“could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risksand uncertainties, including those under “Risk Factors” in this Annual Report that could cause actual results or events to differ materially from thoseexpressed or implied by the forward-looking statements. The Company’s actual results and the timing of events could differ materially from thoseanticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-lookingstatements to reflect events or circumstances occurring after the date of this Annual Report.References in this section to “ViewRay,” “we,” “us,” “our,” “the Company” and “our Company” refer to ViewRay, Inc. and its consolidated subsidiary,ViewRay Technologies, Inc.As previously reported, on July 23, 2015, our wholly-owned subsidiary, Vesuvius Acquisition Corp., a corporation formed in the State of Delaware onJuly 16, 2015, or the Acquisition Sub, merged with and into ViewRay Technologies, Inc., a corporation incorporated in 2004 in the State of Floridaoriginally under the name of ViewRay Incorporated, subsequently reincorporated in the State of Delaware in 2007. Pursuant to this transaction, or the Merger,ViewRay Technologies, Inc. was the surviving corporation and became our wholly-owned subsidiary. All of the outstanding capital stock of ViewRayTechnologies, Inc. was converted into shares of our common stock, as described in more detail below.Also, as previously reported, immediately prior to the closing of the Merger, under the terms of a split-off agreement, or the Split-Off Agreement, and ageneral release agreement, we transferred all of our pre-Merger operating assets and liabilities to our wholly-owned special-purpose subsidiary, MiraxEnterprise Corp., a Nevada corporation, or the Split-Off Subsidiary, formed on July 16, 2015.In connection with the Merger and pursuant to the Split-Off Agreement, we transferred all of the outstanding shares of capital stock of the Split-Off Subsidiaryto our pre-Merger majority stockholder, in exchange for the surrender and cancellation of 4,150,171 shares of our common stock.As a result of the Merger and Split-Off, we discontinued our pre-Merger business, acquired the business of ViewRay Technologies, Inc. and continued thebusiness operations of ViewRay Technologies, Inc., as a publicly-traded company under the name ViewRay, Inc.As a result of the Merger and the change in our business and operations, a discussion of our past financial results is not pertinent, and under applicableaccounting principles the historical financial results of ViewRay Technologies, Inc., the accounting acquirer, prior to the Merger are considered our historicalfinancial results.The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity andcapital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of thestatements of financial condition and results of operations presented herein. The following discussion and analysis are based on our consolidated financialstatements contained in this Annual Report, which we have prepared in accordance with U.S. generally accepted accounting principles. You should read thisdiscussion and analysis together with such consolidated financial statements and the related notes thereto. 79 Company OverviewWe design, manufacture and market MRIdian, an MRI-guided radiation therapy system to simultaneously image and treat cancer patients. MRI is a broadlyused imaging tool that has the ability to clearly differentiate between types of soft tissue, unlike X-ray or computed tomography, or CT, which are the mostcommonly used imaging technologies in radiation therapy today. MRIdian integrates MRI technology, radiation delivery and our proprietary software tolocate, target and track the location and shape of soft-tissue tumors while radiation is delivered. These capabilities allow MRIdian to accurately deliverradiation to the tumor while reducing the amount delivered to healthy tissue, as compared to other radiation therapy treatments today. We believe this leadsto improved patient outcomes and reduced side effects from off-target radiation delivery.We received initial 510(k) marketing clearance from the FDA for our treatment planning and delivery software in January 2011 and for MRIdian with Cobalt-60 in May 2012. We also received permission to affix the Conformité Européene, or CE, mark to MRIdian with Cobalt-60 in November 2014, allowingMRIdian with Cobalt-60 to be sold within the European Economic Area, or EEA. In August 2016, we received regulatory approval from the JapaneseMinistry of Health, Labor and Welfare to market MRIdian with Cobalt-60 in Japan. In August 2016, we also received approval from the China Food and DrugAdministration to market MRIdian with Cobalt-60 in China. In September 2016, we received CE mark approval of MRIdian Linac in the EEA. In February2017, we received 510(k) clearance from the FDA to market MRIdian Linac. In June 2017, we received 510(k) clearance to market RayZR, our highresolution multi-leaf collimator, or MLC.MRIdian is a radiation therapy solution that enables treatment and real-time imaging of a patient’s anatomy simultaneously. The high-quality images that itgenerates differentiate the targeted tumor, surrounding soft tissue and nearby critical organs. MRIdian also records the level of radiation dose that thetreatment area has received, enabling physicians to adapt the prescription between treatments as needed. We believe this improved visualization and accuratedose recording will enable better treatment, improve patient outcomes and reduce side effects. Key benefits to users and patients include improved imagingand patient alignment, on-table adaptive treatment planning, motion management and an accurate recording of the delivered radiation dose. Physicians havealready used MRIdian to treat a broad spectrum of radiation therapy patients with more than 45 different types of cancer, as well as patients for whomradiation therapy was previously not an option.At December 31, 2017, we have delivered or installed MRIdian systems at 14 leading cancer centers, including six units in the United States and nine unitsoutside the United States.We currently market MRIdian through a direct sales force in the United States and distributors in the rest of the world. We market MRIdian to a broad rangeof worldwide customers, including university research and teaching hospitals, community hospitals, private practices, government institutions andfreestanding cancer centers. Our sales and revenue cycle varies based on the customer and can be lengthy, sometimes lasting up to 18 to 24 months or morefrom initial customer contact to sales contract execution. Following execution of a sales contract, it generally takes nine to 12 months for a customer tocustomize an existing facility or construct a new vault. After the customer completes their customization, it typically takes approximately ninety days tocomplete the installation and on-site testing of the system, including the completion of acceptance test procedures.We generated product, service, distribution rights and grant revenue of $34.0, $22.2 million and $10.4 million, and had net losses of $72.2, $50.6 million and$45.0 million during the years ended December 31, 2017, 2016 and 2015, respectively.We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses will increasesubstantially in connection with our ongoing activities, as we: •add personnel to support our product development and commercialization efforts; •continue our research and development efforts; •seek regulatory approval for MRIdian in certain foreign countries; and •operate as a public company. 80 Accordingly, we may seek to fund our operations through public or private equity, debt financings or other sources. However, we may be unable to raiseadditional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such otherarrangements as and when needed would have a negative impact on our financial condition and our ability to develop enhancements to and integrate newtechnologies into MRI-guided radiation therapy systems.MergerOn July 23, 2015, ViewRay, Inc. (f/k/a Mirax Corp.), and ViewRay Technologies, Inc. (f/k/a ViewRay Incorporated), consummated an Agreement and Plan ofMerger and Reorganization, or Merger Agreement. Pursuant to the Merger Agreement, the stockholders of ViewRay Technologies, Inc. contributed all oftheir equity interests to ViewRay, Inc. for shares of the ViewRay, Inc.’s common stock and merged with the Company’s subsidiary, which resulted inViewRay Technologies, Inc. becoming a wholly-owned subsidiary of ViewRay, Inc., or the Merger. Effective as of July 23, 2015, ViewRay, Inc. amended andrestated its Certificate of Incorporation to increase its authorized common stock to 300,000,000 shares and 10,000,000 shares of “blank check” preferredstock, par value of $0.01 per share.Upon closing of the Merger, under the terms of the Split-Off Agreement, dated July 23, 2015 among ViewRay, Inc., ViewRay Technologies, Inc. andVesuvius Acquisition Sub, Inc., the acquisition subsidiary of Mirax, and a general release agreement dated July 23, 2015, or the General Release Agreement,ViewRay, Inc. transferred all of its pre-Merger operating assets and liabilities to a wholly-owned special-purpose subsidiary incorporated in Nevada, MiraxEnterprise Corp., or the Split-Off Subsidiary. Thereafter, Mirax transferred all of the outstanding shares of capital stock of the Split-Off Subsidiary to certainpre-Merger insiders of Mirax in exchange for the surrender and cancellation of shares of Mirax common stock held by such persons, or the Split-Off.Together with the Merger, on July 23, 2015, ViewRay Technologies, Inc. effected a 2.975-for-1 stock split of its then outstanding common stock andconvertible preferred stock, collectively referred to as Capital Stock, and convertible preferred stock warrants, in which (i) each share of outstanding CapitalStock was increased into 2.975 shares of Capital Stock; (ii) the number of outstanding options to purchase each Capital Stock was proportionately increasedon a 2.975-for-1 basis; (iii) number of shares reserved for future option grants under the 2008 Plan were proportionately increased on a 2.975-for-1 basis;(iv) the exercise price of each such outstanding option was proportionately decreased on a 2.975-for-1 basis; and (v) each share of outstanding convertiblepreferred stock warrant was increased into 2.975 shares of convertible preferred stock warrant. All of the share and per share amounts have been adjusted, on aretroactive basis, to reflect this 2.975-for-1 stock split.Private PlacementAt the closing of the Merger, ViewRay, Inc. conducted a private placement offering, or the Private Placement, of its securities for $26.3 million through thesale of 5,884,504 shares of the common stock of the surviving corporation, at an offering price of $5.00 per share, net of offering cost. Existing ViewRayTechnologies, Inc. investors purchased $17.0 million shares of common stock in the Private Placement. Certain shareholders of Mirax retained, after givingeffect to the Split-Off, 1,000,005 shares of the common stock of the surviving corporation upon the Private Placement.The Merger was accounted for as a reverse-merger and recapitalization. ViewRay Technologies, Inc. was the acquirer for financial reporting purposes, andViewRay, Inc. was the acquired company under the acquisition method of accounting in accordance with the Financial Accounting Standards Board (FASB)Accounting Standards Update (ASU) No. 2014-18, Topic 805, Business Combinations. Consequently, the assets, liabilities and operations that were reflectedin the historical financial statements prior to the Merger were those of ViewRay Technologies, Inc. and were recorded at the historical cost basis, and theconsolidated financial statements after completion of the Merger included the assets, liabilities and results of operations of ViewRay Technologies, Inc. up tothe day prior to the closing of the Merger and the assets, liabilities and results of operations of the combined company from and after the closing date of theMerger. 81 2016 Private PlacementOn August 19, 2016, we entered into a Securities Purchase Agreement pursuant to which we sold an aggregate of 5,983,251 shares of common stock whichconsists of 4,602,506 shares of common stock and warrants to purchase 1,380,745 shares of common stock, or the 2016 Placement Warrants, for aggregateproceeds of $13.2 million, net of offering cost, or the 2016 Private Placement. We completed the initial closing of the 2016 Private Placement on August 22,2016 with the final closing on September 9, 2016.January 2017 Private PlacementOn January 13, 2017, we entered into a Securities Purchase Agreement pursuant to which we sold an aggregate of 10,323,101 shares of common stock whichconsists of 8,602,589 shares of common stock and warrants to purchase 1,720,512 shares of common stock, or the January 2017 Placement Warrants, foraggregate gross proceeds of $26.1 million, or the 2017 Private Placement. We completed the closing of the January 2017 Private Placement on January 18,2017.October 2017 Direct Registered OfferingOn October 23, 2017, we entered into Securities Purchase Agreements with certain investors pursuant to which we sold an aggregate of 8,382,643 shares ofcommon stock for aggregate gross proceeds of $50.0 million, or the October 2017 Direct Registered Offering. We completed the closing of the October 2017Direct Registered Offering on October 25, 2017.New Orders and BacklogNew orders are defined as the sum of gross product orders, representing MRIdian contract price, recorded during the period. Backlog is the accumulation ofall orders for which revenue has not been recognized and we consider valid. Backlog includes customer deposits or letters of credit, except when the sale is toa customer where a deposit is deemed not necessary or customary. Deposits received are recorded as a liability on the balance sheet. Orders may be revised orcancelled according to their terms or upon mutual agreement between the parties. Therefore, it is difficult to predict with certainty the amount of backlog thatwill ultimately result in revenue. The determination of backlog includes objective and subjective judgment about the likelihood of an order contractbecoming revenue. We perform a quarterly review of backlog to verify that outstanding orders in backlog remain valid, and based upon this review, ordersthat are no longer expected to result in revenue are removed from backlog. Among other criteria, to consider a transaction to be in backlog we must possessan outstanding and effective written agreement for the delivery of a MRIdian signed by a customer and receipt of a minimum customer deposit or a letter ofcredit except when 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 ofhospitals or a cancer care group that has sufficient credit, sales via tender awards, or indirect channel sales that have signed contracts with end-customers). Forremoval of an order from our backlog, the following criteria are considered: any changes in customer or distributor plans or financial conditions; thecustomer’s or distributor’s continued intent and ability to fulfill the order contract; changes to regulatory requirements; the status of regulatory approvalrequired in the customer’s jurisdiction, if any; and other reasons for potential cancellation of order contracts.During the year ended December 31, 2017, 2016 and 2015, our new orders were $113.6 million, $77.0 million and $40.1 million respectively. AtDecember 31, 2017 and 2016, we had backlog with a total value of $203.6 million and $133.2 million, respectively.Components of Statements of OperationsRevenueProduct Revenue. Product revenue consists of sales of MRIdian systems, as well as optional components, such as additional planning workstations and bodycoils. Forfeited customer deposits from order cancellations are also included in product revenue. 82 Following execution of a sales contract, it generally takes nine to 12 months for a customer to customize an existing facility or construct a new vault. Uponthe commencement of installation at a customer’s facility, it typically takes approximately ninety days to complete the installation and on-site testing of thesystem, including the completion of acceptance test procedures. On-site training takes approximately one week and can be conducted concurrently withinstallation and acceptance testing. Sales contracts generally include customer deposits upon execution of the agreement, and in certain cases, additionalamounts due at shipment or commencement of installation, and final payment due generally upon customer acceptance.Revenue recognition for MRIdian systems that we install generally occurs when the customer acknowledges that the system operates in accordance withstandard product specifications, the customer accepts the installed unit and title and risk of loss are transferred to the customer. For sales of MRIdian systemsthat we are not responsible for installation, revenue is recognized when the entire system is delivered and title and risk of loss are transferred to the customer.Service Revenue. We generally offer maintenance service at no cost to customers to cover parts, labor and maintenance for one to two years. In addition, weoffer multi-year, post-installation maintenance and support contracts that provide various levels of service support, which enables our customers to select thelevel of on-going support services, including parts and labor, which they require. These post-installation contracts are for a period of one to five years andprovide services ranging from 24/7 on-site parts and labor, and preventative maintenance to labor only with a longer response time. We also offer technologyupgrades to our MRIdian systems, when and if available, for an additional fee. Service revenue is recognized on a straight-line basis over the term duringwhich the contracted services are provided.Distribution Rights Revenue. We entered into a distribution agreement with Itochu Corporation pursuant to which we appointed Itochu as our exclusivedistributor for the promotion, sale and delivery of MRIdian products within Japan. In consideration of the exclusive distribution rights granted, we received$4.0 million which was recorded as deferred revenue and starting in August 2016 was recognized as distribution rights revenue on a straight-line basis overthe remaining term of the distribution agreement, which expires in December 2024. Cost of RevenueProduct Cost of Revenue. Product cost of revenue primarily consists of the cost of materials, installation and services associated with the manufacture andinstallation of MRIdian systems, as well as medical device excise tax and royalty payments to the University of Florida Research Foundation. Product cost ofrevenue also includes lower of cost or market inventory, or LCM, adjustments if the carrying value of the inventory is greater than its net realizable value. Forstrategic reasons, we initially sold our MRIdian systems prior to December 31, 2015 at prices lower than our projected costs to manufacture and install. As weaccumulated materials, installation and other costs for these systems, we regularly assessed the carrying value of the related inventory value and recordedcharges, or LCM adjustments, to reduce inventory to the lower of cost and net realizable value. The remaining realizable value of inventory was charged toproduct cost of revenue as those initial sites were completed and accepted. This resulted in LCM charges of $0.9 million, $1.9 million and $2.6 million forthe year ended December 31, 2017, 2016 and 2015, respectively.We expect our materials, installation and service costs to decrease as we continue to scale our operations, improve product designs and work with our third-party suppliers to lower costs. We expect to continue to lower costs and increase sales prices as we transition to the MRIdian Linac.Service Cost of Revenue. Service cost of revenue is comprised primarily of personnel costs, training and travel expenses to service and maintenance ofinstalled MRIdian systems. Service cost of revenue also includes the costs of replacement parts under maintenance and support contracts.Operating ExpensesResearch and Development. Research and development expenses consist primarily of compensation and related costs for personnel, including stock-basedcompensation, employee benefits and travel. Other significant research 83 and development costs arise from third-party consulting services, laboratory supplies, research materials, medical equipment, computer equipment andlicensed technology, and related depreciation and amortization. We expense research and development expenses as incurred. As we continue to invest inimproving MRIdian and developing new technologies, we expect our research and development expenses to increase.Selling and Marketing. Selling and marketing expenses consist primarily of compensation and related costs for our direct sales force, sales management, andmarketing and customer support personnel, and include stock-based compensation, employee benefits and travel expenses. Selling and marketing expensesalso include costs related to trade shows and marketing programs. We expense selling and marketing costs as incurred. We expect selling and marketingexpenses to increase in future periods as we expand our sales force and our marketing and customer support organizations and increase our participation intrade shows and marketing programs.General and Administrative. Our general and administrative expenses consist primarily of compensation and related costs for our operations, finance, humanresources, regulatory, and other administrative personnel, and include stock-based compensation, employee benefits and travel expenses. In addition, generaland administrative expenses include third-party consulting, legal, audit, accounting services, quality and regulatory functions and facilities costs, and gain orloss on the disposal of property and equipment. We expect our general and administrative expenses to increase as our business grows and as we invest in thedevelopment of our MRIdian Linac.Interest IncomeInterest income consists primarily of interest income received on our cash and cash equivalents.Interest ExpenseInterest expense consists primarily of interest and amortization of the debt discount related to our long-term debt entered in 2013 from Hercules TechnologyIII, L.P. and Hercules Technology Growth Capital, Inc., or together, Hercules and long-term debt entered in 2015 from Capital Royalty II L.P., CapitalRoyalty Partners II—Parallel Fund “A” L.P., Capital Royalty Partners II (Cayman) L.P. and Parallel Investment Opportunities Partners II L.P., or together withtheir successors by assignment, CRG, and such loan the CRG Term Loan.Other Expense, NetOther expense, net consists primarily of changes in the fair value of the 2017 and 2016 Placement Warrants and a convertible preferred stock warrant, as wellas foreign currency exchange gains and losses.The outstanding 2017 and 2016 Placement Warrants are re-measured to fair value at each balance sheet date with the corresponding gain or loss from thechange in fair value of warrant liabilities recorded as a component of other expense, net.When the convertible preferred stock warrants were outstanding, the warrants were re-measured to fair value at each balance sheet date with the correspondinggain or loss from the change in fair value of warrant liabilities recorded as a component of other expense, net. In July 2015, upon the closing of the Merger,the convertible preferred stock warrants were converted into warrants to purchase common stock. The aggregate fair value of the convertible preferred stockwarrants, upon the closing of the Merger, was reclassified from liabilities to additional paid-in-capital, a component of stockholders’ equity (deficit), and weno longer recorded the change in fair value adjustments. 84 Results of OperationsThe following tables set forth our results of operations for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Revenue: Product $30,458 $20,555 $9,620 Service 3,109 1,504 530 Distribution rights 475 178 — Grant — — 240 Total revenue 34,042 22,237 10,390 Cost of revenue: Product 25,488 23,897 12,673 Service 2,222 1,969 1,871 Total cost of revenue 27,710 25,866 14,544 Gross margin 6,332 (3,629) (4,154)Operating expenses: Research and development 14,709 11,442 10,449 Selling and marketing 8,412 5,601 5,139 General and administrative 31,375 23,503 21,685 Total operating expenses: 54,496 40,546 37,273 Loss from operations (48,164) (44,175) (41,427)Interest income 5 2 2 Interest expense (7,247) (5,951) (3,452)Other expense, net (16,770) (512) (117)Loss before provision for income taxes (72,176) (50,636) (44,994)Provision for income taxes — — 1 Net loss $(72,176) $(50,636) $(44,995) Comparison of the years ended December 31, 2017 and 2016Revenue Year Ended December 31, 2017 2016 Change (in thousands) Product $30,458 $20,555 $9,903 Service 3,109 1,504 1,605 Distribution rights 475 178 297 Total revenue $34,042 $22,237 $11,805 Total revenue during the year ended December 31, 2017 increased $11.8 million compared to the year ended December 31, 2016. The increase was primarilydue to revenue from six MRIdian systems during the year ended December 31, 2017, compared to revenue from four MRIdian systems during the year endedDecember 31, 2016.Product Revenue. Product revenue increased $9.9 million in fiscal 2017 compared to fiscal 2016. The increase is primarily due to the revenuerecognized from six MRIdian systems in fiscal 2017 compared to four units in fiscal 2016.Service Revenue. Service revenue increased $1.6 million in fiscal 2017 compared to fiscal 2016 due to increased billings to existing customers, aswell as the increased install base. 85 Distribution Rights Revenue. Distribution rights revenue increased $0.3 million in fiscal 2017 compared to fiscal 2016. After receipt of Japaneseregulatory approval in August 2016, we started recognizing the distribution rights revenue on a straight-line basis over the remaining term of the distributionagreement with Itochu. The increase was due to recognition of revenue for twelve months in fiscal 2017 compared to four and half months for fiscal 2016.Cost of Revenue Year Ended December 31, 2017 2016 Change (in thousands) Product $25,488 $23,897 $1,591 Service 2,222 1,969 253 Total cost of revenue $27,710 $25,866 $1,844 Product Cost of Revenue. Product cost of revenue increased $1.6 million in fiscal 2017 compared to fiscal 2016. The increase was primarily due tocosts of six MRIdian Linac systems in fiscal 2017 compared to costs of four MRIdian with Cobalt-60 in fiscal 2016. The increase was partially offset by thelower cost for MRIdian Linac systems.Service Cost of Revenue. Service cost of revenue increased $0.3 million in fiscal 2017 compared to fiscal 2016. The increase in service cost ofrevenue was primarily due to service provided to more installed units in fiscal 2017.Operating Expenses Year Ended December 31, 2017 2016 Change (in thousands) Research and development $14,709 $11,442 $3,267 Selling and marketing 8,412 5,601 2,811 General and administrative 31,375 23,503 7,872 Total operating expenses $54,496 $40,546 $13,950 Research and Development. Research and development expenses increased $3.3 million, or 28.5% in fiscal 2017 compared to fiscal 2016. Thisincrease was primarily attributable to a $1.4 million increase in engineering and research expense and projects supplies, a $1.0 million increase in consultingand contract labor expense due to increased usage of consultants and contractors, and a $0.7 million increase in personnel costs due to higher averageheadcount in fiscal 2017.Selling and Marketing. Selling and marketing expenses increased $2.8 million, or 50.2% in fiscal 2017 compared to fiscal 2016. This increase wasprimarily attributable to a $1.4 million increase in trade show costs, a $1.1 million increase in personnel expense due to higher average headcount in fiscal2017, and a $0.2 million increase in travel expense.General and Administrative. General and administrative expenses increased $7.9 million, or 33.5% in fiscal 2017 compared to fiscal 2016. Thisincrease was primarily attributable to a $4.0 million increase in personnel and related costs due to higher average headcount, a $2.3 million increase inconsulting and contract labor expense, a $0.6 million increase in depreciation expense, and a $0.6 million increase in travel and other general expenses. 86 Interest Expense Year Ended December 31, 2017 2016 Change (in thousands) Interest expense $(7,247) $(5,951) $(1,296) Interest expense increased $1.3 million in fiscal 2017, due primarily to higher outstanding CRG loan balances in fiscal 2017.Other Expense, Net Year Ended December 31, 2017 2016 Change (in thousands) Other expense, net $(16,770) $(512) $(16,258) Other expense, net for fiscal 2017 consisted primarily of a $16.6 million change in fair value of warrant liability related to the 2017 and 2016 PlacementWarrants. Other expense, net for fiscal 2016 consisted primarily of a $0.4 million loss on disposal of fixed assets.Comparison of the Years Ended December 31, 2016 and 2015Revenue Year Ended December 31, 2016 2015 Change (in thousands) Product $20,555 $9,620 $10,935 Service 1,504 530 974 Distribution rights 178 — 178 Grant — 240 (240)Total revenue $22,237 $10,390 $11,847 Total revenue during the year ended December 31, 2016 increased $11.8 million compared to the year ended December 31, 2015. The increase was primarilydue to revenue from four MRIdian systems during the year ended December 31, 2016, compared to revenue from two MRIdian systems during the year endedDecember 31, 2015.Product Revenue. Product revenue increased $10.9 million in fiscal 2016 compared to fiscal 2015. The increase is due to the revenue recognizedfrom four units of MRIdian systems in fiscal 2016 compared to two units in fiscal 2015.Service Revenue. Service revenue increased $1.0 million in fiscal 2016 compared to fiscal 2015 due to increased install base, which was sevenMRIdian systems worldwide in fiscal 2016 compared to five MRIdian systems in 2015.Distribution Rights Revenue. Distribution rights revenue increased $0.2 million in fiscal 2016 compared to fiscal 2015. This increase was due toreceipt of Japanese regulatory approval in August 2016, after which we started recognizing the distribution rights revenue on a straight-line basis over theremaining term of the distribution agreement with Itochu.Grant Revenue. Grant revenue decreased $0.2 million in fiscal 2016 compared to fiscal 2015. This decrease was due to our note payable to thecounty redevelopment fund in the State of Ohio being forgiven based on meeting certain employment requirements in fiscal 2015, while no such revenue wasearned in fiscal 2016. 87 Cost of Revenue Year Ended December 31, 2016 2015 Change (in thousands) Product $23,897 $12,673 $11,224 Service 1,969 1,871 98 Total cost of revenue $25,866 $14,544 $11,322 Product Cost of Revenue. Product cost of revenue increased $11.2 million in fiscal 2016 compared to fiscal 2015. The increase was primarily due tocosts of four units of MRIdian systems in fiscal 2016 compared to costs of two units of MRIdian systems in fiscal 2015.Service Cost of Revenue. Service cost of revenue increased $0.1 million in fiscal 2016 compared to fiscal 2015. The increase in service cost ofrevenue was due to the provision of services for the MRIdian systems installed at VU University Medical Center, Netherlands, beginning in April 2016.Operating Expenses Year Ended December 31, 2016 2015 Change (in thousands) Research and development $11,442 $10,449 $993 Selling and marketing 5,601 5,139 462 General and administrative 23,503 21,685 1,818 Total operating expenses $40,546 $37,273 $3,273 Research and Development. Research and development expenses increased $1.0 million, or 9.5% in fiscal 2016 compared to fiscal 2015. Thisincrease was primarily attributable to a $1.2 million increase in personnel costs due to increased wages and stock-based compensation, and a $0.8 millionincrease in engineering and research expenses as a result of increased emphasis on research and development projects, partially offset by a $1.0 milliondecrease in consulting and contract labor expense due to less consultants and contractors used in 2016.Selling and Marketing. Selling and marketing expenses increased $0.5 million, or 9.0% in fiscal 2016 compared to fiscal 2015. This was a result ofan increase of $0.4 million in trade show costs and an increase of $0.3 million in marketing consulting fees and contract labor, partially offset by a $0.2million decrease in travel expenses, and a $0.1 million decrease in personnel expense due to reduced headcount from ten to nine employees.General and Administrative. General and administrative expenses increased $1.8 million, or 8.4% in fiscal 2016 compared to fiscal 2015. Thisincrease was primarily attributable to a $3.6 million increase in personnel and related costs due to stock-based compensation and salary increase, a $0.5million increase in business insurance expense, a $0.3 million increase in accounting and legal fees related to patent and intellectual property as well aspublic company related SEC expenses, a $0.2 million increase in facility expense as a result of increased utilities expense, partially offset by a $2.9 millionwrite-off of deferred offering costs in June 2015.Interest Expense Year Ended December 31, 2016 2015 Change (in thousands) Interest expense $(5,951) $(3,452) $(2,499) Interest expense increased $2.5 million in fiscal 2016, due primarily to a higher loan balance from the additional $15.0 million draw down in May 2016 aswell as the higher effective interest rate in 2016. 88 Other Expense, Net Year Ended December 31, 2016 2015 Change (in thousands) Other expense, net $(512) $(117) $(395) Other expense, net changed $0.4 million in fiscal 2016, due primarily to loss on disposal of fixed assets. Liquidity and Capital ResourcesSince our inception in 2004, we have incurred significant net losses and negative cash flows from operations. During the years ended December 31, 2017,2016 and 2015, we had net loss of $72.2 million, $50.6 million and $45.0 million, respectively. At December 31, 2017 and 2016, we had an accumulateddeficit of $319.9 and $247.7 million, respectively.At December 31, 2017 and 2016, we had cash and cash equivalents of $57.4 and $14.2 million, respectively. To date, we have financed our operationsprincipally through placements of our capital stock, issuances of convertible promissory notes, issuances of term loans and receipts of customer deposits fornew orders and payments from customers for systems installed. We may, from time to time, seek to raise capital through a variety of sources including thepublic equity market, private equity financing, and/or public or private debt. In May 2016, we drew down the additional $15.0 million in funds from theCRG term loan. In August and September 2016, we issued common stock and warrants to purchase common stock via the 2016 Private Placement for grossproceeds of $13.8 million. In January 2017, we issued additional common stock and warrants to purchase common stock via the January 2017 PrivatePlacement for gross proceeds of $26.1 million. During fiscal 2017, we also raised aggregate gross proceeds of $40.1 million through our at-the-marketoffering program in which we sold 6.6 million shares of our common stock at an average sale price of $6.10 per share. In October 2017, we issued morecommon stock via the October 2017 Direct Registered Offering for gross proceeds of $49.9 million. We expect that our existing cash and cash equivalents,together with cash receipts from sales of MRIdian systems and the plan to raise additional funds from various sources from time to time will enable us toconduct our planned operations for at least the next 12 months. We could potentially use our available financial resources sooner than we currently expect, and we may incur additional indebtedness to meet futurefinancing needs. Adequate additional funding may not be available to us on acceptable terms or at all. In addition, although we anticipate being able toobtain additional financing, we may be unable to do so. Our failure to raise capital as and when needed could have significant negative consequences for ourbusiness, financial condition and results of operations. Our future capital requirements and the adequacy of available funds will depend on many factors,including those set forth in the section titled “Risk Factors.”The following table summarizes our cash flows for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Cash used in operating activities $(70,053) $(28,156) $(39,849)Cash used in investing activities (2,163) (7,243) (4,145)Cash provided by financing activities 115,407 28,930 53,532Operating ActivitiesWe have historically experienced negative cash outflows as we developed MRIdian with Cobalt-60, MRIdian Linac and expanded our business. Our primarysource of cash flow from operating activities is cash receipts from customers including sales of MRIdian systems and, to a lesser extent, up-front paymentsfrom customers. Our primary uses of cash from operating activities are amounts due to vendors for purchased components and employee-related expenditures.During fiscal 2017, cash used in operating activities was $70.1 million as a result of our net loss of $72.2 million and a $26.3 million net change in ouroperating assets and liabilities, partially offset by aggregated non-cash charges 89 of $28.4 million. The net change in our operating assets and liabilities was primarily a result of an increase in inventory and deposits on purchased inventory,an increase in accounts receivable, an increase in deferred cost of revenue and an increase in prepaid expenses and other assets, partially offset by an increasein customer deposits and deferred revenue, an increase in accounts payable and an increase in accrued expenses and other long-term liabilities. Inventory anddeposits on purchased inventory increased $12.3 million and $4.5 million, respectively, in anticipation of upcoming shipments and installation of MRIdianLinac systems. Deferred cost of revenue increased $9.8 million due to the shipment of additional components for MRIdian Linac systems currently beinginstalled. Prepaid expenses and other assets increased $2.0 million, primarily attributable to deferred sales commission on new sales contracts and prepaidinsurance premium. The $16.2 million increase in accounts receivable resulted primarily from the timing of collection from shipment and installation of fourunits of MRIdian Linac in the last quarter of fiscal 2017. The net change in our operating assets and liabilities were partially offset by $11.4 million increasein customer deposits and deferred revenue mainly due to installation in progress. The $6.3 million increase in accounts payable resulted from the timing ofpayment. The $0.8 million increase in accrued expenses and other long-term liabilities was due primarily to the timing of invoice receipts for services andinventory purchased. Non-cash charges included a $16.6 million change in the fair value of warrant liability related to the 2016 and 2017 PlacementWarrants, $3.3 million of amortization of debt discount and interest accrual related to the CRG Term Loan, $5.3 million of stock-based compensation, $2.2million of depreciation and amortization expense as well as $0.9 million due to LCM adjustments related to the reduction of the carrying value of inventoryto its net realizable value.During fiscal 2016, cash used in operating activities was $28.2 million primarily as a result of our net loss of $50.6 million, partially offset by $12.9 millionnet increase in our operating assets and liabilities and aggregate non-cash charges of $9.5 million. The net change in our operating assets and liabilities wasprimarily the result of an increase in customer deposits, deferred revenue and accrued expenses, and a decrease in deferred cost of revenue and deposits onpurchased inventory components, offset by an increase in accounts receivable, inventory and prepaid expenses and other current assets. The $11.1 millionincrease in customer deposits and deferred revenue was the result of 13 new sales contracts and the receipt of payment from Itochu Corporation related to thedistribution agreement during the year ended December 31, 2016. The $4.9 million decrease in deferred cost of revenue and the $1.4 million decrease indeposits on purchased inventory components was due to the recognition of four MRIdian systems sales during the year ended December 31, 2016. The $2.2million increase in accrued expenses is attributable to the timing of invoice receipts for services and inventory purchased, as well as accrued bonuses. The netincrease in our operating assets and liabilities was partially offset by a $3.4 million increase in accounts receivable attributable to our increased sales, a $2.1million increase in inventories due to upcoming shipments and installations of MRIdian systems, and a $1.7 million increase in prepaid expenses and othercurrent assets due to prepayments made for deferred sales commission on new sales contracts. Non-cash charges primarily included $2.9 million of stock-based compensation, $2.6 million due to amortization of debt discount and interest accrual related to the CRG Term Loan, $1.9 million due to LCMadjustments related to the reduction of carrying value of inventory to its net realizable value, and $1.7 million depreciation and amortization expense.During fiscal 2015, cash used in operating activities was $39.8 million, primarily as a result of our net loss of $45.0 million and $3.7 million net change inour operating assets and liabilities, partially offset by aggregate non-cash charges of $8.8 million. The net change in our operating assets and liabilities wasprimarily the result of an increase in deferred cost of revenue, purchase of inventory, a decrease in accounts payable and making prepaid payments oninventory components, offset by an increase in customer deposits and accrued expenses. The $4.1 million increase in deferred cost of revenue was the resultof new MRIdian systems sales orders awaiting installation. This increase also resulted in an increase of $2.4 million in inventory. The $1.1 million increasein deposits on purchased inventory was due to the growth in our business. The decrease of $2.1 million in accounts payable was primarily due to the timingof payments as a result of the growth in our business. The decrease in our operating assets and liabilities was partially offset by $5.3 million increase incustomer deposits and deferred revenue, primarily due to new sales contracts, and a $1.5 million increase in accrued expenses attributable to higher accruedinventory purchase. Non-cash charges primarily included $2.9 million for write-off of deferred offering costs, $2.6 million of inventory lower of cost ormarket charges related to the expected MRIdian system installation in Miami, $1.3 million of depreciation and amortization charges, $1.1 million foramortization of debt discount and accrued interest related to our debt incurred in December 2013 and June 2015, and $1.1 million of stock-basedcompensation. 90 Investing ActivitiesCash used in investing activities for fiscal 2017 of $2.2 million primarily resulted from capital expenditures to purchase property and equipment.Cash used in investing activities for fiscal 2016 of $7.2 million primarily resulted from capital expenditures to purchase property and equipment. Cash used in investing activities for fiscal 2015 of $4.1 million primarily resulted from capital expenditures to purchase property and equipment. Financing ActivitiesCash provided by financing activities for fiscal 2017 of $115.4 million primarily from $49.9 million gross proceeds from the October 2017 Direct RegisteredOffering, $26.1 million gross proceeds from the January 2017 Private Placement, $40.1 million gross proceeds from our at-the-market offering program, $0.7million from the exercise of stock options, and $0.1 million from the exercise of warrants, partially offset by offering costs of $1.2 million for our at-the-market offering program and offering costs of $0.4 million for our October 2017 Direct Registered Offering, January 2017 Private Placement and the 2016Private Placement.Cash provided by financing activities for fiscal 2016 of $28.9 million primarily resulted from the net proceeds of $15.0 million related to the additional CRGdraw down, net proceeds of $13.4 million related to the 2016 Private Placement and $0.5 million from the exercise of stock options.Cash provided by financing activities for fiscal 2015 of $53.5 million primarily resulted from the net proceeds of $28.9 million related to the draw-down oflong-term debt, net of debt issuance cost, the net proceeds of $26.6 million from the Private Placement and the net proceeds of $15.7 million from issuance ofSeries C convertible preferred stock, which was partially offset by repayments of a term loan of $15.0 million and payments of $2.7 million for costs related toour originally planned initial public offering.Hercules Term LoanOn June 26, 2015, we paid off in full the $15.0 million outstanding term debt with Hercules using part of the proceeds received from the CRG Term Loan.CRG Term LoanIn June 2015, we entered the CRG Term Loan for up to $50.0 million, of which $30.0 million was made available to us upon closing with the remaining$20.0 million to be available on or before June 26, 2016 upon meeting certain milestones. We drew down the first $30.0 million on the closing date in June2015. In March 2016, the CRG Term Loan was amended with regard to the conditions for borrowing the remaining $20.0 million available under the CRGTerm Loan. We achieved one milestone at March 31, 2016 and borrowed an additional $15.0 million in May 2016. In April 2017, we executed anamendment to the CRG Term Loan, which included an extension to the availability of the existing $5.0 million tranche at ViewRay’s option throughJune 30, 2017, added a $15.0 million tranche of borrowing capacity available at ViewRay’s option through September 30, 2017, extended the interest-onlyand payment in-kind period, decreased the combined 2016 and 2017 revenue covenant and included a 1.75% increase to the facility fee. We did not drawdown any amount under the $5.0 million tranche and it has since expired. In October 2017, we executed another amendment to the CRG Term Loan,extending the availability of the existing $15.0 million borrowing capacity through December 31, 2017. In February 2018, the CRG Term Loan was amendedto decrease the amount of the minimum combined 2016 and 2017 revenue covenant effective December 31, 2017. We did not draw down any amount underthe $15 million tranche and it has since expired. The CRG Term Loan is subject to financial covenants and is collateralized by essentially all our assets andlimits our ability with respect to additional indebtedness, investments or dividends, among other things, subject to customary exceptions. 91 At December 31, 2017, we had $45.0 million in outstanding debt to CRG, which is repayable through June 26, 2020. The CRG Term Loan bears cash interestat a rate of 12.5% per annum and has an interest-payment-only period through March 31, 2020. We were in compliance with all financial covenants under theCRG Term Loan at December 31, 2017. Additional details regarding the CRG Term Loan are included in the section entitled “Notes to ConsolidatedFinancial Statements – Note 6 – Debt” in the consolidated financial statements included elsewhere in this Form 10-K.2016 Private PlacementOn August 19, 2016, we entered into a Securities Purchase Agreement pursuant to which we sold an aggregate of 5,983,251 shares of common stock whichconsists of 4,602,506 shares of common stock and warrants to purchase 1,380,745 shares of common stock, or the 2016 Placement Warrants, for aggregateproceeds of $13.2 million, net of offering cost, or the 2016 Private Placement. We completed the initial closing of the 2016 Private Placement on August 22,2016 with the final closing on September 9, 2016. The 2016 Placement Warrants have an exercise price of $2.95 per share, are exercisable at any time at theoption of the holder and expire seven years from the date of issuance.January 2017 Private PlacementIn January 2017, we entered into a Securities Purchase Agreement pursuant to which we sold an aggregate of 10,323,101 shares of common stock whichconsists of 8,602,589 shares of common stock and warrants to purchase 1,720,512 shares of common stock, or the 2017 Placement Warrants, for total grossproceeds of $26.1 million, or the January 2017 Private Placement. We completed the closing of the January 2017 Private Placement on January 18, 2017. The2017 Placement Warrants have a per share exercise price of $3.17 per share, are exercisable after six months and expire seven years from the date of issuance.At-The-Market Offering of Common StockIn January 2017, we entered into a sales agreement (the “ATM Sales Agreement”) with FBR Capital Markets & Co., or FBR, under which we may sell up to$25.0 million of our common shares pursuant to an at-the-market offering program in accordance with Rule 415(a)(4) under the Securities Act. FBR acted assales agent on a best efforts basis and used commercially reasonable efforts to sell on our behalf all of the shares of common stock requested to be sold by us,consistent with its normal trading and sales practices, on mutually agreed terms between FBR and us. There is no arrangement for funds to be received in anyescrow, trust or similar arrangement. In April 2017, we agreed to sell up to an additional $25.0 million of our common stock in accordance with the terms ofthe ATM Sales Agreement with FBR and pursuant to an at-the-market offering program in accordance with Rule 415(a)(4) under the Securities Act.FBR is entitled to compensation of up to 3.0% of the gross sales price per share sold. We have also agreed to provide indemnification and contribution toFBR with respect to certain liabilities, including liabilities under the Securities Act. At December 31, 2017, we had sold an aggregate of approximately 6.6 million shares of our common stock at an average market price of $6.10 per shareunder the at-the-market offering program, resulting in aggregate gross proceeds of approximately $40.1 million.October 2017 Direct Registered OfferingIn October 2017, we entered into Securities Purchase Agreements pursuant to which we sold an aggregate of 8,382,643 shares of common stock for total grossproceeds of $49.9 million, or the October 2017 Direct Registered Offering. We completed the closing of the October 2017 Direct Registered Offering onOctober 25, 2017. 92 Contractual ObligationsThe following summarizes our contractual obligations at December 31, 2017, and the effect such obligations are expected to have on our liquidity and cashflow over the next five years (in thousands): Payment due by period Total Less than 1 year 1-3 years 3-5 years More than 5years CRG Term Loan (1) 45,000 - 45,000 Interest on CRG Term Loan (1) 26,210 4,108 22,102 Operating leases (2) 2,157 1,118 1,039 Total 73,367 5,226 68,141 - - (1)Refer to “Note 6. Debt” (2)Refer to “Note 7. Commitments and Contingencies”Off-Balance Sheet ArrangementsWe do not have any off-balance sheet arrangements as of December 31, 2017.Critical Accounting Policies and EstimatesOur consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. Thepreparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experienceand various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.We believe that the following assumptions and estimates have the greatest potential impact on our consolidated financial statements. Therefore, we considerthese to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see the notes to ourconsolidated financial statements.Revenue RecognitionRevenue recognition for systems that we install generally occurs when the customer acknowledges that the system operates in accordance with our standardproduct specifications, the customer accepts the installed unit and we transfer title and risk of loss to the customer. For sales of MRIdian systems that we arenot responsible for installation, revenue is recognized when the entire system is delivered and title and risk of loss are transferred to the customer asqualifying distributors and third-party certified technicians are readily available to perform the installation. Service revenue is recognized on a straight-linebasis over the term during which contracted services are provided. We use judgment to estimate revenue allocations from sales arrangements with multipledeliverables between the product and service revenue. In situations where a deliverable in a multi-element arrangement has a value to the customer on astand-alone basis, we are required to allocate the fair value of the various elements based on the selling price of each element. The principal deliverablesconsist of (i) sales of MRIdian systems, which generally includes installation, site preparation and software, and (ii) product support, which includes extendedservice and maintenance. We determine selling prices using vendor specific objective evidence, or VSOE, if it exists, or third-party evidence, or TPE. Ifneither VSOE nor TPE exists for a deliverable, we use best estimated selling price, or BESP. We allocate revenue to multiple elements generally using therelative fair values as determined by BESP. We regularly review VSOE, TPE and BESP for all of our products and services.We have, in the past, received payments for cost reimbursement of allowable expenditures and payments for the achievement of certain milestones undergovernment grants in return for qualifying property and equity purchases and research and development activities over a contractually defined period. Thesepayments are nonrefundable. Government grants generally provide us with fixed payments and a contractually defined period of research. Grant 93 revenues were recognized as associated expenses incurred and are billed to grantors in conjunction with the terms of the grants. We do not anticipate grantrevenue in the future.Stock-Based CompensationStock-based compensation expense is measured and recognized in the consolidated financial statements based on the fair value of the awards granted. Thefair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. The fair value of Restricted Stock Units, orRSUs, is based on the closing market price of the Company’s common stock on the grant date. Stock-based compensation expense is recognized, net offorfeitures, over the requisite service periods of the awards, which is generally four years. At December 31, 2017, total unrecognized compensation costrelated to stock-based awards granted to employees, net of estimated forfeitures, was $9.9 million which is expected to be recognized over a weighted-average period of 2.7 years.Our use of the Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the options’ expected term and pricevolatility of the underlying stock. The assumptions used in our option-pricing model represent management’s best estimates. These estimates involveinherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensationexpense could be materially different in the future.Common Stock WarrantIn December 2013 in connection with the Hercules Term Loan, we issued a warrant to purchase 128,231 shares of our preferred stock with an exercise price of$5.84 per share, subject to certain adjustments. These warrants were converted to a warrant to purchase our common stock upon the closing of the Merger inJuly 2015. This warrant is exercisable in whole or in part at any time prior to the expiration date of the warrant, which is the later of (i) December 16, 2023and (ii) the date that is five years following the effective date of the registration statement of an initial underwritten public offering of our common stock.Prior to the Merger, the preferred stock warrant was recorded as preferred stock warrant liability and adjusted to fair value at each balance sheet date, with thechange in fair value being recorded as a component of other expense, net in the consolidated statements of operations and comprehensive loss.Upon the closing of the Merger on July 23, 2015, all shares of Series C convertible preferred stock were converted into common stock, and the warrant topurchase Series C convertible preferred stock was converted into the warrant to purchase 128,231 shares of our common stock. Fair value of these warrants atthe closing date were reclassified into additional paid-in capital, and we no longer recorded changes in fair value of the converted common stock warrants.In connection with the Merger and the Private Placement, we issued 198,760 shares of common stock warrants at an exercise price of $5.00 per share toprivate placement agents as payment for services provided. These placement warrants are exercisable at any time at the option of the holder until the five-yearanniversary of its date of issuance. These warrants were accounted for as equity awards.In connection with the 2016 Private Placement, we issued 1,380,745 shares of common stock warrants at an exercise price of $2.95 per share and thesewarrants are exercisable at any time at the option of the holder and expire seven years from the date of issuance. In connection with the January 2017 PrivatePlacement, we issued 1,720,512 shares of common stock warrants at an exercise price of $3.17 per share and these warrants are exercisable after six monthsand expire seven years from the date of issuance. The 2016 and 2017 Placement Warrants were accounted for as a liability with subsequent changes in fairvalue recorded in other expenses, net at each reporting date until the warrants are exercised or expired. Inventory ValuationInventory consists primarily of purchased components for assembling MRIdian systems and other direct costs associated with MRIdian system installation.Inventory is stated at the lower of cost or market value. When the net 94 realizable value of the inventory is lower than related costs, we reduce the carrying value of the inventory for the difference while recording a correspondingcharge to cost of product revenues. The assumptions we used in estimating the net realizable value of the inventory primarily include the total cost tocomplete the applicable MRIdian system. We recorded an inventory lower of cost and market adjustment of $0.9 million, $1.9 million and $2.6 millionduring the years ended December 31, 2017, 2016 and 2015, respectively.Prior to January 1, 2015, our inventory cost was measured on a first-in, first-out basis through specific identification. To support the increasing MRIdiansystem installations and inventory purchase activities, starting January 1, 2015, we elected to change inventory cost measurement to weighted average basis.The accounting principle change does not have an impact on prior periods’ financial statements, therefore no retrospective adjustment is required. Theaccounting principle change does not have an impact on product cost of revenue or net loss for the year ended December 31, 2015.Income TaxesWe are subject to income taxes in the United States, and we use estimates in determining our provision for income taxes. We use the asset and liabilitymethod of accounting for income taxes. Under this method, we calculate deferred tax asset or liability account balances at the balance sheet date usingcurrent tax laws and rates in effect for the year in which the differences are expected to affect our taxable income.We estimate actual current tax exposure together with assessing temporary differences resulting from differences in accounting for reporting purposes and taxpurposes for certain items, such as accruals and allowances not currently deductible for tax purposes. These temporary differences result in deferred tax assetsand liabilities, which are included in our consolidated balance sheets. In general, deferred tax assets represent future tax benefits to be received when certainexpenses previously recognized in our consolidated statements of operations and comprehensive loss become deductible expenses under applicable incometax laws or when net operating loss or credit carryforwards are utilized. Accordingly, realization of our deferred tax assets is dependent on future taxableincome against which these deductions, losses and credit carryforwards can be utilized.We assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely,establish a valuation allowance. At December 31, 2017, 2016 and 2015, we have a full valuation allowance set up for our net deferred tax assets.Under federal and similar state tax statutes, changes in our ownership, including ownership changes resulting from the Merger, may limit our ability to useour available net operating loss and tax credit carryforwards. The annual limitation, as a result of a change of ownership, may result in the expiration of netoperating losses and credits before utilization. We believe we have experienced at least one ownership change in the past. We are currently analyzing the taximpact of such ownership change on our federal NOLs and credit carryforwards. Our ability to use our remaining net operating loss carryforwards may befurther limited if we experience an ownership change or as a result of future changes in our stock ownership.JOBS Act Accounting ElectionWe are an “emerging growth company” within the meaning of the JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company cantake advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to privatecompanies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accountingstandards on the relevant dates on which adoption of such standards is required for other public companies that are not emerging growth companies.Recently Issued and Adopted Accounting PronouncementsWe review new accounting standards to determine the expected financial impact, if any, that the adoption of each such standard will have. For the recentlyissued accounting standards that we believe may have an impact on our 95 consolidated financial statements, see the section entitled “Notes to Consolidated Financial Statements – Note 2 – Summary of Significant AccountingPolicies” in the consolidated financial statement.Item 7A. Quantitative and Qualitative Disclosures About Market RiskNot applicable to smaller reporting companies. 96 Item 8. Consolidated Financial Statements and Supplementary Data VIEWRAY, INC.Index to Financial Statements Page Report of Independent Registered Public Accounting Firm 98 Consolidated Balance Sheets 99 Consolidated Statements of Operations and Comprehensive Loss 100 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) 101 Consolidated Statements of Cash Flows 102 Notes to Consolidated Financial Statements 103 97 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of ViewRay, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of ViewRay, Inc. and its subsidiary (the "Company") as of December 31, 2017 and 2016, therelated consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for eachof the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, thefinancial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally acceptedin the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations ofthe Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLPSan Francisco, CAMarch 12, 2018 We have served as the Company's auditor since 2012. 98 VIEWRAY, INC.Consolidated Balance Sheets(In thousands, except share and per share data) December 31, 2017 2016 ASSETS Current assets: Cash and cash equivalents $57,389 $14,198 Accounts receivable 20,326 4,200 Inventory 19,375 8,082 Deposits on purchased inventory 7,043 2,522 Deferred cost of revenue 13,696 3,909 Prepaid expenses and other current assets 4,862 3,023 Total current assets 122,691 35,934 Property and equipment, net 11,564 11,560 Restricted cash 1,143 1,143 Intangible assets, net 78 97 Other assets 235 30 TOTAL ASSETS $135,711 $48,764 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $11,014 $4,980 Accrued liabilities 7,207 6,334 Customer deposits 17,820 19,400 Deferred revenue, current portion 20,151 6,515 Total current liabilities 56,192 37,229 Deferred revenue, net of current portion 3,238 3,918 Long-term debt 44,504 44,290 Warrant liability 22,420 2,723 Other long-term liabilities 7,370 4,257 TOTAL LIABILITIES 133,724 92,417 Commitments and contingencies (Note 7) Stockholders’ equity (deficit): Convertible preferred stock, par value $0.01 per share; 10,000,000 shares authorized at December 31, 2017 and 2016; no shares issued and outstanding at December 31, 2017 and 2016 — — Common stock, par value of $0.01 per share; 300,000,000 shares authorized at December 31, 2017 and 2016; 67,653,974 and 43,581,184 shares issued and outstanding at December 31, 2017 and 2016 666 426 Additional paid-in capital 321,174 203,598 Accumulated deficit (319,853) (247,677)TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 1,987 (43,653)TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $135,711 $48,764 The accompanying notes are an integral part of these consolidated financial statements. 99 VIEWRAY, INC.Consolidated Statements of Operations and Comprehensive Loss(In thousands, except share and per share data) Year Ended December 31, 2017 2016 2015 Revenue: Product $30,458 $20,555 $9,620 Service 3,109 1,504 530 Distribution rights 475 178 — Grant — — 240 Total revenue 34,042 22,237 10,390 Cost of revenue: Product 25,488 23,897 12,673 Service 2,222 1,969 1,871 Total cost of revenue 27,710 25,866 14,544 Gross margin 6,332 (3,629) (4,154)Operating expenses: Research and development 14,709 11,442 10,449 Selling and marketing 8,412 5,601 5,139 General and administrative 31,375 23,503 21,685 Total operating expenses 54,496 40,546 37,273 Loss from operations (48,164) (44,175) (41,427)Interest income 5 2 2 Interest expense (7,247) (5,951) (3,452)Other expense, net (16,770) (512) (117)Loss before provision for income taxes $(72,176) $(50,636) $(44,994)Provision for income taxes — — 1 Net loss and comprehensive loss $(72,176) $(50,636) $(44,995)Net loss per share, basic and diluted $(1.23) $(1.26) $(2.58)Weighted-average common shares used to compute net loss per share attributable to common stockholders, basic and diluted 58,457,868 40,068,307 17,432,434 The accompanying notes are an integral part of these consolidated financial statements. 100 VIEWRAY, INC.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(In thousands, except share data) Convertible Preferred Stock Common Stock Shares Amount Shares Amount 'AdditionalPaid-inCapital AccumulatedDeficit TotalStockholders’Equity(Deficit) Balance at January 1, 2015 27,654,928 $145,110 907,037 $9 $1,414 $(152,046) $(150,623)Issuance of common stock from option exercises — — 31,427 — 24 — 24 Stock-based compensation — — — — 1,066 — 1,066 Issuance of Series C convertible preferred stock(net of issuance costs of $221) 2,727,059 15,729 — — — — — Conversion of convertible preferred stock intocommon stock in connection with the Merger (30,381,987) (160,839) 30,381,987 304 160,535 — 160,839 Issuance of common stock upon private placement(net of offering costs of $3,125) — — 5,884,504 59 26,264 — 26,323 Issuance of common stock to Mirax — — 1,000,005 — — — — Conversion of convertible preferred stock warrantsinto common stock warrants in connection with theMerger — — — — 93 — 93 Issuance of common stock warrants to placementagent as payment for services — — — — 316 — 316 Net loss — — — — (44,995) (44,995)Balance at December 31, 2015 — $— 38,204,960 $372 $189,712 $(197,041) $(6,957)Issuance of common stock from option exercises — — 773,718 8 531 — 539 Stock-based compensation — — — — 2,907 — 2,907 Issuance of common stock upon private placement(net of offering cost of $529) — — 4,602,506 46 10,448 — 10,494 Net loss — — — — — (50,636) (50,636)Balance at December 31, 2016 — $— 43,581,184 $426 $203,598 $(247,677) $(43,653)Issuance of common stock from option exercises — — 420,377 4 661 — 665 Issuance of common stock from releases ofrestricted stock units — — 57,626 — — — — Stock-based compensation — — — — 5,319 — 5,319 Issuance of common stock upon private placement(net of offering cost of $111) — — 8,602,589 86 22,530 — 22,616 Issuance of common stock upon direct registeredoffering (net of offering cost of $81) — — 8,382,643 84 49,776 — 49,860 Issuance of common stock from at-the-marketoffering (net of offering cost of 1,147) — — 6,575,062 66 38,913 — 38,979 Issuance of common stock from warrant exercises — — 34,493 — 103 — 103 Reclassification of warrant liability to additionalpaid-in capital upon warrant exercises — — — — 274 — 274 Net loss — — — — — (72,176) (72,176)Balance at December 31, 2017 — $— 67,653,974 $666 $321,174 $(319,853) $1,987The accompanying notes are an integral part of these consolidated financial statements. 101 VIEWRAY, INC.Consolidated Statements of Cash Flows(In thousands) Year Ended December 31, 2017 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(72,176) $(50,636) $(44,995)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,197 1,708 1,256 Stock-based compensation 5,319 2,907 1,066 Accretion on asset retirement obligation 40 36 8 Change in fair value of warrant liability 16,598 (3) (45)Loss on disposal of property and equipment 9 358 12 Inventory lower of cost and market adjustment 911 1,939 2,578 Amortization of debt discount and interest accrual 3,321 2,629 1,129 Write-off of deferred offering cost — — 2,920 Changes in operating assets and liabilities: Accounts receivable (16,126) (3,370) 74 Inventory (12,329) (2,065) (2,413)Deposits on purchased inventory (4,521) 1,414 (1,138)Deferred cost of revenue (9,787) 4,873 (4,070)Prepaid expenses and other assets (2,044) (1,633) (733)Accounts payable 6,309 381 (2,053)Notes payable — — (240)Accrued expenses and other long-term liabilities 850 2,197 1,532 Customer deposits and deferred revenue 11,376 11,109 5,263 Net cash used in operating activities (70,053) (28,156) (39,849)CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,163) (7,031) (4,151)Purchase of intangible and other assets — (12) (104)Change in restricted cash balance — (200) 110 Net cash used in investing activities (2,163) (7,243) (4,145)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of convertible preferred stock, net — — 15,729 Proceeds from draw down of long-term debt — 15,000 30,000 Payment of debt issuance cost — (18) (1,132)Payments of long-term debt — — (15,000)Proceeds from common stock private placement, gross 26,100 13,750 29,447 Payment of offering costs related to common stock private placement (300) (341) (2,808)Proceeds from at-the-market offering of common stock, gross 40,126 — — Payment of offering costs related to at-the-market offering of common stock (1,147) — — Proceeds from direct registered offering, gross 49,941 — — Payment of offering costs related to direct registered offering (81) — — Payments of costs related to the initial public offering — — (2,728)Proceeds from the exercise of stock options 665 539 24 Proceeds from the exercise of warrants 103 — — Net cash provided by financing activities 115,407 28,930 53,532 NET INCREASE (DECREASE) IN CASH 43,191 (6,469) 9,538 CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD 14,198 20,667 11,129 CASH AND CASH EQUIVALENTS — END OF PERIOD $57,389 $14,198 $20,667 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $3,925 $3,310 $2,332 Cash paid for taxes $1 $— $1 SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: Fair value of common stock warrants issued to placement agents as payment for service $— $— $316 Fair value of common stock warrants reclassed from liability to additional paid-in capital upon exercise $274 $— $— Transfer of property and equipment from inventory $125 $117 $— Purchase of property and equipment in accounts payable and accrued expenses $96 $193 $1,136 Offering costs included in accounts payable and accrued expenses $— $189 $— Conversion of convertible preferred stock warrants into common stock warrants in connection with the Merger $— $— $160,839 Asset retirement obligation $— $— $258 Conversion of convertible preferred stock warrants into common stock warrants $— $— $93 The accompanying notes are an integral part of these consolidated financial statements. 102 VIEWRAY, INC.Notes to Consolidated Financial Statements 1.Background and OrganizationOn July 23, 2015, ViewRay, Inc. (f/k/a Mirax Corp.), or the Company, and ViewRay Technologies, Inc. (f/k/a ViewRay Incorporated), consummated anAgreement and Plan of Merger and Reorganization, or Merger Agreement. Pursuant to the Merger Agreement, the stockholders of ViewRay Technologies,Inc. contributed all of their equity interests to the Company for shares of the Company’s common stock and merged with the Company’s subsidiary, whichresulted in ViewRay Technologies, Inc. becoming a wholly-owned subsidiary of the Company, or the Merger. Refer to Note 3 for further information on theMerger.ViewRay, Inc. and its wholly-owned subsidiary ViewRay Technologies, Inc., designs, manufactures and markets the MRIdian system, an MRI-guidedradiation therapy system to image and treat cancer patients simultaneously.Since inception, ViewRay Technologies, Inc. has devoted substantially all of its efforts towards research and development, initial selling and marketingactivities, raising capital and the manufacturing and shipment of MRIdian systems. In May 2012, ViewRay Technologies, Inc. was granted clearance from theFDA, to sell MRIdian with Cobalt-60. In November 2013, ViewRay Technologies, Inc. received its first clinical acceptance of a MRIdian with Cobalt-60 at acustomer site, and the first patient was treated with that system in January 2014. ViewRay Technologies, Inc. has had the right to affix the CE mark toMRIdian with Cobalt-60 in the European Economic Area since November 2014. In September 2016, the Company received the right to affix the CE mark toMRIdian Linac in the EEA, and in February 2017, the Company received 510(k) clearance from the FDA to market the MRIdian Linac system. The Company’s consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for a reasonable period oftime. The Company’s principal sources of liquidity are cash flows from public and private shares offerings and available borrowings under its Term Loanagreement. These have historically been sufficient to meet working capital needs, capital expenditures, and debt service obligations. During the year endedDecember 31, 2017, the Company incurred a net loss from operations of $72.2 million and used cash from operations of $70.1 million. The Companybelieves that its existing cash balance of $57.4 million as of December 31, 2017, and the aggregate $59.1 million of proceeds from the February equityfinancing (see Note 20), are sufficient to provide liquidity to fund its operations for at least the next 12 months. 2.Summary of Significant Accounting PoliciesBasis of PresentationThe consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or GAAP, andpursuant to the rules and regulation of the Securities and Exchanges Commission, or SEC. The consolidated financial statements include the accounts ofViewRay, Inc. and its wholly-owned subsidiary, ViewRay Technologies, Inc. All inter-company accounts and transactions have been eliminated inconsolidation.Use of EstimatesThe preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect theamounts reported and disclosed in the consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, allocationof revenue to its multiple deliverable elements, inventory write-downs to reflect net realizable value, assumptions used in the valuation of stock-based awardsand warrant liability, and valuation allowances against deferred tax assets. Actual results could differ from those estimates. 103 Cash and Cash EquivalentsThe Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Companydeposits its cash primarily in checking and money market accounts.Restricted CashAt December 31, 2017 and 2016, the Company had an aggregate of $0.9 million of outstanding letters of credit related to its operating leases and itscontractual obligations with distributors and customers. The letters of credit are collateralized by a restricted cash deposit account, which is presented as partof noncurrent assets on the balance sheets because the Company is not certain when the restriction will be lifted on the collateralized letters of credit. AtDecember 31, 2017, and 2016, no amounts were drawn on the letters of credit.The restricted cash balance as of December 31, 2017 also includes $0.2 million collateral for a credit card account.Concentration of Credit Risk, Other Risks and UncertaintiesFinancial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accountsreceivable. Cash and cash equivalents are deposited in checking and money market accounts with various financial institutions. At times, cash balances maybe in excess of the amounts insured by the Federal Deposit Insurance Corporation. Management believes the financial risk associated with these balances isminimal and has not experienced any losses to date. The Company performs periodic credit evaluations of its customers’ financial condition and generallyrequires deposits from its customers. The Company’s accounts receivable was derived from billings to customers. The Company’s customers representinggreater than 10% of accounts receivable and revenue for the periods presented were as follows: Revenue Accounts Receivables Year Ended December 31, December 31,Customers 2017 2016 2015 2017 2016Customer A 17% Customer B 17% Customer C 16% 48% Customer D 16% 24% Customer E 14% 16% Customer F 10% Customer G 36% Customer H 47% 49%Customer I 25% Customer J 23% 41%Customer K 43% The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results andcause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of MRIdian,competition from substitute products and larger companies, protection of proprietary technology, ability to maintain distributor relationships anddependence on key individuals. Furthermore, new products to be developed by the Company require approval from the FDA or other international regulatoryagencies prior to commercial sales. There can be no assurance that the Company’s future products will receive the necessary clearances.The Company relies on a concentrated number of suppliers to manufacture essentially all of the components used in MRIdian. The Company’s suppliers mayencounter problems during manufacturing due to a variety of reasons, including failure to comply with applicable regulations, including the FDA’s QualitySystem Regulation, equipment malfunction and environmental factors, any of which could delay or impede our ability to meet demand. 104 Accounts Receivables and Allowance for Doubtful AccountsAccounts receivable are recorded at the invoiced amount, net of any allowance for doubtful accounts, and do not bear interest. The allowance for doubtfulaccounts, if any, is based on the assessment of the collectability of customer accounts.Based on the specific customers and the current economic conditions, there was no allowance for doubtful accounts recorded at December 31, 2017 and2016.Fair Value of Financial InstrumentsFinancial instruments consist of cash and cash equivalents, accounts receivable, restricted cash, prepaid expenses and other current assets, accounts payable,accrued liabilities, warrant liability and long-term debt. Cash equivalents are stated at amortized cost, which approximates fair value at the balance sheetdates, due to the short period of time to maturity. Accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities arestated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. The warrant liability is carried atfair value. The carrying amount of the Company’s long-term debt approximates fair value as the stated interest rate approximates market rates currentlyavailable to the Company.Inventory and Deposits on Purchased InventoryInventory consists of purchased components for assembling MRIdian systems and other direct and indirect costs associated with MRIdian systeminstallation. Inventory is stated at the lower of cost (on a weighted average cost basis) or market value. All inventories expected to be placed in service duringthe normal operating cycle of the Company for the delivery and assembly of MRIdian systems, including items expected to be on hand for more than oneyear, are classified as current assets.The Company reduces the carrying value of its inventory for the difference between cost and net realizable value and records a charge to cost of productrevenues for the amount required to reduce the carrying value of inventory to net realizable value. The Company recorded an inventory lower of cost andmarket adjustment of $0.9 million, $1.9 million and $2.6 million during the years ended December 31, 2017, 2016 and 2015, respectively.The Company records inventory items which have been paid for but not yet received and title has not yet transferred to the Company as deposits onpurchased inventory. Deposits on purchased inventory are included within current assets as the related inventory items are expected to be received and usedin MRIdian systems within the Company’s normal operating cycle. The Company assesses the recoverability of deposits on purchased inventory based oncredit assessments of the vendors and their history supplying these assets. At December 31, 2017, the Company did not have any instances whereby depositsfor purchased inventory were written off or the purchased inventory was not delivered.Shipping and Handling CostsShipping and handling costs for product shipments to customers are included in cost of product revenue. Shipping and handling costs incurred for inventorypurchases are capitalized in inventory and expensed in cost of product revenue. These costs are not passed on to customers.Property and EquipmentProperty and equipment are recorded at cost. Depreciation is computed over estimated useful lives, ranging from two to 15 years, of the related assets usingthe straight-line method. Acquired software is recorded at cost. Amortization of acquired software generally occurs over three years using the straight-linemethod. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life or term of the lease. Demonstration units, which arethe Company products used for demonstration purpose for customers and/or potential customers, and generally not intended to be sold, are amortized by thestraight-line method. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the 105 resulting gain or loss is recorded to general and administrative expense in the accompanying statements of operations and comprehensive loss. Routineexpenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization periods for property and equipment are as follows: Property and Equipment Estimated Useful LifePrototype 2 – 10 yearsMachinery and equipment 5 – 15 yearsFurniture and fixture 5 – 10 yearsSoftware 3 yearsLeasehold improvements Lesser of estimated useful life or remaining lease term Asset Retirement ObligationIn connection with certain lease agreements entered into in October 2015, the Company has a legal requirement to remove long-lived assets constructed onleased property and to restore the leased property to its original condition. The Company records the fair value of the liability for a legal obligation to retirean asset in the period in which the obligation is incurred if a reasonable estimate of fair value can be made. The Company measures the fair value of the assetretirement obligation based upon the present value of the expected future payments, and recognized asset retirement obligation of $250,000 atinception. The liability is accreted to its present value each period and the capitalized cost is depreciated over the remaining lease term. Accretion expenseis calculated by applying the effective interest rate to the carrying amount of the liability at the beginning of each period. The effective interest rate is thecredit-adjusted risk-free rate applied when the liability was initially measured and recognized. At December 31, 2017, the Company had outstanding asset retirement obligations of $334,000, which was included in other long-term liabilities in theaccompanying consolidated balance sheets. For the years ended December 31, 2017, 2016 and 2015, the Company recognized accretion expenses of$40,000, $36,000 and $8,000 in the accompanying statements of operations and comprehensive loss. Intangible AssetsIntangible assets consist primarily of patents and license acquisition costs associated with certain technology components incorporated into the Company’sMRIdian systems. The Company capitalizes the cost and amortizes it on a straight-line basis over the estimated useful lives, which is generally three years forlicense cost and five to seven years for patents.Impairment of Long-Lived AssetsThe Company reviews the recoverability of long-lived assets, including equipment, leasehold improvements, software and intangible assets when events orchanges in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based onthe ability to recover the carrying value of the assets from the expected future cash flows (undiscounted and without interest charge) of the related operations.If these cash flows are less than the carrying value of such assets, an impairment loss for the difference between the estimated fair value and carrying value isrecorded. There was no impairment loss recognized during the years ended December 31, 2017, 2016 and 2015.Deferred Offering CostsViewRay Technologies, Inc. capitalized qualified legal, accounting and other direct costs related to its efforts to raise capital through a public sale of itscommon stock in its planned IPO. These costs were recorded in deferred offering costs in the accompanying balance sheets. During the year ended December31, 2015, ViewRay Technologies, Inc. terminated its plan for IPO, and wrote off deferred offering costs of $2.9 million in the accompanying consolidatedstatements of operations and comprehensive loss. The balance of deferred offering costs was zero at December 31, 2017 and 2016. 106 Comprehensive LossComprehensive loss is the change in equity of a company during a period from transactions and other events and circumstances, excluding transactionsresulting from investment owners and distribution to owners. For the periods presented, comprehensive loss did not differ from net loss.Revenue RecognitionThe Company derives revenue primarily from the sale of the systems and related services, which are sales of MRIdian, as well as support and maintenanceservices on sold systems. In all sales arrangements, the Company recognizes revenues when there is persuasive evidence of an arrangement, the fee is fixed ordeterminable, collection of the fee is reasonably assured and delivery has occurred. For sales of MRIdian systems that the Company is required to install atthe customer site, product revenue is recognized upon receipt of customer acceptance. For sales of MRIdian systems that the Company is not responsible forinstallation, product revenue is recognized when the entire system is delivered and title and risk of loss are transferred to the customer. For sales of the relatedsupport and maintenance services, the Company recognizes service revenue on a straight-line basis over the service contract term, which is typically 12months.Multiple ElementsBased on the nature of the Company’s business, it frequently enters into sales arrangements with customers that contain multiple elements or deliverables.The principal deliverables consist of (i) sale of MRIdian systems, which generally includes installation, site preparation and software, and (ii) productsupport, which includes extended service and maintenance.The Company determines selling prices of each deliverable using vendor specific objective evidence, or VSOE, if it exists, or third-party evidence, or TPE. Ifneither VSOE nor TPE exists for a deliverable, the Company uses best estimated selling price, or BESP. The Company allocates revenue to each standalonedeliverable using the relative fair values for each deliverable as determined by BESP. The Company regularly reviews VSOE, TPE and BESP for all of itsMRIdian systems and services.Product RevenueProduct revenue is derived primarily from the sales of MRIdian. The system contains both software and non-software components that together deliveressential functionality. However, because MRIdian includes hardware products as well as software components that function together with the hardwarecomponents to deliver MRIdian’s essential functionality, the revenue from the sale of MRIdian systems does not fall within the scope of the software revenuerecognition rules.The Company’s customer contracts generally call for on-site assembly of the system components and system integration. Once the system installation iscompleted, the Company performs a detailed demonstration with the customer showing that MRIdian meets the standard product specifications. Aftersuccessful demonstration, the customer signs a document indicating customer’s acceptance. For sales of MRIdian systems that the Company is required toinstall at the customer site, revenue recognition occurs when the customer acknowledges that the system operates in accordance with standard productspecifications, the customer accepts the installed unit and title and risk of loss are transferred to the customer.Certain customer contracts with distributors do not require installation at the customer site, and the distributors typically have its own or engage a qualifyingthird-party certified technician to perform the installation. For sales of MRIdian systems when the Company is not responsible for installation, revenuerecognition occurs when the entire system is delivered and title and risk of loss are transferred to the customer.All contracts include customer deposits upon signing of the agreement with final payment generally due upon customer acceptance. 107 Service RevenueService revenue is derived primarily from maintenance services. Service revenue is recognized ratably over the service period.Distribution Rights RevenueThe Company entered into a distribution agreement with Itochu Corporation pursuant to which it appointed Itochu as its exclusive distributor for thepromotion, sale and delivery of MRIdian products within Japan. In consideration of the exclusive distribution rights granted, the Company received $4.0million which was recorded as deferred revenue and starting in August 2016 was recognized as distribution rights revenue on a straight-line basis over theremaining term of the distribution agreement of approximately 8.5 years. Customer DepositsCustomer deposits represent payments received in advance of system installation. For domestic sales, advance payments received prior to inventoryshipments and customer acceptance are recorded as customer deposits. For international sales, advance payments are initially recorded as customer depositsand are subsequently reclassified to deferred revenue upon inventory shipment when the title and risk of loss of inventory items transfer to customers. Allcustomer deposits, including those that are expected to be a deposit for more than one year, are classified as current liabilities based on consideration of theCompany’s normal operating cycle (the time between acquisition of the inventory components and the final cash collection from customers on theseinventory components) which is in excess of one year.Deferred Revenue and Deferred Cost of RevenueDeferred revenue consists of deferred product revenue and deferred service revenue. Deferred product revenue arises from timing differences between thefulfillment of other contract deliverables and satisfaction of all revenue recognition criteria consistent with the Company’s revenue recognition policy.Deferred service revenue results from the advance billing for services to be delivered over a period of time. Deferred revenues expected to be realized withinone year are classified as current liabilities.Deferred cost of revenue consists of cost for inventory items that have been shipped with title and risk of loss transferred to the customer but the customeracceptance has not been received. Deferred cost of revenue is included as part of current assets as the corresponding deferred product revenue is expected tobe realized within one year. The inventories recorded in deferred cost of revenue are also included in the inventory lower of cost or market analysis. AtDecember 31, 2017 and 2016, no reserve was required for deferred cost of revenue.Research and Development CostsExpenditures, including payroll, contractor expenses and supplies, for research and development of products and manufacturing processes are expensed asincurred.Software development costs incurred subsequent to establishing technological feasibility are capitalized through the general release of MRIdian systems thatcontain the embedded software elements. Technological feasibility is demonstrated by the completion of a working model. The Company has not capitalizedany software development costs at December 31, 2017 or 2016, since the costs incurred subsequent to achieving technological feasibility and completing theresearch and development for the software components were immaterial.Stock-Based CompensationThe Company uses the Black-Scholes option-pricing model as the method for estimating the fair value of stock options. The Black-Scholes option-pricingmodel requires the use of highly subjective and complex assumptions that determine the fair value of share-based awards, including the options’ expectedterm and the price volatility of the underlying stock. The fair value of Restricted Stock Units, or RSUs, is based on the closing market price of the Company’scommon stock on the grant date. The fair value of the portion of the award that is ultimately expected to 108 vest is recognized as compensation expense over the awards’ requisite service periods in the consolidated statements of operations and comprehensive loss.The Company attributes the value of share-based compensation to expense using the straight-line method.Medical Device Excise TaxMedical Device Excise Tax, or MDET, Section 4191 of the Internal Revenue Code enacted by the Health Care and Education Reconciliation Act of 2010, inconjunction with the Patient Protection and Affordable Care Act, established a 2.3% excise tax on medical devices sold domestically which, due tosubsequent legislative amendments, was suspended from January 1, 2016 to December 31, 2017. MDET was suspended for another two years after thestopgap bill was signed by the President in January 2018. The Company included MDET in cost of product revenue during the year ended December 31,2015, net of amounts directly billed to the customer for this tax, if any.Deferred CommissionsDeferred commissions are the direct and incremental costs directly associated with the MRIdian system contracts with customers, which primarily consist ofsales commissions to our direct sales force. The commissions are deferred and expensed in proportion to the revenue recognized upon the acceptance of theMRIdian system. At December 31, 2017 and 2016, the Company had $3.5 million and $2.6 million deferred commissions recorded as part of prepaidexpenses and other current assets on the accompanying consolidated balance sheets.Income TaxesThe Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future taxconsequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differencesare expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. Valuation allowancesare established when necessary to reduce deferred tax assets where, based upon the available evidence, management concludes that it is more-likely-than notthat the deferred tax assets will not be realized. Because of the uncertainty of the realization of the deferred tax assets, the Company has recorded a fullvaluation allowance against its net deferred tax assets.In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including itsoperating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company was todetermine that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment tothe valuation allowance which would reduce the provision for income taxes.Reserves are provided for tax benefits for which realization is uncertain. Such benefits are only recognized when the underlying tax position is consideredmore likely than not to be sustained on examination by a taxing authority, assuming they possess full knowledge of the position and facts. It is theCompany’s policy to include any penalties and interest related to income taxes in its income tax provision; however, the Company currently has no penaltiesor interest related to income taxes. The earliest year that the Company is subject to examination is the year ended December 31, 2004.Warrant LiabilityConvertible Preferred Stock Warrant LiabilityThe Company’s warrant to purchase convertible preferred stock was classified as a liability on the consolidated balance sheets at fair value upon issuancebecause the warrant is exercisable for contingently redeemable preferred stock which is classified outside of stockholders’ equity (deficit). The warrant wassubject to re-measurement to fair value at each balance sheet date, and any change in fair value was recognized in the consolidated statements of operationsand comprehensive loss as other expense, net. In July 2015, upon the Merger of the Company and 109 ViewRay Technologies, Inc., and the Private Placement, the convertible preferred stock warrants were converted into warrants to purchase the Company’scommon stock, and the fair value of the preferred stock warrant liability was reclassified to additional paid-in capital.Common Stock Warrant LiabilityCertain warrants to purchase common stock provide for cash settlement in the event of change in control, and are classified as liabilities on the balance sheetsat fair value upon issuance (see Note 14). These warrants are subject to re-measurement to fair value at each balance sheet date, and any change in fair valueare recognized in the consolidated statements of operations and comprehensive loss as other expense, net. Upon exercise or expiration of the warrants, therelated warrant liability will be reclassified to additional paid-in capital.Net Loss per ShareThe Company’s basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for theperiod. Contingently issuable shares are included in the computation of basic net loss per share as of the date that all necessary conditions have been satisfiedand issuance of the shares is no longer contingent. The diluted net loss per share is computed by giving effect to all potential common stock equivalentsoutstanding for the period determined using the treasury stock method. For purposes of this calculation, stock options, restricted stock units and warrants topurchase common stock are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share as theireffect is anti-dilutive.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), whichsupersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. This ASU, herein referred to as Topic606, is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration towhich the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timingand uncertainty of revenues and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognizedfrom costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14 to defer the effective date by one year with earlyadoption permitted as of the original effective date. ASU No. 2014-09 will be effective for the Company’s fiscal year beginning after December 15, 2017, andthe interim periods thereafter. In addition, the FASB issued ASU No. 2016-08, 2016-10, 2016-12, 2016-20, 2017-13 and 2017-14 in March 2016, April 2016,May 2016, December 2016, September 2017 and November 2017, respectively, to help provide interpretive clarification on the new guidance in Topic606. ASU No. 2016-08, 2016-10, 2016-12, 2017-13 and 2017-14 are all effective during the same period as ASU No. 2014-09.The Company will adopt Topic 606 on January 1, 2018 using the full retrospective method which requires the Company to restate each prior reporting periodpresented. Based on the nature of its sales arrangements, the Company does not believe the adoption of the new standards will have a material impact on theamount or timing of its revenue recognition, and the Company’s product revenue, service revenue and distribution rights revenue will remain substantiallyunchanged. As a result, the adoption of the new standards will have no material impact on the Company’s prior period financial statements. The Companyexpects to update the related disclosures upon adoption of the new standards in the first quarter of fiscal year 2018. 110 In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and issued subsequent amendments to the initial guidance in September 2017within ASU 2017-13 (collectively, Topic 842). Topic 842 supersedes the Accounting Standards Codification 840, Leases, and requires lessees to recognizeall leases, with exception of short-term leases, as a lease liability on the balance sheet. Under this ASU, a lease is defined as a lessee’s obligation to make leasepayments arising from a lease, measured on a discounted basis, and a right-of-use asset which is an asset that represents the lessee’s right to use, or control theuse of, a specified asset during the lease term. The ASU also requires additional disclosure about the amount, timing and uncertainty of cash flow from leases.The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. As disclosed inNote 7, future minimum payments under noncancelable operating leases are approximately $2.2 million. This new standard will require the present value ofthese leases to be recorded in the consolidated balance sheets as a right of use asset and lease liability. The Company is continuing to evaluate the impact ofthis guidance on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments, which eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishmentcosts, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements,distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU No. 2016-15 designates theappropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investingand financing activities. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires thatthe statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash orrestricted cash equivalents. ASU No. 2016-15 and ASU No. 2016-18 should be applied using the retrospective transition method, requiring adjustment to allcomparative periods presented, unless it is impracticable for some of the amendments, in which case those amendments would be made prospectively as ofthe earliest date practicable. The amendments in ASU No. 2016-15 and ASU No. 2016-18 are effective for fiscal years beginning after December 15, 2017,and interim periods therein. Early adoption is permitted, including adoption in an interim period. The Company had restricted cash of $1.1 million at bothDecember 31, 2017 and December 31, 2016. The adoption of ASU No. 2016-15 and ASU No. 2016-18 will not have a material impact on the Company’sconsolidated financial statements and related disclosures.In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which providesclarified guidance on applying modification accounting to changes in the terms or conditions of a share-based payment award. Changes that do not impactthe award’s fair value, vesting conditions, or classification as an equity or liability instrument will not be subject to modification accounting. ASU No. 2017-09 is effective prospectively for annual periods beginning after December 15, 2017 and interim periods therein. Early adoption is permitted, includingadoption in an interim period. The Company does not believe that the adoption of ASU No. 2017-09 will have a material impact on its consolidated financialstatements and related disclosures. 111 Recently Adopted Accounting PronouncementsIn July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires entities to measure most inventory at the lower ofcost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. ASU No.2015-11 is effective prospectively for annual periods beginning after December 15, 2016 and interim periods therein. Early application is permitted. TheCompany adopted ASU No. 2015-11 as required in the first quarter of fiscal year 2017. The adoption of the new guidance did not have a material impact onits consolidated financial reporting statements and related disclosures.In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, application ofaward forfeitures to expense, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU No. 2016-09 iseffective for fiscal years beginning after December 15, 2016, and interim periods therein. Early adoption is permitted. The Company adopted ASU No. 2016-09 as required in the first quarter of fiscal year 2017, and there was no material impact on the financial statements given the full valuation allowance positionof its deferred tax assets.3.MergerOn July 23, 2015, ViewRay, Inc. (f/k/a Mirax Corp.), or the Company, and ViewRay Technologies, Inc. (f/k/a ViewRay Incorporated), consummated anAgreement and Plan of Merger and Reorganization, or Merger Agreement. Pursuant to the Merger Agreement, the stockholders of ViewRay Technologies,Inc. contributed all of their equity interests to the Company for shares of the Company’s common stock and merged with the Company’s subsidiary, whichresulted in ViewRay Technologies, Inc. becoming a wholly-owned subsidiary of the Company, or the Merger. Effective as of July 23, 2015, the Companyamended and restated its Certificate of Incorporation to increase its authorized common stock to 300,000,000 shares and 10,000,000 shares of “blank check”preferred stock, par value of $0.01 per share.Upon the closing of the Merger, under the terms of the Split-Off Agreement, dated July 23, 2015 among the Company, ViewRay Technologies, Inc. andVesuvius Acquisition Sub, Inc., the acquisition subsidiary of the Company, or the Split-Off Agreement, and a general release agreement dated July 23, 2015,or the General Release Agreement, the Company transferred all of its pre-Merger operating assets and liabilities to wholly- owned special-purpose subsidiaryincorporated in Nevada, Vesuvius Acquisition Sub, Inc. or the Split-Off Subsidiary. Thereafter, the Company transferred all of the outstanding shares ofcapital stock of the Split-Off Subsidiary to certain pre-Merger insiders of the Company in exchange for the surrender and cancellation of shares of theCompany’s common stock held by such persons.Together with the Merger, on July 23, 2015, ViewRay Technologies, Inc. effected a 2.975-for-1 stock split of its then outstanding common stock andconvertible preferred stock, collectively referred to as Capital Stock, and convertible preferred stock warrants, in which (i) each share of outstanding CapitalStock was increased into 2.975 shares of Capital Stock; (ii) the number of outstanding options to purchase each Capital Stock was proportionately increasedon a 2.975-for-1 basis; (iii) number of shares reserved for future option grants under the 2008 Plan were proportionately increased on a 2.975-for-1 basis; (iv)the exercise price of each such outstanding option was proportionately decreased on a 2.975-for-1 basis; and (v) each share of outstanding convertiblepreferred stock warrant was increased into 2.975 shares of convertible preferred stock warrant. All of the share and per share amounts have been adjusted, on aretroactive basis, to reflect this 2.975-for-1 stock split.At the closing of the Merger, the Company conducted a private placement offering, or the Private Placement, of its securities for $26.3 million, net of offeringcost, through the sale of 5,884,504 shares of the common stock of the surviving corporation, at an offering price of $5.00 per share. Investors in ViewRayTechnologies, Inc. purchased $17.0 million of shares in the Private Placement. Certain shareholders of the Company retained, after giving effect to the Split-Off, 1,000,005 shares of the common stock of the surviving corporation upon the Private Placement. The former stockholders of ViewRay Technologies Inc.collectively own approximately 90.9% of the outstanding shares of the Company’s common stock. 112 Immediately following the closing of the Merger, the Company’s outstanding shares of common stock (on a fully diluted basis) were owned as follows: •Former holders of the ViewRay Technologies, Inc.’s capital stock hold an aggregate of 34,715,582 shares of the Company’s common stock,or approximately 72.7% on a fully diluted basis; •The Private Placement, resulted in an aggregate of 5,884,504 shares of the Company’s common stock, consisting of 3,400,003 shares held byViewRay Technologies, Inc. shareholders and 2,484,501 shares issued to new shareholders, or together approximately 12.3% on a fullydiluted basis; •128,231 shares of ViewRay Technologies, Inc.’s preferred stock warrants were converted to the Company’s common stock warrant, orapproximately 0.3% on a fully diluted basis; •198,760 shares of common stock issued as warrants to placement agents as payment for services provided, or approximately 0.4% on a fullydiluted basis; •Holders of the Company’s common stock prior to the closing of the Merger hold an aggregate of 1,000,005 shares of the Company’s commonstock, or approximately 2.1% on a fully diluted basis; and •9,225,397 shares of common stock are reserved for issuance under the 2008 Stock Incentive Plan, or the 2008 Plan, and the 2015 EquityIncentive Plan of ViewRay, or the 2015 Plan, collectively representing approximately 19.3% on a fully diluted basis. Upon closing,1,507,147 options to purchase shares of the Company’s common stock are granted to employees under the 2015 Plan. In addition, the Boardof Directors of the Company has adopted a 285,621-share reserve under the 2015 ESPP.The Merger was accounted for as a reverse-merger and recapitalization. ViewRay Technologies, Inc. was the acquirer for financial reporting purposes, andViewRay, Inc. was the acquired company under the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combination.Consequently, the assets, liabilities and operations that will be reflected in the historical consolidated financial statements prior to the Merger will be thoseof ViewRay Technologies, Inc. and will be recorded at the historical cost basis, and the consolidated financial statements after completion of the Merger willinclude the assets, liabilities and results of operations of ViewRay Technologies, Inc. up to the day prior to the closing of the Merger and the assets, liabilitiesand results of operations of the combined company from and after the closing date of the Merger.4.Balance Sheet ComponentsProperty and EquipmentProperty and equipment consisted of the following (in thousands): December 31, 2017 2016 Prototype $11,929 $6,405 Machine and equipment 7,831 6,057 Leasehold improvements 4,438 4,371 Furniture and fixtures 558 368 Software 1,142 1,028 Construction in progress - 5,498 Property and equipment, gross 25,898 23,727 Less: accumulated depreciation and amortization (14,334) (12,167)Property and equipment, net $11,564 $11,560 Depreciation and amortization expense related to property and equipment was $2.2 million, $1.6 million and $1.1 million during the years ended December31, 2017, 2016 and 2015, respectively. 113 Intangible AssetsIntangible assets consisted of the following (in thousands): December 31, 2017 2016 License cost $512 $512 Patents 104 104 Intangible assets, gross 616 616 Accumulated amortization (538) (519)Intangible assets, net $78 $97 Intangible amortization expense was $19 thousand, $115 thousand and $168 thousand during the years ended December 31, 2017, 2016 and 2015,respectively, which were recorded in general and administrative expenses in the consolidated statements of operations and comprehensive loss.At December 31, 2017, the estimated future amortization expense of purchased intangible assets was as follows (in thousands): Year Ended December 31, Estimated FutureAmortizationExpense 2018 $19 2019 19 2020 19 2021 10 2022 3 Thereafter 8 Total amortization expense $78 Accrued LiabilitiesAccrued liabilities consisted of the following (in thousands): December 31, 2017 2016 Accrued payroll and related benefits $3,944 $4,274 Accrued accounts payable 2,671 1,202 Tax payable 149 13 Accrued legal and accounting 322 509 Other 121 336 Total accrued liabilities $7,207 $6,334 114 Deferred RevenueDeferred revenue consisted of the following (in thousands): December 31, 2017 2016 Deferred revenue: Product $18,861 $5,050 Services 1,182 1,561 Distribution rights 3,346 3,822 Total deferred revenue 23,389 10,433 Less: current portion of deferred revenue (20,151) (6,515)Noncurrent portion of deferred revenue $3,238 $3,918 5.Fair Value of Financial InstrumentsAssets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with theinputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exitprice) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standarddescribes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used tomeasure fair value which are the following:Level 1—Quoted prices in active markets for identical assets or liabilities.Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quotedprices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the fullterm of the assets or liabilities.Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.The assets’ or liabilities’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fairvalue measurement.The Company’s financial instruments that are carried at fair value mainly consist of Level 1 assets and Level 3 liabilities. Level 1 assets include highly liquidbank deposits and money market funds, which were not material at December 31, 2017 or 2016. Level 3 liabilities that are measured on a recurring basisconsists of convertible preferred stock warrants and common stock warrants. Preferred stock warrant and common stock warrant liabilities are valued using theBlack-Scholes option-pricing model. Generally, increases (decreases) in the fair value of the underlying stock, estimated term and volatility would result in adirectionally similar impact to the fair value of the warrant (see Note 13).The convertible preferred stock warrants were issued in December 2013 and were converted into warrants to purchase common stock upon the Merger of theCompany and ViewRay Technologies, Inc. The aggregate fair value of these warrants upon the closing of the Merger is $93 thousand which was reclassifiedfrom liabilities to additional paid-in-capital, and the Company no longer recorded change in fair value adjustments in relation to convertible preferred stockwarrants.The Company’s common stock warrants liabilities consist of the 2017 and 2016 Placement Warrants, as described in Note 13. The 2016 Placement Warrantswere issued in August and September 2016, and the 2017 Placement Warrants were issued in January 2017. In December 2017, 25,014 shares of 2016Placement Warrants and 9,389 shares of 2017 Placement Warrants were exercised and the aggregate fair value of these warrants upon exercise of 115 $274 thousand was reclassified from liabilities to additional paid-in-capital. At December 31, 2017, 1,355,641 shares of 2016 Placement Warrants and1,711,123 shares of 2017 Placement Warrants were outstanding. The gains and losses from re-measurement of Level 3 financial liabilities are recorded as part of other income (expense), net in the consolidated statements ofoperations and comprehensive loss. During the year ended December 31, 2017 and 2016, the Company recorded a loss of $16.6 million and a gain of $3thousand, respectively, related to the change in fair value of the 2016 and 2017 Placement Warrants. There have been no transfers between Level 1, Level 2and Level 3 in any periods presented.The following table sets forth the fair value of the Company’s financial liabilities by level within the fair value hierarchy (in thousands): At December 31, 2017 Level 1 Level 2 Level 3 Total 2017 Placement Warrants Liability $— $— $12,487 $12,487 2016 Placement Warrants Liability — — 9,933 9,933 Total Warrant Liability $— $— $22,420 $22,420 At December 31, 2016 Level 1 Level 2 Level 3 Total 2016 Placement Warrants Liability $— $— $2,723 $2,723 The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands): Year Ended December 31, 2017 2016 2015 Fair value, beginning of period $2,723 $— $138 Issuance of 2017 Placement Warrants 3,373 — — Issuance of 2016 Placement Warrants — 2,726 — Change in fair value of Level 3 financial liabilities 16,598 (3) (45)Conversion of convertible preferred stock warrants to common stock warrants — — (93)Fair value of 2017 Placement Warrants at exercise (74) — — Fair value of 2016 Placement Warrants at exercise (200) — — Fair value, end of period $22,420 $2,723 $— 6.DebtHercules Term LoanIn December 2013, ViewRay Technologies, Inc. entered into a Loan and Security Agreement, or the Hercules Term Loan, with Hercules Technology GrowthCapital, Inc. and Hercules Technology III, L.P., or together, Hercules, for $15.0 million that was outstanding at December 31, 2014. Borrowings under theHercules Term Loan bear cash interest at the greater of the annual prime rate plus 7.0% or 10.25%. In addition, borrowings under the Hercules Term Loan beardeferred payment in-kind interest at 1.5% per annum. Interest only payments began in January 2014, with monthly principal and interest payments beginningon January 1, 2015 and the entire balance of the Hercules Term Loan are to be paid in full by the June 1, 2017 maturity date. The Hercules Term Loan issubject to a prepayment penalty of 5% on the outstanding balance during the first 12 months following the funding of the loan and 1% on the outstandingbalance thereafter until maturity. The Hercules Term Loan was issued at a discount of $466 thousand, which was amortized to interest expense during the lifeof the loan using the effective interest method. The discount included the fair value of a convertible preferred stock warrant that was issued with the 116 Hercules Term Loan, as discussed in the following paragraph, and the related transaction costs. The Hercules Term Loan is collateralized by essentially all theassets of ViewRay Technologies, Inc. and limits its ability with respect to additional indebtedness, investments or dividends, among other things, subject tocustomary exceptions.In connection with the issuance of the Hercules Term Loan, ViewRay Technologies, Inc. entered into a Warrant Agreement with Hercules to issue a fullyvested and exercisable warrant to purchase 128,231 shares of Series C convertible preferred stock with an exercise price of $5.84 per share. The warrant isexercisable any time before the later of 10 years from issuance or five years after an IPO. The warrant provides for anti-dilution rights on the Series Cconvertible preferred stock, which includes one-time down-round protection. The fair value of the warrant upon issuance of $158 thousand was recorded asconvertible preferred stock warrant liability and a discount to the carrying value of the Hercules Term Loan. The fair value of the warrant at the time ofissuance was estimated using the Black-Scholes option-pricing model with the following assumptions: expected term of two years, expected volatility of30%, risk-free interest rate of 0.4% and expected dividend yield of 0%. The convertible preferred stock warrants were converted into warrants to purchase theCompany’s common stock upon the consummation of the Merger in July 2015 as disclosed in Notes 1 and 5. See Note 14 for assumptions used to estimatethe fair value of convertible preferred stock warrant liability upon conversion into warrants to purchase common stock on July 23, 2015.In June 2015, ViewRay Technologies, Inc. paid off in full the outstanding balances on Hercules Term Loan, including the related interest and other penaltyfee, using part of the proceeds received from the CRG Term Loan discussed below.CRG Term LoanIn June 2015, ViewRay Technologies, Inc. entered into a Term Loan Agreement, or the CRG Term Loan, with Capital Royalty Partners II L.P., CapitalRoyalty Partners II – Parallel Fund “A” L.P., Capital Royalty Partners II (Cayman) L.P. and Parallel Investment Opportunities Partners II L.P. or together withtheir successors by assignment, CRG, for up to $50.0 million of which $30.0 million was made available to the Company upon closing with the remaining$20.0 million available on or before June 26, 2016 at its option upon the occurrence of either (i) an initial public offering of its common stock on anationally recognized securities exchange that raises a minimum of $40.0 million in net cash proceeds with a minimum of $120.0 million post moneyvaluation, or Qualifying IPO, or (ii) achievement of a minimum of $25.0 million gross revenue from the sales of the MRIdian system during any consecutive12 months before March 31, 2016. The Company drew down the first $30.0 million on the closing date. The CRG Term Loan has a maturity date of June 26,2020 and bears cash interest at a rate of 12.5% per annum to be paid quarterly during the interest-payment-only period of three years. In April 2017, the CRGTerm Loan was amended to allow for interest-payment-only until March 31, 2020. During the interest-payment-only period, the Company has the option toelect to pay only 8% of the 12.5% per annum interest in cash, and the remaining 4.5% of the 12.5% per annum interest as compounded interest, or deferredpayment in-kind interest, added to the aggregate principal amount of the CRG Term Loan. Principal payment and any deferred payment in-kind interest willbe paid quarterly in equal installments following the end of the interest-payment-only period through maturity date.The CRG Term Loan is subject to a prepayment penalty of 3% on the outstanding balance during the first 12 months following the funding of the loan, 2%on the outstanding balance after year 1 but on or before year 2, 1% on the outstanding balance after year 2 but on or before year 3, and 0% on the outstandingloan if prepaid after year 3 thereafter until maturity. The Term Loan is also subject to a facility fee of 7% based on the sum of the amount drawn and anyoutstanding payment in-kind interest payable on the maturity date or the date such loan becomes due. All direct financing costs were accounted for as adiscount on the CRG Term Loan and will be amortized to interest expense during the life of the loan using the effective interest method. The CRG Term Loanis subject to financial covenants and is collateralized by essentially all assets of the Company and limits its ability with respect to additional indebtedness,investments or dividends, among other things, subject to customary exceptions.In March 2016, the Company and CRG executed an amendment to the original terms of the CRG Term Loan such that, with regard to the conditions forborrowing the remaining $20.0 million available under the CRG Term Loan, the Company may, at its election, draw down (i) an amount of either $10.0million or $15.0 million in up to two advances upon achievement of a minimum of $15.0 million of aggregate product and service revenue during anyconsecutive 12 month period ending on or before March 31, 2016 and (ii) an additional $5.0 million (or $10.0 117 million, if the previous draw made was only in an amount of $10.0 million) upon achievement of a minimum of $25.0 million of aggregate product andservice revenue during any consecutive 12 month period ending on or before December 31, 2016 and upon execution of the first sales contract of theCompany’s second generation product. The Company achieved the minimum of $15.0 million gross revenue requirement in March 2016 which made thefirst $15.0 million of the remaining $20.0 million credit facility immediately available for draw down. In May 2016, the Company drew down the additional$15.0 million available amount. In April 2017, the Company and CRG executed an amendment to the terms of its CRG Term Loan, as amended in March 2016. Amendments to the CRGTerm Loan include availability of the existing $5.0 million tranche at ViewRay’s option through June 30, 2017, the addition of a $15.0 million tranche ofborrowing capacity available at ViewRay’s option through September 30, 2017, extension of the interest-only and payment in-kind period, a decrease to thecombined 2016 and 2017 revenue covenant and a 1.75% increase to the facility fee. The Company did not draw down any amounts under the $5.0 milliontranche and it has since expired.In October 2017, the Company and CRG executed another amendment to the terms of its CRG Term Loan, as amended in March 2016 and April 2017. Thisamendment extends the availability of the $15.0 million borrowing capacity through December 31, 2017. The Company did not draw down any amountunder the $15.0 million tranche and it has since expired.In February 2018, the Company and CRG executed an amendment to the terms of its CRG Term Loan, as amended in March 2016, April 2017 and October2017, to decrease the amount of the minimum combined 2016 and 2017 revenue covenant.At December 31, 2017, the Company had $45.0 million in outstanding debt and $4.8 million in deferred payment in- kind interest to CRG, and was incompliance with all financial covenants under the CRG Term Loan. The Company’s scheduled future payment on the CRG Term Loan at December 31, 2017 are as follows (in thousands): Year Ended December 31, 2018 $4,108 2019 4,299 2020 62,803 Total future payments 71,210 Less: amount representing interest and end-of-term facility fee (26,210)Total principal amount 45,000 Less: unamortized debt discount (496)Carrying value of long-term debt 44,504 Less: current portion — Long-term portion $44,504 118 7.Commitments and ContingenciesOperating LeasesThe Company leases office space in Oakwood Village, Ohio and Mountain View, California under non-cancellable operating leases. At December 31, 2017,the future minimum payments for the operating leases are as follows (in thousands): Year Ended December 31, 2018 $1,118 2019 1,039 Total future minimum payments $2,157 Rent expense incurred under operating leases was $1.3 million in each of the years ended December 31, 2017, 2016 and 2015, respectively.ContingenciesThe Company is subject to claims and assessments from time to time in the ordinary course of business. The Company records a provision for a liability whenit believes that it is both probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required todetermine both probability and the estimated amount.In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it isprobable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the mostprobable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount inthe range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and otherdirectly related costs expected to be incurred. The Company was subject to an arbitration claim that arose in the ordinary course of business at September 30,2017. This claim was settled in the fourth quarter of fiscal year 2017. At December 31, 2017, the Company was not involved in any material legalproceedings.Purchase CommitmentsAt December 31, 2017 and 2016, the Company had no outstanding firm purchase commitments. 8.Licensing AgreementIn December 2004, ViewRay Technologies, Inc. entered into a licensing agreement with the University of Florida Research Foundation, Inc., or UFRF,whereby UFRF granted the Company a worldwide exclusive license to certain of UFRF’s patents in exchange for 33,652 shares of common stock and aroyalty from sales of products developed and sold by the Company utilizing the licensed patents. ViewRay Technologies, Inc. met all of the productdevelopment and commercialization milestones at December 31, 2013 and started to make quarterly royalty payments in 2014. Royalty payments are basedon 1% of net sales, defined as the amount collected on sales of licensed products and/or licensed processes after deducting trade and/or quantity discounts,credits on returns and allowances, outbound transportation costs paid and sales tax. Minimum quarterly royalty payments of $50 thousand commenced withthe quarter ended March 31, 2014 and are payable in advance. Minimum royalties paid in any calendar year will be credited against earned royalties for suchcalendar year. The royalty payments continue until the earlier of (i) the date that no licensed patents remain enforceable or (ii) the payment of earnedroyalties, once begun in 2014, cease for more than four consecutive calendars quarters. Royalty expenses based on 1% of net sales were $274.4 thousand,$206 thousand and $49 thousand during the years ended December 31, 2017, 2016 and 2015, respectively, and were recorded as product cost of revenue inthe accompanying consolidated statements of operations and comprehensive loss. The minimum royalty payments in excess of 1% of net sales were $25thousand, $57 thousand and $102 thousand during the years ended December 31, 2017, 2016 and 2015, respectively, and were 119 recorded as general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.9.Distribution AgreementIn December 2014, the Company entered into a distribution agreement with Itochu Corporation, or Itochu, a Japanese entity, pursuant to which the Companyappointed Itochu as its exclusive distributor for the sale and delivery of its MRIdian products within Japan. The exclusive distribution agreement has aninitial term of 10 years from December 2014, and contains features customary in such distribution agreements. Under this distribution agreement, theCompany will supply its products and services to Itochu based upon the Company’s then-current pricing. In consideration of the exclusive distributionrights granted, ltochu agreed to pay a distribution fee of $4.0 million in three installments: (i) the first installment of $1.0 million was due upon execution ofthe distribution agreement; (ii) the second installment of $1.0 million was due within 10 business days following submission of the application for regulatoryapproval of the Company’s product to the Japan regulatory authority; and (iii) the final installment of $2.0 million was due within 10 business daysfollowing receipt of approval for the Company’s product from the Japanese Ministry of Health, Labor and Welfare. The distribution fee paid by Itochu wasrefundable if the Company failed to obtain the approval from the Japan regulatory authority before December 31, 2017. The first and second installments of$2.0 million in aggregate were received in December 2014 and December 2015, respectively. In August 2016, the Company received the third and final $2.0million installment upon the receipt of regulatory approval to market MRIdian in Japan. The entire $4.0 million distribution fee received was reclassified todeferred revenue as it was no longer refundable. In August 2016, the Company started recognizing distribution rights revenue on a straight-line basis over theremaining term of the exclusive distribution agreement of approximately 8.5 years. The distribution rights revenue was $475 thousand and $178 thousandduring the years ended December 31, 2017 and 2016, respectively.10.Equity FinancingPrivate PlacementsIn September 2016, the Company completed the final closing of a private placement offering, or the 2016 Private Placement, through which it sold (i)4,602,506 shares of its common stock and (ii) warrants that provide the warrant holders the right to purchase 1,380,745 shares of common stock, or the 2016Placement Warrants, and raised total gross proceeds of $13.8 million. The 2016 Placement Warrants have an exercise price of $2.95 per share, are exercisableat any time at the option of the holder and expire seven years from the date of issuance.In January 2017, the Company completed the final closing of a private placement offering, or the January 2017 Private Placement, through which it sold (i)8,602,589 shares of its common stock and (ii) warrants that provide the warrant holders the right to purchase 1,720,512 shares of common stock, or the 2017Placement Warrants, and raised total gross proceeds of $26.1 million. The 2017 Placement Warrants have an exercise price of $3.17 per share, becameexercisable in July 2017 and expire in January 2024.Direct Registered OfferingIn October 2017, the Company completed the final closing of a direct registered offering, or the October 2017 Direct Registered Offering, through which itsold 8,382,643 shares of its common stock and raised total gross proceeds of $50.0 million.At-The-Market Offering of Common StockIn January 2017, the Company filed a shelf registration statement on Form S-3 with the SEC, which included a base prospectus covering the offering,issuance and sale of up to a maximum aggregate offering of $75.0 million of the Company’s common stock, preferred stock, debt securities, warrants,purchase contracts and/or units; and the Company entered into a sales agreement with FBR Capital Markets & Co., or FBR, under which it may sell up to$25.0 million of its common shares pursuant to an at-the-market offering program in accordance with Rule 415(a)(4) under the Securities Act. FBR acted assales agent on a best efforts basis and used commercially reasonable efforts to sell on behalf of the Company all of the shares of common stock requested tobe sold by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between FBR and the Company. There is no 120 arrangement for funds to be received in any escrow, trust or similar arrangement. In April 2017, the Company agreed to sell up to an additional $25.0 millionof the Company’s common stock in accordance with the terms of a sales agreement with FBR and pursuant to an at-the-market offering program inaccordance with Rule 415(a)(4) under the Securities Act.FBR is entitled to compensation of up to 3.0% of the gross sales price per share sold. In connection with the sale of the Company’s common stock on theCompany’s behalf, FBR is deemed to be an “underwriter” within the meaning of the Securities Act and the compensation of FBR is deemed to beunderwriting commissions or discounts. The Company has also agreed to provide indemnification and contribution to FBR with respect to certain liabilities,including liabilities under the Securities Act.At December 31, 2017, the Company sold an aggregate of 6,575,062 shares of its common stock under the at-the-market offering program at an averagemarket price of $6.10 per share, resulting in aggregate gross proceeds of approximately $40.1 million.In April 2017, the Company filed another shelf registration statement on Form S-3, which included a base prospectus covering the offering, issuance and saleof up to a maximum aggregate offering of $100.0 million of the Company’s common stock, preferred stock, debt securities, warrants, purchase contractsand/or units. At December 31, 2017, no securities had been sold pursuant to this registration statement.11.Common Stock Reserved for IssuanceThe common stock reserved for future issuance at December 31, 2017 and 2016 was as follows: December 31, 2017 2016 Shares underlying outstanding stock options 8,592,747 6,127,291 Shares available for future stock option grants 969,783 2,168,391 Shares issuable upon settlement of restricted stock units outstanding 149,636 151,240 ESPP shares available for issuance 1,103,481 667,670 Warrant to purchase common stock 3,393,755 1,707,736 Total shares of common stock reserved 14,209,402 10,822,328 12.Convertible Preferred StockIn January 2015, the Company issued an aggregate of 162,407 shares of Series C convertible preferred stock to a new investor at a price of $5.84 per share fora total gross consideration of $950 thousand.In February 2015, the Company issued 2,564,652 shares of Series C convertible preferred stock to another investor at a price of $5.84 per share for total grossconsideration of $15.0 million.In July 2015, upon the closing of the Merger, all of ViewRay Technologies, Inc.’s 30,381,987 shares of outstanding convertible preferred stock wereconverted into the Company’s common stock at a 1:1 conversion rate. As a result, the Company had no convertible preferred stock issued and outstanding atDecember 31, 2017, 2016 and 2015. 13.WarrantsPreferred Stock WarrantsIn connection with a 2013 debt financing (see Note 6), the Company issued a warrant to purchase 128,231 shares of Series C convertible preferred stock.These warrants have an exercise price of $5.84 per share, and are exercisable any time at the option of the holder until December 16, 2023. The convertiblepreferred stock warrant was recorded as a liability and is adjusted to fair value at each balance sheet date, with the change in fair value being recorded as acomponent of other expense, net in the consolidated statements of operations and comprehensive loss. For the year 121 ended December 31, 2015, the Company recognized a gain of $45 thousand related to the change in fair value of the warrant in the accompanyingconsolidated statements of operations and comprehensive loss.Upon the consummation of the Merger in July 2015, the warrant to purchase Series C convertible preferred stock was converted into the warrant to purchase128,231 shares of the Company’s common stock. As a result, the fair value of the preferred stock warrant liability of $93 thousand was reclassified intoadditional paid-in capital.The Company used the Black-Scholes option-pricing model to estimate the fair value of the convertible preferred stock warrant upon conversion with thefollowing assumptions: Upon the Closing ofthe Merger on July 23,2015 Common Stock Warrants: Expected term (in years) 5.0 Expected volatility (%) 31.8% Risk-free interest rate (%) 1.7% Expected dividend yield (%) 0% Equity Classified Common Stock Warrants In connection with the Merger and the Private Placement, in July and August 2015, the Company issued warrants, or 2015 Placement Warrants, that providethe warrant holder the right to purchase 198,760 shares of common stock at an exercise price of $5.00 per share. These warrants were issued to privateplacement agents as payment for services provided. The 2015 Placement Warrants are exercisable at any time at the option of the holder until the five-yearanniversary of their date of issuance.The Company estimated the aggregate fair value of 2015 Placement Warrants on issuance date to be $316 thousand which was recorded in additional paid-incapital as an offering cost against the total proceeds from the Private Placement.The fair value of the placement warrants was measured at their grant dates using the Black-Scholes pricing model and the following weighted averageassumptions: Upon Issuance Common Stock Warrants: Expected term (in years) 5.0 Expected volatility (%) 31.8% Risk-free interest rate (%) 1.6% Expected dividend yield (%) 0%At December 31, 2017 and 2016, all of these equity classified warrants had not been exercised and remain outstanding.Liability Classified Common Stock Warrants In connection with the 2016 Private Placement, in August and September 2016, the Company issued warrants, the 2016 Placement Warrants, that provide thewarrant holder the right to purchase 1,380,745 shares of common stock at an exercise price of $2.95 per share.These 2016 Placement Warrants are exercisable at any time at the option of the holder until the seven-year anniversary of their date of issuance. The 2016Placement Warrants also contain protection whereby the warrants will expire immediately prior to the consummation of a change of control, as defined in theagreement, and holders have the right to receive cash in the amount equal to the Black-Scholes value of warrants. The 2016 Placement Warrants wereaccounted for as a liability at the date of issuance and are adjusted to fair value at each 122 balance sheet date, with the change in fair value recorded as a component of other expense, net in the consolidated statements of operations andcomprehensive loss.As separate classes of securities were issued in a bundled transaction, the gross proceeds from the 2016 Private Placement of $13.8 million was allocated firstto the 2016 Placement Warrants based on their fair value upon issuance, and the residual was allocated to the common stock. The fair value upon issuance of$2.7 million for the 2016 Placement Warrants was estimated using the Black-Scholes option-pricing model with the following weighted-averageassumptions: expected term of seven years, expected volatility of 61.6%, risk-free interest rate of 1.4% and expected dividend yield of 0%.During the year ended December 31, 2017 and 2016, the Company recorded loss of $7.4 million and a gain of $3 thousand, respectively, related to thechange in fair value of the 2016 Placement Warrants. The fair value of the 2016 Placement Warrants of $9.9 million and $2.7 million at December 31, 2017and 2016, respectively, was estimated using the Black-Scholes option pricing model and the following weighted-average assumptions: December 31, 2017 2016 2016 Placement Warrants: Expected term (in years) 5.7 6.7 Expected volatility (%) 62.1% 63.6% Risk-free interest rate (%) 2.2% 2.3% Expected dividend yield (%) 0% 0% In connection with the January 2017 Private Placement, the Company issued warrants, the 2017 Placement Warrants, that provide the warrant holder the rightto purchase 1,720,512 shares of common stock at an exercise price of $3.17 per share. These 2017 Placement Warrants became exercisable in July 2017 andexpire in January 2024. The 2017 Placement Warrants also contain protection whereby warrants will expire immediately prior to the consummation of achange of control, as defined in the agreement, and holders have the right to receive cash in the amount equal to the Black-Scholes value of the warrants. The2017 Placement Warrants were accounted for as a liability at the date of issuance and are adjusted to fair value at each balance sheet date, with the change infair value recorded as a component of other expense, net in the consolidated statements of operations and comprehensive loss.As separate classes of securities were issued in a bundled transaction, the gross proceeds from the January 2017 Private Placement of $26.1 million wasallocated first to the 2017 Placement Warrants based on its fair value upon issuance, and the residual was allocated to the common stock. The fair value uponissuance of $3.4 million for the 2017 Placement Warrants was estimated using the Black-Scholes option-pricing model with the following weighted-averageassumptions: expected term of seven years, expected volatility of 62.9%, risk-free interest rate of 2.2% and expected dividend yield of 0%.During the year ended December 31, 2017, the Company recorded a loss of $9.2 million related to the change in fair value of the 2017 Placement Warrants.The fair value of the 2017 Placement Warrants of $12.5 million at December 31, 2017 was estimated using the Black-Scholes option pricing model and thefollowing weighted-average assumptions: December 31,2017 2017 Placement Warrants: Expected term (in years) 6.1 Expected volatility (%) 62.3% Risk-free interest rate (%) 2.3% Expected dividend yield (%) 0%In December 2017, 25,104 shares of 2016 Placement Warrant and 9,389 shares of 2017 Placement Warrant were exercised and the related warrant liability of$274 thousand was reclassified into additional paid-in capital upon 123 exercise. At December 31, 2017, 1,355,641 shares of the 2016 Placement Warrant and 1,711,123 shares of the 2017 Placement Warrant were outstanding. 14.Stock-Based CompensationThe Company adopted 2008 Stock Option and Incentive Plan, or 2008 Plan, and 2015 Equity Incentive Award Plan, or 2015 Plan, to its employees, officers,directors, advisors and consultants. With the establishment of the 2015 Plan, the Company no longer grants stock options under the 2008 Plan, and the sharesavailable for future grants under the 2008 Plan were transferred to the 2015 Plan.Only stock options were granted under the 2008 Plan. The 2015 Plan provides for the grant of stock and stock-based awards including stock options,restricted stock awards, restricted stock units and stock appreciation rights.Options granted may be either incentive stock options or non-statutory stock options. Under the 2008 Plan, incentive stock options could only have beengranted to employees with exercise prices of no less than the fair value of the common stock on the grant date and non-statutory options may be granted toemployees or consultants at exercise prices of no less than 85% of the fair value of the common stock on the grant date, as determined by the board ofdirectors. Under the 2015 Plan, for both inventive stock options and nonstatutory options, the exercise price should not be less than the fair value of thecommon stock on the date of grant. Under both the 2008 Plan and the 2015 Plan, if, at the time of grant, the optionee owns stock representing more than 10%of the voting power of all classes of stock of the Company, a 10% shareholder, the exercise price must be at least 110% of the fair value of the common stockon the grant date as determined by the board of directors. Options become exercisable generally ratably over four years, and expire in 10 years from the dateof grant, or five years from the date of grant for 10% shareholders.In July 2015, the Company adopted the 2015 Employee Stock Purchase Plan, or 2015 ESPP, and 667,670 shares were reserved for issuance under the 2015ESPP. At December 31, 2017 and 2016, no shares have been issued under the 2015 ESPP.A summary of the Company’s stock option activity and related information is as follows: Options Outstanding SharesAvailablefor Grant Numberof StockOptionsOutstanding Weighted-AverageExercisePrice Weighted-AverageRemainingContractual Life(Years) AggregateIntrinsicValue (In thousands) Balance at December 31, 2016 2,168,391 6,127,291 2.60 7.3 7,800 Additional authorized 1,743,247 Granted (2,986,244) 2,986,244 5.65 Exercised — (420,377) 1.58 Cancelled 100,411 (100,411) 3.95 RSUs granted (56,022) — Balance at December 31, 2017 969,783 8,592,747 $3.69 7.4 $47,864 Vested and exercisable at December 31, 2017 5,011,207 $2.65 6.5 $33,130 Vested and expected to vest at December 31, 2017 8,303,413 $3.64 7.4 $46,655 The weighted-average grant date fair value of options granted to employees was $3.38, $2.72 and $3.13 per share for the year ended December 31, 2017,2016 and 2015. The grant date fair value of options vested was $4.8 million, $2.4 million and $782 thousand, respectively, during the year ended December31, 2017, 2016 and 2015. 124 Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The aggregate intrinsic value of options exercised was $2.6 million and $2.3 million for the year ended December 31, 2017 and 2016.The aggregate intrinsic value of options exercised was insignificant for the year ended December 31, 2015.At December 31, 2017, total unrecognized compensation cost related to stock-based awards granted to employees, net of estimated forfeitures, was $9.9million which is expected to be recognized over a weighted-average period of 2.7 years.Determination of Fair ValueThe determination of the fair value of stock options on the date of grant using an option-pricing model is affected by the estimated fair value of theCompany’s common stock, as well as assumptions regarding a number of complex and subjective variables. The variables used to calculate the fair value ofstock options using the Black-Scholes option-pricing model include actual and projected employee stock option exercise behaviors, expected pricevolatility of the Company’s common stock, the risk-free interest rate and expected dividends. Each of these inputs is subjective and generally requiressignificant judgment to determine.Fair Value of Common StockPrior to the Merger, the fair value of the common stock underlying the stock-based awards was determined by ViewRay Technologies, Inc.’s board ofdirectors, with input from management and third-party valuations. Post-Merger and up through March 30, 2016, the Company’s common stock shares werelisted on the OTC Bulletin Board. Beginning March 31, 2016, the Company’s common stock shares were listed on The NASDAQ Global Market, orNASDAQ. Fair value of the common stock is the adjusted closing price of the Company’s common stock on the trading date on these stock exchanges.Expected TermThe expected term represents the period that the Company’s option awards are expected to be outstanding. The Company considers several factors inestimating the expected term of options granted, including the expected lives used by a peer group of companies within the Company’s industry that theCompany considers to be comparable to its business and the historical option exercise behavior of its employees, which the Company believes isrepresentative of future behavior.Expected VolatilityAs the Company does not have a sufficient trading history for its common stock, the expected stock price volatility for the Company’s common stock wasestimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term ofthe stock option grants. Industry peers consist of several public companies in the Company’s industry which were the same as the comparable companiesused in the common stock valuation analysis. The Company intends to continue to consistently apply this process using the same or similar publiccompanies until a sufficient amount of historical information regarding the volatility of its own share price becomes available, or unless circumstanceschange such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publiclyavailable would be used in the calculation.Risk-Free Interest RateThe risk-free interest rate is based on the zero-coupon U.S. Treasury notes, with maturities similar to the expected term of the options. 125 Expected Dividend YieldThe Company does not anticipate paying any dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero in the Black-Scholesoption-valuation model.In addition to the Black-Scholes assumptions discussed immediately above, the estimated forfeiture rate also has a significant impact on the related stock-based compensation. The forfeiture rate of stock options is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ fromthose estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for thoseawards that are expected to vest.The fair value of employee stock options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-averageassumptions: Year Ended December 31, 2017 2016 2015 Expected term (in years) 5.9 6.0 5.9 Expected volatility (%) 66.0% 67.1% 68.7% Risk-free interest rate (%) 2.1% 1.3% 1.8% Expected dividend yield (%) 0.0% 0.0% 0.0% Restricted Stock UnitsFrom time to time, the Company grants Restricted Stock Units, or RSUs, to its board of directors for their services. These RSUs were fully vested uponissuance and will be released and settled upon termination of the board services or the occurrence of a change in control event. In September 2016 andNovember 2017, the Company granted 112,578 shares and 43,554 shares of RSUs to its board members, respectively, and 18,964 shares of these RSUs werereleased in December 2017 upon termination of one board member.In December 2016, the Company granted 18,017 shares of RSUs to certain executive officers for bonus and 20,645 shares of RSUs to a consultant for service.These RSUs were fully vested upon issuance and released in fiscal year 2017.In November 2017, the Company granted 12,468 shares of RSUs to one executive officer upon his termination. These RSUs were fully vested upon issuancebut not released in fiscal year 2017, although the conditions to release these RSUs were satisfied at December 31, 2017.The fair value of RSUs is based on the closing market price of the Company’s common stock on the grant date. The weighted-average grant date fair value ofRSUs granted in fiscal year 2016 and 2017 was $3.52 per share and $8.02 per share, respectively, and the Company recorded stock based compensationexpense related to RSUs of $532 thousand and $449 thousand during the year ended December 31, 2016 and 2017, which was included in general andadministrative expenses in the accompanying statements of operations and comprehensive loss. There was no stock based compensation expense related toRSUs during the year ended December 31, 2015.Stock-Based Compensation ExpenseTotal stock-based compensation expense recognized in the Company’s consolidated statements of operations and comprehensive loss is classified as follows(in thousands): Year Ended December 31, 2017 2016 2015 Research and development $952 $593 $262 Selling and marketing 303 120 50 General and administrative 4,064 2,194 754 Total stock-based compensation expense $5,319 $2,907 $1,066 126 During the years ended December 31, 2017, 2016 and 2015 there were no stock-based compensation expenses capitalized as a component of inventory orrecognized in cost of revenue. Stock-based compensation relating to stock-based awards granted to consultants was insignificant for the years endedDecember 31, 2017, 2016 and 2015.15.Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. taxlaws that impact the Company, most notably a reduction of the top U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning afterDecember 31, 2017. The Company recognized the income tax effects of the 2017 Tax Act in its 2017 financial statements in accordance with SEC Staff Accounting Bulletin No.118 (“SAB 118”), which provides guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the 2017 Tax Act wassigned into law. As such, the Company’s financial results reflect the income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 iscomplete and provisional amounts for those specific income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 is incomplete buta reasonable estimate could be determined. Upon completion of our 2017 U.S. income tax return in 2018 we may identify additional remeasurementadjustments to our recorded deferred tax assets. We will continue to assess our provision for income taxes as future guidance is issued, but do not currentlyanticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in SAB118. The changes to existing U.S. tax laws as a result of the 2017 Tax Act, which we believe have the most significant impact on the Company’s federal incometaxes are as follows: Reduction of the U.S. Corporate Income Tax RateThe Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expectedto be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate incometax rate from 35 percent to 21 percent. This resulted in a $38.7 million decrease in net deferred tax assets and a corresponding $38.7 million decrease to thevaluation allowance as of December 31, 2017. Income Tax ExpenseThe following reconciles the differences between income taxes computed at the federal income tax rate and the provision for income taxes: Year Ended December 31, 2017 2016 2015 Expected income tax benefit at the federal statutory rate 34.0 % 34.0 % 34.0 %State taxes, net of federal benefit 0.0 0.0 (0.8) Change in effective tax rate (54.1) 0.0 (0.9) Non-deductible items and other 0.5 (0.7) (0.5) Federal and state credits 0.5 0.6 (0.7) Change in valuation allowance 19.1 (33.9) (31.1) Total 0.0 % 0.0 % 0.0 % 127 Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposesand the amounts used for income tax purposes. The principal components of the Company’s net deferred tax assets consisted of the following atDecember 31, 2017 and 2016 (in thousands): Year Ended December 31, 2017 2016 Net operating loss carryforwards $61,049 $75,036 Research and development tax credits 3,731 2,131 Reserves and accruals 1,168 1,791 Other 6,611 4,594 Total deferred tax assets 72,559 83,552 Valuation allowance (72,559) (83,552)Net deferred tax assets $— $— The Company maintains a valuation allowance related to its deferred tax asset position when management believes it is more likely than not that the netdeferred tax assets will not be realized in the future. The Company’s valuation allowance decreased by $11.0 million and increased by $17.4 million duringthe year ended December 31, 2017 and 2016.At December 31, 2017, the Company had federal net operating loss carryforwards of $266.3 million, which begin to expire in the year ending December 31,2024, and $144.8 million related to state net operating loss carryforwards, which begin to expire in the year ending December 31, 2019. The Company hadfederal research and development tax credit carryforwards of $3.8 million, and state carryforwards of $1.3 million at the year ended December 31, 2017. Thesecredits begin to expire in the year ending December 31, 2024.Under the provisions of the Internal Revenue Code, or IRC, net operating loss and credit carryforwards and other tax attributes may be subject to limitation ifthere has been a significant change in ownership of the Company, as defined by the IRC. The Company believes it has experienced at least one ownershipchange in the past. The Company is currently analyzing the tax impact of such ownership change on its federal net operating loss and credit carryforwards.Future change in the Company’s ownership could result in limitations on net operating loss and credit carryforwards.Because of the net operating loss and credit carryforwards, all of the Company’s federal tax returns and state returns since the year ended December 31, 2004remain subject to federal and California examination.The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold. The evaluation of uncertain tax positions is based on factorsincluding, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement ofmatters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates these tax positions on anannual basis. In addition, the Company also accrues for potential interest and penalties related to unrecognized tax benefits in income tax expense.At December 31, 2017 and 2016, the Company’s unrecognized tax benefits consist of the following: Year Ended December 31, 2017 2016 Unrecognized tax benefit, beginning of period $940 $742 Gross increases — current year tax positions 327 198 Gross increases — prior year tax positions 73 — Gross decreases — prior year tax positions (205) — Unrecognized tax benefit, end of period $1,135 $940 128 16.Employee BenefitsThe Company has a 401(k) Plan which covers its eligible employees. The 401(k) Plan permits the participants to defer a portion of their compensation inaccordance with the provisions of Section 401(k) of the IRC. At its discretion, the Company can match a portion of the participants’ contributions or makeprofit-sharing contributions. There was no matching or profit-sharing contributions during the years ended December 31, 2017, 2016 or 2015.17.Net Loss per ShareThe following table sets forth the computation of the Company’s basic and diluted net loss per share for the periods presented (in thousands, except share andper share data): Year Ended December 31, 2017 2016 2015 Net loss $(72,176) $(50,636) $(44,995)Weighted-average common shares used in computing net loss per share, basic and diluted 58,457,868 40,068,307 17,432,434 Net loss per share, basic and diluted $(1.23) $(1.26) $(2.58) The following weighted-average common stock equivalents were excluded from the calculation of diluted net loss per share for the periods presented becauseincluding them would have had an anti-dilutive effect: Year Ended December 31, 2017 2016 2015 Convertible preferred stock (if converted) — — 16,558,330 Options to purchase common stock 7,914,067 6,181,015 5,032,768 Convertible preferred stock warrant — — 71,318 Common stock warrant 3,345,674 804,248 142,513 Restricted stock units 108,107 33,835 — 18.Segment and Geographic InformationThe Company has one business activity, which is radiation therapy technology combined with magnetic resonance imaging, and operates in one reportablesegment. The Company’s chief operating decision-maker, its chief executive officer, reviews its operating results on an aggregate basis for purposes ofallocating resources and evaluating financial performance. Also, the Company does not have segment managers as the Company manages its operations as asingle operating segment.The following table sets forth revenue by geographic area on the customers’ location (in thousands): Year Ended December 31, 2017 2016 2015 United States $11,506 $1,106 $5,332 UAE 5,675 — — Korea 5,504 182 4,988 Israel 5,309 — — China 4,680 — — Japan 753 10,375 — Netherlands 317 5,486 — Italy 298 5,088 — Rest of world — — 70 Total revenue $34,042 $22,237 $10,390 At December 31, 2017 and 2016, all long-lived assets are located in the United States. 129 19.Related Party TransactionsAs discussed in Note 8, the Company pays a royalty to UFRF, a common stockholder, related to a licensing agreement.In January 2017, the Company entered into a sales consulting agreement with Puissance Capital Management, or PCM, to assist with business developmentactivities in a key market in Asia. PCM is the investment manager of Puissance Cross Board Opportunities LLP, a stockholder in the Company. Theodore T.Wang, Ph.D., a member of the Company’s board of directors, is the managing member of the general partners of PCM. The sales consulting agreement has aterm of one year with a total consideration of $1.3 million. 20.Subsequent EventIn February 2018, the Company entered into a Securities Purchase Agreement pursuant to which it sold 4.1 million shares of common stock, 3.0 millionshares of Series A convertible preferred stock and warrants to purchase 1.4 million shares of common stock for total gross proceeds of $59.1 million. Thesewarrants have an exercise price of $8.31 per share, became exercisable upon issuance at the closing and expire seven years from the date of issuance. TheCompany completed the closing of this equity financing on March 5, 2018. 130 Item 9. Changes in and Disagreements with Accountants and Financial Disclosure and Supplementary DataNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the timelines specified in the SEC’s rules and forms, and that such information is accumulated and communicatedto our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding requireddisclosure.As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management,including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures,as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective at December 31, 2017 at the reasonable assurance level.Changes in Internal ControlThere were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of theExchange Act during the fourth quarter of 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financialreporting.Limitations on Effectiveness of Controls and ProceduresIn designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designedand operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of controls and procedures mustreflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls andprocedures relative to their costs.Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f)of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are beingmade only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted anevaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 based on the framework established in “InternalControl – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management concludedthat our internal control over financial reporting was effective as of that date. 131 As a smaller reporting company, pursuant to the rules of the SEC, this Annual Report on Form 10-K does not include an attestation report of the Company’sindependent registered public accounting firm.Item 9B. Other Information. None. PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceDirectors, Executive Officers and Corporate GovernanceThe information in our Proxy Statement for the 2018 Annual Meeting of stockholders regarding directors and executive officers appearing under theheadings "Proposal One—Election of Directors," "Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporatedherein by reference.In addition, the information in our Proxy Statement for the 2018 Annual Meeting of stockholders regarding the director nomination process, the AuditCommittee financial expert and the identification of the Audit Committee members appearing under the heading "Corporate Governance and Board ofDirectors Matters" is incorporated herein by reference.Code of Conduct and EthicsWe have adopted a Code of Conduct and Ethics that applies to all employees including our principal executive officer and principal financial officer. Thefull text of our Code of Business Conduct and Ethics is posted on our website at http://investors.viewray.com/corporate-governance/highlights.We intend todisclose future amendments to certain provisions of our code, or waivers of such provisions granted to executive officers and directors, on our website withinfour business days following the date of such amendment or waiver. Any information on ViewRay’s website or which can be accessed through it is not a partof this Annual Report on Form 10-K).Item 11. Executive CompensationWe maintain employee compensation programs and benefit plans in which our executive officers are participants. Copies of these plans and programs are setforth or incorporated by reference as Exhibits to this Annual Report. The information in our Proxy Statement for the 2018 Annual Meeting of stockholdersappearing under the heading “Executive Compensation” is incorporated herein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management Related Stockholder MattersThe information in our Proxy Statement for the 2018 Annual Meeting of stockholders appearing under the heading "Security Ownership of Certain BeneficialOwners and Management" and "Equity Compensation Plan Information" is incorporated herein by reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information in our Proxy Statement for the 2018 Annual Meeting of stockholders appearing under the headings "Certain Relationships and Related PartyTransactions" and "Corporate Governance—Director Independence" is incorporated herein by reference.Item 14. Principal Accountant Fees and ServicesThe information in our Proxy Statement for the 2018 Annual Meeting of stockholders appearing under the headings "Proposal Three—Ratification ofAppointment of Independent Registered Public Accounting Firm—Audit and Non-Audit Services" and "Proposal Three—Ratification of Appointment ofIndependent Registered Public Accounting Firm—Audit Committee Pre-Approval Policies and Procedures" is incorporated herein by reference. 132 PART IVItem 15. Exhibits and Financial Statement Schedules(a) (1) The financial statements required by Item 15(a) are filed in Item 8 of this Report.(2) The financial statement schedules required by Item 15(a) are omitted because they are not applicable, not required or the required information is includedin the financial statements or notes thereto as filed in Item 8 of this Report.(3) We have filed, or incorporated into this report by reference, the exhibits listed below. Incorporated by Reference ExhibitNumber Description Form Exhibit Date Filed FiledHerewith 2.1 Agreement and Plan of Merger and Reorganization, dated as of July 23, 2015,by and among ViewRay Inc., Acquisition Sub and ViewRay Technologies, Inc. S-1/A 2.1 12/16/15 3.1 Amended and Restated Certificate of Incorporation. S-1/A 3.1 12/16/15 3.2 Amended and Restated Bylaws. S-1/A 3.2 12/16/15 3.3 Certificate of Merger of Acquisition Sub with and into ViewRay Technologies,Inc. S-1/A 3.3 12/16/15 3.4 Certificate of Designations, Preferences and Rights of Series A ConvertiblePreferred Stock of ViewRay, Inc. X 4.1 Form of Common Stock Certificate. S-1/A 4.1 12/16/15 4.2 Form of Placement Agent Warrant for Common Stock of ViewRay, Inc. S-1/A 10.6 12/16/15 4.3 Form of Warrants issued pursuant to that certain Securities PurchaseAgreement, dated as of August 19, 2016, by and among ViewRay, Inc. and thePurchasers named therein. S-1 10.3 9/26/16 4.4 Form of Warrants issued pursuant to that certain Securities PurchaseAgreement, dated as of January 13, 2017, by and among ViewRay, Inc. and thePurchasers named therein. 10-K 4.4 3/17/17 10.1 Split-Off Agreement, dated as of July 23, 2015, by and among ViewRay, Inc.,Mirax Enterprise Corp. and Dinara Akzhigitova. S-1/A 10.1 12/16/15 10.2 General Release Agreement, dated as of July 23, 2015, by and amongViewRay, Inc., Mirax Enterprise Corp. and Dinara Akzhigitova. S-1/A 10.2 12/16/15 10.3 Form of Lock-Up and No Short Selling Agreement between ViewRay, Inc., andthe officers, directors and shareholders party thereto. S-1/A 10.3 12/16/15 10.4 Form of Securities Purchase Agreement between ViewRay, Inc., and theinvestors party thereto. S-1/A 10.4 12/16/15 10.5 Engagement Letter, dated June 9, 2015, among ViewRay, Inc. and thePlacement Agents as defined therein. S-1/A 10.5 12/16/15 133 Incorporated by Reference ExhibitNumber Description Form Exhibit Date Filed FiledHerewith10.6 Form of Registration Rights Agreement, by and among ViewRay, Inc. andcertain investors named therein. S-1/A 4.2 12/16/15 10.7(a) Office Lease, effective April 17, 2008, by and between Cleveland IndustrialPortfolio, LLC and ViewRay Incorporated. S-1/A 10.7(a) 12/16/15 10.7(b) First Amendment to the Office Lease, effective April 16, 2013 by and betweenCleveland Industrial Portfolio, LLC and ViewRay Incorporated. S-1/A 10.7(b) 12/16/15 10.7(c) Second Amendment to the Office Lease, effective August 15, 2014 by andbetween Cleveland Industrial Portfolio, LLC and ViewRay Incorporated. S-1/A 10.7(c) 12/16/15 10.8 Office Lease, effective June 19, 2014, by and between BXP Research Park LPand ViewRay Incorporated. S-1/A 10.8 12/16/15 10.9† Employment Agreement, effective January 18, 2013, by and between ViewRayIncorporated and Chris A. Raanes. S-1/A 10.9 12/16/15 10.10† Offer Letter, effective November 11, 2010, by and between ViewRayIncorporated and D. David Chandler. S-1/A 10.10 12/16/15 10.11† First Amended and Restated Offer Letter, dated October 6, 2010, by andbetween ViewRay Incorporated and James F. Dempsey, Ph.D. S-1/A 10.11 12/16/15 10.12† Offer Letter, dated December 9, 2011, by and between ViewRay Incorporatedand Michael Brandt. S-1/A 10.12 12/16/15 10.13# Manufacturing and Supply Agreement, effective September 18, 2013, by andbetween ViewRay Incorporated and Japan Superconductor Technology, Inc. S-1/A 10.13 12/16/15 10.14(a)# Development and Supply Agreement, effective May 29, 2008, by and betweenViewRay Incorporated and Siemens Aktiengesellschaft, Healthcare Sector. S-1/A 10.14(a) 12/16/15 10.14(b)# Amendment No. 1 to the Development and Supply Agreement, effectiveDecember 1, 2009, by and between ViewRay Incorporated and SiemensAktiengesellschaft, Healthcare Sector. S-1/A 10.14(b) 12/16/15 10.14(c)# Amendment No. 2 to the Development and Supply Agreement, effective May4, 2010, by and between ViewRay Incorporated and SiemensAktiengesellschaft, Healthcare Sector. S-1/A 10.14(c) 12/16/15 10.14(d)# Amendment No. 3 to the Development and Supply Agreement, effectiveFebruary 9, 2011, by and between ViewRay Incorporated and SiemensAktiengesellschaft, Healthcare Sector. S-1/A 10.14(d) 12/16/15 10.14(e)# Amendment No. 4 to the Development and Supply Agreement, effective May11, 2012, by and between ViewRay Incorporated and SiemensAktiengesellschaft, Healthcare Sector. S-1/A 10.14(e) 12/16/15 134 Incorporated by Reference ExhibitNumber Description Form Exhibit Date Filed FiledHerewith 10.14(f)# Amendment No. 5 to the Development and Supply Agreement, effective May30, 2012, by and between ViewRay Incorporated and SiemensAktiengesellschaft, Healthcare Sector. S-1/A 10.14(f) 12/16/15 10.14(g)# Amendment No. 6 to the Development and Supply Agreement, effectiveFebruary 21, 2014, by and between ViewRay Incorporated and SiemensAktiengesellschaft, Healthcare Sector. S-1/A 10.14(g) 12/16/15 10.15# Cobalt-60 Source Supply and Removal Agreement, effective December 19,2013, by and between ViewRay Incorporated and Best Theratronics, Ltd. S-1/A 10.15# 12/16/15 10.16# Development and Supply Agreement, effective June 24, 2009, by and betweenViewRay Incorporated and Manufacturing Sciences Corporation. S-1/A 10.16# 12/16/15 10.17(a)# Development and Supply Agreement, effective July 9, 2009, by and betweenViewRay Incorporated and Tesla Engineering Limited. S-1/A 10.17(a) 12/16/15 10.17(b)# Amendment No. 1 to the Development and Supply Agreement, effectiveJanuary 20, 2015, by and between ViewRay Incorporated and TeslaEngineering Limited. S-1/A 10.17(b) 12/16/15 10.18# Development and Supply Agreement, effective July 2, 2010, by and betweenViewRay Incorporated and PEKO Precision Products, Inc. S-1/A 10.18 12/16/15 10.19(a)# Amended and Restated Joint Development and Supply Agreement, effectiveMay 15, 2008, by and between ViewRay Incorporated and 3D Line GmbH. S-1/A 10.19(a) 12/16/15 10.19(b)# Amendment No. 1 to the Amended and Restated Joint Development andSupply Agreement, effective August 13, 2008, by and between ViewRayIncorporated and Euromechanics Medical GmbH. S-1/A 10.19(b) 12/16/15 10.19(c)# Amendment No. 2 to the Amended and Restated Joint Development andSupply Agreement, effective November 27, 2009, by and between ViewRayIncorporated and Euromechanics Medical GmbH. S-1/A 10.19(c) 12/16/15 10.20# Development and Supply Agreement, effective June 1, 2010, by and betweenViewRay Incorporated and Quality Electrodynamics, LLC. S-1/A 10.20 12/16/15 10.21(a)# Standard Exclusive License Agreement with Sublicensing Terms, effectiveDecember 15, 2004, by and between ViewRay Incorporated and the Universityof Florida Research Foundation, Inc. S-1/A 10.21(a) 12/16/15 10.21(b)# Amendment No. 1 to the Standard Exclusive License Agreement withSublicensing Terms, effective December 6, 2007, by and between ViewRayIncorporated and the University of Florida Research Foundation, Inc. S-1/A 10.21(b) 12/16/15 135 Incorporated by Reference ExhibitNumber Description Form Exhibit Date Filed FiledHerewith 10.22 Warrant Agreement, effective December 16, 2013, by and between ViewRayIncorporated and Hercules Technology III, L.P. S-1/A 10.23 12/16/15 10.23(a)# Term Loan Agreement, effective June 26, 2015, by and among ViewRayIncorporated, the Subsidiary Guarantors (as defined therein), Capital RoyaltyPartners II L.P., Capital Royalty Partners II—Parallel Fund “A” L.P., CapitalRoyalty Partners II (Cayman) L.P. and Parallel Investment OpportunitiesPartners II L.P. S-1/A 10.22 12/16/15 10.23(b) Amendment No. 1 to Term Loan Agreement effective March 24, 2016, by andamong ViewRay Technologies, Inc. (formerly known as ViewRayIncorporated), the Subsidiary Guarantors (as defined therein), Capital RoyaltyPartners II L.P., Capital Royalty Partners II—Parallel Fund “A” L.P., CapitalRoyalty Partners II (Cayman) L.P. and Parallel Investment OpportunitiesPartners II L.P. 10-K 10.23(b) 3/28/16 10.23(c) Amendment No. 2 to Term Loan Agreement dated April 12, 2017, by andamong ViewRay Technologies, Inc. (formerly known as ViewRayIncorporated), the Subsidiary Guarantors (as defined therein), Capital RoyaltyPartners II L.P., Capital Royalty Partners II—Parallel Fund “A” L.P., CapitalRoyalty Partners II (Cayman) L.P. and Parallel Investment OpportunitiesPartners II L.P. 10-Q 10.1 8/7/17 10.23(d) Amendment No. 3 to Term Loan Agreement effective September 30, 2017, byand among ViewRay Technologies, Inc. (formerly known as ViewRayIncorporated), the Subsidiary Guarantors (as defined therein), Capital RoyaltyPartners II L.P., Capital Royalty Partners II—Parallel Fund “A” L.P., CapitalRoyalty Partners II (Cayman) L.P. and Parallel Investment OpportunitiesPartners II L.P. 10-Q 10.1 11/13/17 10.23(e) Amendment No.4 to Term Loan Agreement effective December 31, 2017, byand among ViewRay Technologies, Inc. (formerly known as ViewRayIncorporated), the Subsidiary Guarantors (as defined therein), Capital RoyaltyPartners II L.P., Capital Royalty Partners II—Parallel Fund “A” L.P., CapitalRoyalty Partners II (Cayman) L.P. and Parallel Investment OpportunitiesPartners II L.P X 10.24(a)† ViewRay Incorporated 2008 Stock Incentive Plan. S-1/A 10.24(a) 12/16/15 10.24(b)† Form of Incentive Stock Option and Reverse Vesting Agreement (Change ofControl) under the 2008 Plan. S-1/A 10.24(b) 12/16/15 10.24(c)† Form of Incentive Stock Option and Reverse Vesting Agreement under the2008 Plan. S-1/A 10.24(c) 12/16/15 136 Incorporated by Reference ExhibitNumber Description Form Exhibit Date Filed FiledHerewith10.24(d)† Form of Nonstatutory Stock Option and Reverse Vesting Agreement under the2008 Plan. S-1/A 10.24(d) 12/16/15 10.25† Contingent Equity Agreement, effective January 8, 2008, by and amongViewRay Incorporated, James F. Dempsey, Ph.D., Russell S. Donda, JimCarnall and William Wells. S-1/A 10.25 12/16/15 10.26(a)† ViewRay, Inc. 2015 Equity Incentive Award Plan. S-1/A 10.26(a) 12/16/15 10.26(b)† Form of Option Agreement under the 2015 Plan. S-1/A 10.26(b) 12/16/15 10.26(c)† Form of Restricted Stock Agreement under the 2015 Plan. S-1/A 10.26(c) 12/16/15 10.26(d)† Form of Restricted Stock Unit Agreement under the 2015 Plan. S-1/A 10.26(d) 12/16/15 10.27† Form of Indemnification Agreement for directors and executive officers. S-1/A 10.27 12/16/15 10.28† Agreement, effective June 11, 2008, by and among ViewRay Incorporated,James F. Dempsey, Ph.D., William W. Wells, James D. Carnall and Russell S.Donda. S-1/A 10.28 12/16/15 10.29† ViewRay, Inc. 2015 Employee Stock Purchase Plan. S-1/A 10.29 12/16/15 10.30† Offer Letter, dated April 30, 2015, between ViewRay, Inc. and Doug Keare. S-1/A 10.30 12/16/15 10.31 Securities Purchase Agreement, dated as of August 19, 2016, by and amongViewRay, Inc. and the Purchasers named therein. S-1 10.1 9/26/16 10.32 Registration Rights Agreement, dated as of August 22, 2016, by and amongViewRay, Inc. and the Purchasers named therein. S-1 4.3 9/29/16 10.33 Securities Purchase Agreement, dated as of January 13, 2017, by and amongViewRay, Inc. and the Purchasers named therein. 10-K 10.33 3/17/17 10.34 Stockholders’ Agreement, dated as of January 13, 2017, by and amongViewRay, Inc. and the Purchasers named therein. 10-K 10.34 3/17/17 10.35 Agreement for Consulting Services by and among ViewRay, Inc. andPuissance Capital Management dated January 13, 2017. 10-Q 10.3 5/15/17 10.36 Securities Purchase Agreement, dated as of October 23, 2017, by and amongViewRay, Inc. and Fosun International Limited named therein. 8-K 10.1 10/25/17 10.37 Securities Purchase Agreement, dated as of October 23, 2017, by and amongViewRay, Inc. and the Purchasers named therein. 8-K 10.2 10/25/17 10.38 Registration Rights Agreement, dated as of October 23, 2017, by and amongViewRay, Inc. and Strong Influence Limited. 8-K 10.3 10/25/17 137 Incorporated by Reference ExhibitNumber Description Form Exhibit Date Filed FiledHerewith10.39 Registration Rights Agreement, dated as of October 23, 2017, by and amongViewRay, Inc. and KVP Capital, LP. 8-K 10.4 10/25/17 10.40 Amended and Restated Securities Purchase Agreement, dated as of March 5,2018, by and among ViewRay, Inc. and Fosun International Limited namedtherein X 10.41 Amended and Restated Registration Rights Agreement, dated as of March 5,2018, by and among ViewRay, Inc. and Strong Influence Limited. X 10.42 Warrant Agreement, effective February 25, 2018, by and between ViewRayInc. and Strong Influence Limited. X 21 List of Subsidiaries. X 23.1 Consent of Deloitte & Touche LLP X 24 Power of Attorney (contained on the signature page hereto). X 31.1 Certification of Principal Executive Officer Required under SecuritiesExchange Act Rule 13a-14(a) and 15d-14(a). X 31.2 Certification of Principal Financial Officer under Securities Exchange ActRule 13a-14(a) and 15d-14(a). X 32.1 Certification of Principal Executive Officer and Principal Financial Officerpursuant to 18 U.S.C. 1350 and Securities Exchange Act Rule 13a-14(b). X 101 Interactive Data Files of Financial Statements and Notes. X 101.INS Instant Document. X 101.SCH XBRL Taxonomy Schema Document. X 101.CAL XBRL Taxonomy Calculation Linkbase Document. X 101.DEF XBRL Taxonomy Definition Linkbase Document. X 101.LAB XBRL Taxonomy Label Linkbase Document. X 101.PRE XBRL Taxonomy Presentation Linkbase Document. X #Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been filedseparately with the SEC.†Indicates management contract or compensatory plan. Item 16. Form 10-K SummaryNone. 138 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on March 12, 2018. VIEWRAY, INC. By: /s/ Chris A. Raanes Chris A. Raanes Chief Executive OfficerPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Chris A. Raanes and AjayBansal, and each of them, with full power of substitution and full power to act without the other, his or her true and lawful attorney-in-fact and agent to act forhim or her in his or her name, place and stead, in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same,with exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, hereby ratifying and confirming allthat said attorney-in-fact, or his substitute, may do or cause to be done by virtue thereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities andon the dates indicated. SignatureTitleDate /s/ Chris A. RaanesDirector, President and Chief Executive OfficerMarch 12, 2018Chris A. Raanes(Principal Executive Officer) /s/ Ajay BansalChief Financial OfficerMarch 12, 2018Ajay Bansal(Principal Financial and Accounting Officer) /s/ David Bonita, M.D.DirectorMarch 12, 2018David Bonita, M.D. /s/ Caley Castelein, M.D.DirectorMarch 12, 2018Caley Castelein, M.D. /s/ James F. Dempsey, Ph.D.Director and Chief Scientific OfficerMarch 12, 2018James F. Dempsey, Ph.D. /s/ Mark S. Gold, M.D.DirectorMarch 12, 2018Mark S. Gold, M.D. /s/ Aditya PuriDirectorMarch 12, 2018Aditya Puri /s/ Henry A. McKinnell, Jr., Ph.D.DirectorMarch 12, 2018Henry A. McKinnell, Jr., Ph.D /s/ Brian K. RobertsDirectorMarch 12, 2018Brian K. Roberts /s/ Theodore T. Wang, Ph.D.DirectorMarch 12, 2018Theodore T. Wang, Ph.D. /s/ Scott Huennekens, MBADirectorMarch 12, 2018Scott Huennekens, MBA 139 /s/ Daniel Moore, MBADirectorMarch 12, 2018Daniel Moore, MBA 140Exhibit 3.4CERTIFICATE OF DESIGNATIONS, PREFERENCESAND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCKofViewRay, Inc.Pursuant to Section 151 of the General Corporation Lawof the State of DelawareThe undersigned, Chris A. Raanes, President and Chief Executive Officer of ViewRay, Inc., a Delaware corporation (the“Corporation”), hereby certifies that, pursuant to the authority expressly vested in the Board of Directors of the Corporation by itsAmended and Restated Certificate of Incorporation, and in accordance with the provisions of Sections 103 and 151 of the GeneralCorporation Law of the State of Delaware, the Board of Directors of the Corporation (the “Board of Directors”) has duly adopted thefollowing resolutions:RESOLVED, that, pursuant to Article IV of the Corporation’s Amended and Restated Certificate of Incorporation, whichauthorizes the issuance of Ten Million (10,000,000) shares of Preferred Stock, par value $0.01 per share of the Corporation (the“Preferred Stock), issuable from time to time in one or more series, the Board of Directors hereby fixes the powers, designations,preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of the SeriesA Convertible Preferred Stock (the “Series A Convertible Preferred Stock”).RESOLVED, that each share of Series A Convertible Preferred Stock shall rank equally in all respects with and shall haveall the same rights and privileges as a share of the Corporation’s Common Stock, par value $0.01 per share (the “Common Stock”),except as set forth in the following provisions:1.Number and Designation. 3,000,581 shares of Preferred Stock shall be designated as Series AConvertible Preferred Stock. The number of shares of the Series A Preferred Stock may be increased or decreased by resolution of theBoard of Directors; provided that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than thenumber of shares then outstanding.2.Rights and Preferences Generally. Except as set forth in this Certificate of Designation or as otherwiserequired by applicable law, the Series A Convertible Preferred Stock shall have the same rights and privileges as the Common Stock,including, without limitation, that the Series A Convertible Preferred Stock shall rank equally with the Common Stock with respect toany dividend, liquidation, winding-up or dissolution of the Corporation.3.Voting Rights. The holders of the Series A Convertible Preferred Stock shall have no voting rights withrespect to the election or composition of the Corporation’s Board of Directors. Other than as set forth in the foregoing sentence or asrequired by applicable law, the holders of the Series A Preferred Stock shall be entitled to vote on all and only those matters withrespect to which the holders of Common Stock are entitled to vote, and shall vote together with the holders of the Common Stock as asingle class on an as-converted to Common Stock basis, and not as a separate class.4.Conversion.(a)Conversion by the Holder. Subject to the provisions of this Section 4, each holder of theSeries A Convertible Preferred Stock shall have the right, at such holder’s option, to convert any or all outstanding shares of the SeriesA Convertible Preferred Stock held by such holder, in whole or in part, into fully paid and non-assessable shares of Common Stock ona one-for-one basis, subject to adjustment as provided herein (the “Conversion Rate”).(i)In order to exercise the conversion privilege, the holderof the shares of Series A Convertible Preferred Stock to be converted shall surrender the certificates or bookentry entitlements representing such shares at the office of the Corporation, with a written notice of electionto convert completed and signed, specifying the number of shares to be converted. Unless the shares issuableon conversion are to be issued in the same name as the name in which such shares of Series A ConvertiblePreferred Stock are registered, each share surrendered for conversion shall be accompanied by instruments oftransfer, in form satisfactory to the Corporation, duly executed by the holder or the holder’s duly authorizedattorney and an amount sufficient to pay any transfer or similar tax.(ii)As promptly as practicable after the surrender by theholder of the shares of the Series A Convertible Preferred Stock for conversion pursuant to this Section 4, theCorporation shall issue and deliver to such holder or on the holder’s written order to the holder’s transfereethe whole number of shares of Common Stock issuable upon conversion.2 (iii)Each conversion shall be deemed to have beeneffected immediately prior to the close of business on the date on which the shares of Series A ConvertiblePreferred Stock were surrendered and notice of conversion was received by the Corporation. The Person inwhose name or names the shares of Common Stock are issuable upon such conversion shall be deemed tohave become the holder of record of the shares of Common Stock represented thereby at such time on suchdate, and such conversion shall be into a number of shares of Common Stock equal to the product of thenumber of shares of Series A Convertible Preferred Stock surrendered times the Conversion Rate in effect atsuch time on such date. All shares of Common Stock delivered upon conversion of the Series A ConvertiblePreferred Stock will upon delivery be duly and validly issued and fully paid and non-assessable, free of allliens and charges and not subject to any preemptive rights. Upon the surrender of shares of Series APreferred Stock, such shares shall no longer be deemed to be outstanding and all rights of a holder withrespect to such shares surrendered for conversion shall immediately terminate except the right to receiveCommon Stock and other amounts payable pursuant to this Section 4.(b)Automatic Conversion. Each share of the Series A Convertible Preferred Stock shall automatically beconverted into non-assessable shares of Common Stock at the then effective Conversion Rate upon the Transfer of such share of theSeries A Convertible Preferred Stock to a Person that is not an Affiliate of the holder (“Automatic Conversion”). (i)In the event of an Automatic Conversion, each share ofSeries A Convertible Preferred Stock that is Transferred in accordance with Section 4(b) shall be convertedautomatically without any further action by the holder of such share. (ii)For purposes of this Certificate of Designation,(A)the term, “Affiliate” means,with respect to a Person, any other Person, that directly or indirectly through one or moreintermediaries, controls or is controlled by or is under common control with such Person.(B)the term, “Transfer” or“Transferred” means the direct or indirect sale (including open market sales), assignment,transfer or disposal of, by operation of law or otherwise, of any share of Series A ConvertiblePreferred Stock.3 (c)Each conversion shall be deemed to have been effected immediately prior to the close of business on thedate on which the shares of Series A Convertible Preferred Stock were surrendered and notice of conversion was received by theCorporation, or in the case of Automatic Conversion, on the date of closing or settlement of the Transfer. The Person in whose nameor names the shares of Common Stock are issuable upon such conversion shall be deemed to have become the holder of record of theshares of Common Stock represented thereby at such time on such date, and such conversion shall be into a number of shares ofCommon Stock equal to the product of the number of shares of Series A Convertible Preferred Stock surrendered times the ConversionRate in effect at such time on such date. All shares of Common Stock delivered upon conversion of the Series A Convertible PreferredStock will upon delivery be duly and validly issued and fully paid and non-assessable, free of all liens and charges and not subject toany preemptive rights. Upon the surrender or Automatic Conversion of shares of Series A Preferred Stock, such shares shall no longerbe deemed to be outstanding and all rights of a holder with respect to such shares surrendered for conversion shall immediatelyterminate except the right to receive Common Stock and other amounts payable pursuant to this Section 4.(d)The Corporation shall at all times reserve and keep available, free from preemptive rights, such number ofits authorized but unissued shares of Common Stock as may be required to effect conversions of the Series A Convertible PreferredStock.(e)In connection with the conversion of any shares of Series A Convertible Preferred Stock, no fractions ofshares of Common Stock shall be issued. In lieu thereof the Corporation shall pay a cash adjustment in respect of such fractionalinterest in an amount equal to such fractional interest multiplied by the Current Market Price Per Common Share on the day on whichsuch shares of Series A Convertible Preferred Stock are deemed to have been converted. “Current Market Price Per CommonShare” means, on any determination date, the average of the Daily Prices (as defined below) per share of Common Stock for the 20consecutive trading days immediately prior to such date. If, on any determination date, the shares of Common Stock are not traded ona national securities exchange or quoted by any regulated quotation service, the Current Market Price Per Common Share shall be thefair market value per share as determined in good faith by the Board of Directors. “Daily Price” means if the shares of CommonStock are then listed and traded on a national securities exchange, the closing price on the applicable day as reported by the principalnational securities exchange on which such shares are listed and traded and if such shares are not then listed and traded on a nationalsecurities exchange, the closing price on such day as quoted by any regulated quotation service.5.Anti-dilution Adjustments.4 (a)Common Stock Dividends and Distributions. If the Corporation shall declare and pay a dividend or make adistribution on Common Stock payable in Common Stock, the Conversion Rate in effect immediately prior to the record date for suchdividend or distribution shall be adjusted by multiplying such Conversion Rate by a fraction:(i)the numerator of which shall be the sum of the number of shares of CommonStock outstanding immediately prior to the record date for such dividend or distribution and the total number of shares ofCommon Stock constituting such dividend or distribution; and(ii)the denominator of which shall be the number of shares of Common Stockoutstanding immediately prior to the record date for such dividend or distribution.Any adjustment made pursuant to this Section 5(a) shall become effective immediately after the applicable record date.(b)Subdivisions, Splits and Combinations of Common Stock. If the Corporation shall subdivide or split theoutstanding shares of Common Stock into a greater number of shares or combine or reclassify the outstanding shares of CommonStock into a smaller number of shares, the Conversion Rate in effect immediately prior to the effective date of such subdivision, split,combination or reclassification shall be adjusted by multiplying such Conversion Rate by a fraction:(i)the numerator of which shall be the number of shares of Common Stockoutstanding immediately after such subdivision, split, combination or reclassification; and(ii)the denominator of which shall be the number of shares of Common Stockoutstanding immediately prior to such subdivision, split, combination or reclassification.Any adjustment made pursuant to this Section 5(b) shall become effective immediately after the applicable effective date.(c)Reorganization Events. In the event of:(i)any consolidation or merger of the Corporation with or into another Personpursuant to which the Common Stock will be converted into cash, securities or other property of the Corporation oranother Person;(ii)any sale, transfer, lease or conveyance to another Person of all or substantiallyall of the Corporation’s property and assets;5 (iii)any reclassification of the Common Stock into securities, including securitiesother than the Common Stock;(iv)any statutory exchange of the outstanding shares of Common Stock forsecurities of another Person (other than in connection with a merger or acquisition) (any such event specified in clauses (i)through (iv), a “Reorganization Event”),each share of Series A Convertible Preferred Stock outstanding immediately prior to such Reorganization Event will, without theconsent of the holders thereof, become convertible into the kind and amount of securities, cash and other property receivable in suchReorganization Event that a holder of such share of Series A Convertible Preferred Stock would have been entitled to receive if suchholder had converted its Series A Convertible Preferred Stock into Common Stock immediately prior to such Reorganization Event(such securities, cash and other property, the “Exchange Property”). For purposes of this Section 5(c), the kind and amount ofExchange Property that a holder of Common Stock would have been entitled to receive upon a Reorganization Event if there is right toelect to receive the type of consideration receivable shall be deemed to be the weighted average of the kind and amount of ExchangeProperty received by the holders of Common Stock that affirmatively make such an election or if no holders of Common Stockaffirmatively make such an election, the weighted average of the kind and amount of Exchange Property actually received by suchholders. 6.General Provisions.(a)The term “outstanding”, when used with reference to shares of stock, shall mean issued shares,excluding shares held by the Corporation or any subsidiary of the Corporation.(b)The term “Person” as used herein means any corporation, limited liability company, partnership, trust,organization, association, other entity or individual.(c)The headings of the sections of this Certificate of Designations are for convenience of reference onlyand shall not define, limit or affect any of the provisions hereof. 6  IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be signed and acknowledgedby the undersigned this 5th day of March, 2018.VIEWRAY, INC.By: Name:Chris A. Raanes Title:President and CEO Exhibit 10.23(e) AMENDMENT NO. 4 TO TERM LOAN AGREEMENTTHIS AMENDMENT NO. 4 to Term Loan Agreement, dated as of February 8, 2018 (this “Amendment”) and effective asof December 31, 2017, is made among ViewRay Technologies, Inc., a Delaware corporation (formerly known as ViewRayIncorporated) (“Borrower”) and the lenders listed on the signature pages hereof under the heading “LENDERS” (each a “Lender”and, collectively, the “Lenders”), with respect to the Loan Agreement referred to below.RECITALSWHEREAS, the Borrower and the Lenders are parties to a Term Loan Agreement, dated as of June 26, 2015 (as amendedby that certain Amendment No. 1 to Term Loan Agreement, dated as of March 24, 2016, that certain Amendment No. 2 to Term LoanAgreement, dated as of April 12, 2017, and that certain Amendment No. 3 to Term Loan Agreement, effective as of September 30,2017, the “Loan Agreement”). WHEREAS, the parties hereto desire to amend the Loan Agreement on the terms and subject to the conditions set forthherein.NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the partiesagree as follows:SECTION 1.Definitions; Interpretation. (a)Terms Defined in Loan Agreement. All capitalized terms used in this Amendment (including in therecitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.(b)Interpretation. The rules of interpretation set forth in Section 1.03 of the Loan Agreement shall beapplicable to this Amendment and are incorporated herein by this reference.SECTION 2.Amendment of Loan Agreement. Subject to Section 3, the Loan Agreement is hereby amended asfollows:(a)Section 10.02(b) of the Loan Agreement shall be amended by replacing the number “60,000,000” thereinwith the number “55,000,000.”SECTION 3.Conditions of Effectiveness. The effectiveness of Section 2 shall be subject to the following conditionsprecedent:(a)Borrower shall have paid or reimbursed Lenders for Lenders’ reasonable out of pocket costs and expensesincurred in connection with this Amendment, including Lenders’ reasonable out of pocket legal fees and costs, pursuant to Section12.03(a)(i)(z) of the Loan Agreement. US_ACTIVE-138183225.2(b)The representations and warranties in Section 4 shall be true and correct on the date hereof.SECTION 4.Representations and Warranties; Reaffirmation. (a)Borrower hereby represents and warrants to each Lender as follows:(i)Borrower has full power, authority and legal right to make and perform thisAmendment. This Amendment is within Borrower’s corporate powers and has been duly authorized by all necessary corporate and, ifrequired, by all necessary shareholder action. This Amendment has been duly executed and delivered by Borrower and constitutes alegal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as suchenforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicabilityaffecting the enforcement of creditors’ rights and (b) the application of general principles of equity (regardless of whether suchenforceability is considered in a proceeding in equity or at law). This Amendment (x) does not require any consent or approval of,registration or filing with, or any other action by, any Governmental Authority or any third party, except for such as have beenobtained or made and are in full force and effect, (y) will not violate any applicable law or regulation or the charter, bylaws or otherorganizational documents of Borrower and its Subsidiaries or any order of any Governmental Authority, other than any such violationsthat, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (z) will not violate or resultin an event of default under any material indenture, agreement or other instrument binding upon Borrower and its Subsidiaries orassets, or give rise to a right thereunder to require any payment to be made by any such Person.(ii)No Default has occurred or is continuing or will result after giving effect to thisAmendment. (iii)The representations and warranties made by or with respect to Borrower in Section 7 ofthe Loan Agreement are true in all material respects (except to the extent of any unmade changes to schedules that are permitted to beupdated in accordance with Section 7.20 of the Loan Agreement), except that such representations and warranties that refer to aspecific earlier date were true in all material respects on such earlier date.(iv)There has been no Material Adverse Effect since the date of the Loan Agreement.(b)Borrower hereby ratifies, confirms, reaffirms, and acknowledges its obligations under the LoanDocuments to which it is a party and agrees that the Loan Documents to which it is a party remain in full force and effect,undiminished by this Amendment, except as expressly provided herein and in the Fee Letter. By executing this Amendment,Borrower acknowledges that it has read, consulted with its attorneys regarding, and understands, this Amendment.SECTION 5.Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a)Governing Law. This Amendment and the rights and obligations of the parties hereunder shall begoverned by, and construed in accordance with, the law of the State of NewPage 2 of 6York, without regard to principles of conflicts of laws that would result in the application of the laws of any other jurisdiction; providedthat Section 5-1401 of the New York General Obligations Law shall apply.(b)Submission to Jurisdiction. Borrower agrees that any suit, action or proceeding with respect to thisAmendment or any other Loan Document to which it is a party or any judgment entered by any court in respect thereof may bebrought initially in the federal or state courts in Houston, Texas or in the courts of its own corporate domicile and irrevocably submitsto the non-exclusive jurisdiction of each such court for the purpose of any such suit, action, proceeding or judgment. This Section 5 isfor the benefit of the Lenders only and, as a result, no Lender shall be prevented from taking proceedings in any other courts withjurisdiction. To the extent allowed by applicable Laws, the Lenders may take concurrent proceedings in any number of jurisdictions.(c)Waiver of Jury Trial. Borrower and each Lender hereby irrevocably waives, to the fullest extentpermitted by applicable law, any and all right to trial by jury in any suit, action or proceeding arising out of or relating to thisAmendment, the other Loan Documents or the transactions contemplated hereby or thereby.SECTION 6.Miscellaneous.(a)No Waiver. Nothing contained herein shall be deemed to constitute a waiver of compliance with anyterm or condition contained in the Loan Agreement or any of the other Loan Documents or constitute a course of conduct or dealingamong the parties. Except as expressly stated herein, the Lenders reserve all rights, privileges and remedies under the LoanDocuments. Except as amended hereby and as amended and restated by the Fee Letter, the Loan Agreement and other LoanDocuments remain unmodified and in full force and effect. All references in the Loan Documents to the Loan Agreement shall bedeemed to be references to the Loan Agreement as amended hereby. (b)Severability. In case any provision of or obligation under this Amendment shall be invalid, illegal orunenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of suchprovision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.(c)Headings. Headings and captions used in this Amendment (including the Exhibits, Schedules andAnnexes hereto, if any) are included for convenience of reference only and shall not be given any substantive effect.(d)Integration. This Amendment constitutes a Loan Document and, together with the other LoanDocuments, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression andagreement of the parties hereto with respect to the subject matter hereof.(e)Counterparts. This Amendment may be executed in any number of counterparts, all of which takentogether shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any suchcounterpart.Page 3 of 6(f)Controlling Provisions. In the event of any inconsistencies between the provisions of this Amendmentand the provisions of any other Loan Document, the provisions of this Amendment shall govern and prevail. Except as expresslymodified by this Amendment and by the Fee Letter, the Loan Documents shall not be modified and shall remain in full force andeffect.[Remainder of page intentionally left blank]Page 4 of 6IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment, as of the date first above written. Page 5 of 6 Page 6 of 6 Exhibit 10.40 AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENTTHIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the “Agreement”), is dated as ofMarch 5, 2018, by and among ViewRay, Inc., a Delaware corporation (the “Company”), Strong Influence Limited, a British VirginIslands corporation (the “Investor”) and Fosun International Limited, a company organized under the laws of Hong Kong (the“Guarantor”).RECITALSWHEREAS, the parties hereto entered into a Securities Purchase Agreement dated as of February 25, 2018 (the “OriginalAgreement);WHEREAS, the parties hereto desire to amend and restate the Original Agreement in its entirety as set forth herein;WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to effective registration statementsunder the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to the Investor, and theInvestor desires to purchase from the Company, securities of the Company as more fully described in this Agreement;WHEREAS, the Guarantor desires to guarantee the obligation of the Investor to pay the Purchase Price (as hereinafterdefined) upon the terms described herein;WHEREAS, at the Closing (as hereinafter defined), the Company desires to issue and sell to the Investor, and the Investorwishes to purchase, upon the terms and conditions stated in this Agreement, (a) 4,090,000 shares (the “Common Shares”) of theCompany’s common stock, par value $0.01 per share (“Common Stock”), (b) 3,000,581 shares (the “Preferred Shares”, and togetherwith the Common Shares, the “Shares”) of the Company’s Series A Convertible Preferred Stock, par value $0.01 per share (the“Series A Convertible Preferred Stock”), having the rights and privileges set forth in the Certificate of Designations in the formattached as Exhibit B hereto and (c) a Warrant exercisable for 1,418,116 shares of Common Stock in the form attached as Exhibit Ahereto (the “Warrant”, and together with the Shares, the “Securities”); andNOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other goodand valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company, the Investor and the Guarantorhereby agree to amend and restate the Original Agreement in its entirety as set forth herein: -Amended and Restated Securities Purchase Agreement Page 1 - ARTICLE 1DEFINITIONS1.1Definitions. In addition to the terms elsewhere in this Agreement, the following terms have the meaningsindicated:“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or iscontrolled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the SecuritiesAct.“Board” means the board of directors of the Company.“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in NewYork are authorized or required by applicable law to remain closed.“Change of Control Transaction” means (a) any transaction or series of related transactions, whether or not theCompany is a party thereto, in which, after giving effect to such transaction or transactions, Common Stock representing in excess offifty percent (50%) of the voting power of the Company are owned directly, or indirectly through one or more entities, by any “person”or “group” (as such terms are used in Section 13(d) of the Exchange Act) of Persons, (b) a sale, lease or other disposition of all orsubstantially all of the assets of the Company and its Subsidiaries on a consolidated basis (including securities or interests of theCompany’s directly or indirectly owned Subsidiaries) or (c) the exclusive licensing of substantially all of the Company’s intellectualproperty.“Common Shares” has the meaning ascribed to such term in the Recitals to this Agreement.“Common Stock” has the meaning ascribed to such term in the Recitals to this Agreement.“Commission” means the United States Securities and Exchange Commission.“Company Fundamental Representations” means the representations and warranties of the Company set forth inSections 4.1 (Organization and Qualification), 4.2 (Authorization; Enforcement), 4.5 (Valid Issuance) and 4.6 (Capitalization).“Effective Date” means, with respect to an S-3 Registration Statement, the date and time as of which such S-3Registration Statement was declared effective by the Commission.“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of theCommission promulgated thereunder.“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental,regulatory or administrative authority, department, court, agency or-Amended and Restated Securities Purchase Agreement Page 2 - official (including any court, tribunal or arbitral body) and any political subdivision thereof (including any authority or politicalsubdivision in the People’s Republic of China such as the National Development and Reform Commission, the Ministry of Commerceand the State Administration for Foreign Exchange and any of their respective local branches).“Investor Group” means the Investor and its affiliates and associates (as such terms are defined in Rule 12b-2 ofthe Exchange Act).“Lien” means, with respect to any asset, any pledge, lien, collateral assignment, security interest, encumbrance,right of first refusal, mortgage, deed of trust, title retention, conditional sale or other security arrangement, or adverse claim of title.“Material Adverse Effect” means any of (a) a material adverse effect on the validity or enforceability of thisAgreement, (b) a material adverse effect on the condition (financial or otherwise), earnings, operations, assets, liabilities, business orproperties of the Company and its Subsidiaries, taken as a whole, or (c) a material adverse effect on the Company’s ability to performits obligations under this Agreement, the Warrant or the Registration Rights Agreement.“Person” means any individual, corporation, limited liability company, partnership, joint venture, trust,incorporated or unincorporated association, joint stock company, unincorporated organization, a government or any department,subdivision or agency thereof, or other entity of any kind.“Preferred Shares” has the meaning ascribed to such term in the Recitals to this Agreement.“Series A Preferred Stock” has the meaning ascribed to such term in the Recitals to this Agreement.“Shares” has the meaning ascribed to such term in the Recitals to this Agreement.“Subsidiary” means any direct or indirect subsidiary.“Transfer Agent” means American Stock Transfer & Trust Company, LLC or any successor transfer agent for theCompany. ARTICLE 2PURCHASE AND SALE2.1Purchase and Sale of the Securities. Subject to the terms and conditions of this Agreement, the Company shallissue and sell to the Investor, and the Investor shall purchase from the Company, (a) 4,090,000 Common Shares at a purchase price of$8.31 per share (equal to an aggregate purchase price of $33,987,900.00), (b) 3,000,581 Preferred Shares at a purchase-Amended and Restated Securities Purchase Agreement Page 3 - price of $8.31 per share (equal to an aggregate purchase price of $24,934,828.11) and (c) the Warrant, exercisable for 1,418,116 sharesof Common Stock (the “Warrant Shares”) at an exercise price of $8.31 per share, at a purchase price of $0.125 per Warrant Share(equal to an aggregate purchase price of $177,264.50) (the aggregate purchase price of the Warrant, together with the aggregatepurchase price of the Shares, the “Purchase Price,” equal to $59,099,992.61).ARTICLE 3.CLOSING AND DELIVERY3.1Closing. The closing (the “Closing”) of the purchase and sale of the Securities shall take place on the date of thisAgreement, or on such other date as each of the parties hereto mutually agree, at the offices of Davis Polk & Wardwell LLP, 1600 ElCamino Real, Menlo Park, California, (such date of the Closing, the “Closing Date”). 3.2Purchase of the Securities at the Closing. At the Closing, (a) the Investor shall deliver or cause to be delivered tothe Company the aggregate Purchase Price in U.S. dollars in immediately available funds by wire transfer to the Company’s account,(b) the Company shall either (i) deliver to the Investor evidence of a book entry position evidencing the Shares or (ii) issue one or morestock certificates registered in the name of the Investor, or in such nominee name(s) as designated by the Investor, representing thenumber of Shares purchased by the Investor at the Closing against payment of the Purchase Price, (c) the Company shall execute anddeliver the Warrant to the Investor and (d) each of the Company and the Investor shall deliver to each other an executed registrationrights agreement (the “Registration Rights Agreement”).ARTICLE 4REPRESENTATIONS, WARRANTIES OF THE COMPANYExcept as otherwise described in the SEC Documents (as defined below) or in the Schedule of Exceptions delivered tothe Investor concurrently with the Original Agreement (the “Schedule of Exceptions”), which disclosures qualify these representationsand warranties in their entirety, the Company hereby represents and warrants to the Investor as follows:4.1Organization and Qualification. The Company and each of its material Subsidiaries (i) has been dulyincorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with full corporatepower and authority to own or lease, as the case may be, and to operate its properties and conduct its business as presently conducted,and (ii) is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction whichrequires such qualification, except in the case of clause (ii) above, to the extent that the failure to be so qualified or be in good standingwould not reasonably be expected to result in a Material Adverse Effect. 4.2Authorization; Enforcement. The execution, delivery and performance by the Company of this Agreement, theWarrant and the Registration Rights Agreement (collectively, the “Transaction Documents”) and the consummation of the transactionscontemplated hereby-Amended and Restated Securities Purchase Agreement Page 4 - and thereby are within the corporate powers of the Company and have been duly authorized by all necessary corporate action on thepart of the Company. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and bindingagreement of the Company, enforceable against it in accordance with the terms hereof and thereof, subject to applicable bankruptcy,insolvency and similar laws affecting creditors’ rights generally.4.3No Conflicts. The execution, delivery and performance by the Company of the Transaction Documents and theconsummation of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of theCompany’s certificate of incorporation or by-laws; (ii) conflict with, or constitute a default (or an event that with notice or lapse of timeor both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with orwithout notice, lapse of time or both) of, any agreement to which the Company or any material Subsidiary is a party or by which anyproperty or asset of the Company or any material Subsidiary is bound or affected; or (iii) result in a violation of any applicable law,except, in the case of clause (ii) or (iii), to the extent that such conflict or violation has not had and would not, individually or in theaggregate, reasonably be expected to have a Material Adverse Effect.4.4Governmental Authorization. The execution, delivery and performance by the Company of the TransactionDocuments and the consummation of the transactions contemplated hereby and thereby require no approval or action by or filing withor notice to any Governmental Authority.4.5Valid Issuance. The Shares have been duly authorized and, when issued and paid for in accordance with thisAgreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens. The Warrant Shares have beenduly authorized and, upon exercise of the Warrant in accordance with its terms, including payment of the exercise price therefore, willbe duly and validly issued, fully paid and nonassessable, free and clear of all Liens. The shares of Common Stock into which thePreferred Shares may be converted in accordance with the terms of the Certificate (as defined below) have been duly authorized and,upon conversion of the Preferred Shares in accordance with the terms of the Certificate, will be duly and validly issued, fully paid andnonassessable, free and clear of all Liens.4.6Capitalization. (a)The authorized capital stock of the Company consists of 300,000,000 shares of Common Stock and10,000,000 shares of undesignated preferred stock, par value $0.01 per share (the “Preferred Stock”). As of the date hereof andexcluding the Preferred Shares to be issued hereunder, there were no shares of Preferred Stock issued and outstanding, and as ofFebruary 25, 2018 there were 67,653,974 shares of Common Stock issued and outstanding, of which no shares are owned by theCompany. There are no other shares of any other class or series of capital stock of the Company issued or outstanding. The Companyhas no capital stock reserved for issuance, except that there are 14,198,346 shares of Common Stock reserved for issuance pursuant tothe Company’s 2008 Stock Option and Incentive Plan, 2015 Equity Incentive Plan (the “2015 Plan”) and 2015 Employee StockPurchase Plan (the “ESPP”) (as well as any future automatic increases in the number of shares of the Company’s Common Stockreserved for future issuance under the 2015 Plan and ESPP) and outstanding warrants to-Amended and Restated Securities Purchase Agreement Page 5 - purchase an aggregate of 3,393,755 shares of Common Stock. There are no bonds, debentures, notes or other indebtedness havinggeneral voting rights (or convertible into securities having such rights) (“Voting Debt”) of the Company issued and outstanding. Except as stated above, there are no existing options, warrants, calls, subscriptions or other rights, agreements, arrangements orcommitments relating to the issued or unissued capital stock of the Company, obligating the Company to issue, transfer, sell, redeem,purchase, repurchase or otherwise acquire or cause to be issued, transferred, sold, redeemed, purchased, repurchased or otherwiseacquired any capital stock or Voting Debt of, or other equity interest in, the Company or securities or rights convertible into orexchangeable for such shares or equity interests or obligations of the Company to grant, extend or enter into any such option, warrant,call, subscription or other right, agreement, arrangement or commitment. The issuance of Securities or the Warrant Shares pursuant toany provision of this Agreement or the Warrant will not give rise to any preemptive rights or rights of first refusal on behalf of anyperson or result in the triggering of any anti-dilution rights.(b)Immediately following the Closing, the Shares and the Warrant Shares (assuming the Warrant is fullyexercised) would, in the aggregate, represent approximately 19.94% of the total outstanding shares of capital stock of the Company.4.7SEC Documents; Financial Statements. The Company has filed in a timely manner all documents that theCompany was required to file with the Commission under Sections 13, 14(a) and 15(d) of the Exchange Act, since January 1,2017. As of their respective filing dates (or, if amended prior to the date of this Agreement, when amended), all documents filed by theCompany with the Commission since January 1, 2017 (the “SEC Documents”) complied in all material respects with the requirementsof the Exchange Act and the rules and regulations of the Commission promulgated thereunder. None of the SEC Documents as oftheir respective dates contained any untrue statement of material fact or omitted to state a material fact required to be stated therein ornecessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Thefinancial statements of the Company included in the SEC Documents (the “Financial Statements”) present fairly the financialcondition, results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form with theapplicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principlesapplied on a consistent basis throughout the periods involved (except as otherwise noted therein). Deloitte & Touche LLP, who havecertified certain financial statements of the Company and delivered their report with respect to the audited consolidated financialstatements and schedules included in the SEC Documents, are independent public accountants with respect to the Company within themeaning of the Securities Act and the applicable published rules and regulations thereunder. 4.8Registration Statement. Registration statements on Form S-3 (Nos. 333-217416 and 333-215815), includingforms of prospectuses relating to the Securities (the “S-3 Registration Statements”) have been filed with the Commission and have beendeclared effective. On the Effective Date of each S-3 Registration Statement, such Registration Statement conformed in all materialrespects to the requirements of the Securities Act and the rules and regulations of the Commission (the “Rules and Regulations”) anddid not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary tomake the statements therein not misleading. On the date of this Agreement, the S-3-Amended and Restated Securities Purchase Agreement Page 6 - Registration Statements and related prospectuses each conform in all material respects to the requirements of the Securities Act and theRules and Regulations, and none of such documents includes any untrue statement of a material fact or omits to state any material factrequired to be stated therein or necessary to make the statements therein not misleading.4.9Compliance. Except as would not, individually or in the aggregate, result in a Material Adverse Effect: (a) theCompany is and has been in compliance with statutes, laws, ordinances, rules and regulations applicable to the Company for theownership, testing, development, manufacture, packaging, processing, use, labeling, storage, or disposal of any product manufacturedby or on behalf of the Company or out-licensed by the Company (a “Company Product”), including without limitation, the FederalFood, Drug, and Cosmetic Act, 21 U.S.C. § 301, et seq., the Public Health Service Act, 42 U.S.C. § 262, Health Insurance Portabilityand Accountability Act of 1996, as amended by Health Information Technology for Economic and Clinical Health Act, or HIPPA,Export Administrations Act of 1979, Arms Export Contract Act, 35 U.S.C. Chapter 18, similar laws of other federal and stategovernmental entities and the regulations promulgated pursuant to such laws (collectively, “Applicable Laws”); (b) the Companypossesses all licenses, certificates, approvals, authorizations, permits and supplements or amendments thereto required by any suchApplicable Laws and/or for the ownership of its properties or the conduct of its business as it relates to a Company Product and asdescribed in the SEC Documents (collectively, “Authorizations”) and such Authorizations are valid and in full force and effect and theCompany is not in violation of any term of any such Authorizations; (c) the Company has not received any written notice of adversefinding, warning letter or other written correspondence or notice from the U.S. Food and Drug Administration (the “FDA”), or anyother federal and state governmental entity alleging or asserting noncompliance with any Applicable Laws or Authorizations relating toa Company Product; (d) the Company has not received written notice of any ongoing claim, action, suit, proceeding, hearing,enforcement, investigation, arbitration or other action from any governmental entity or third party alleging that any Company Product,operation or activity related to a Company Product is in violation of any Applicable Laws or Authorizations or has any knowledge thatany such governmental entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation orproceeding, nor, to the Company’s knowledge, has there been any noncompliance with or violation of any Applicable Laws by theCompany that would reasonably be expected to require the issuance of any such written notice or result in an investigation, correctiveaction, or enforcement action by the FDA, or similar governmental entity with respect to a Company Product; (e) the Company has notreceived written notice that any governmental entity has taken, is taking or intends to take action to limit, suspend, modify or revokeany Authorizations or has any knowledge that any such governmental entity has threatened or is considering such action with respectto a Company Product; and (f) the Company has filed, obtained, maintained or submitted all reports, documents, forms, notices,applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations andthat all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments werecomplete, correct and not misleading on the date filed (or were corrected or supplemented by a subsequent submission).4.10Intellectual Property. Except as would not, individually or in the aggregate, result in a Material Adverse Effect:(a) the Company owns, possesses, licenses or has other rights to use, on reasonable terms, all of the Company’s patents, patentapplications, trade and service-Amended and Restated Securities Purchase Agreement Page 7 - marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how andother intellectual property (collectively, “Company Intellectual Property”) necessary for the conduct of the Company’s business as nowconducted or as proposed in the SEC Documents to be conducted, (b) to the knowledge of the Company, there are no rights of thirdparties to any Company Intellectual Property, other than as licensed by the Company, and there is no infringement by third parties ofany Company Intellectual Property (c) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding orclaim by others challenging the Company’s rights in or to any Company Intellectual Property, challenging the validity or scope of anyCompany Intellectual Property or that the Company infringes or otherwise violates any patent, trademark, copyright, trade secret orother proprietary rights of others and (d) the Company is not aware of any facts required to be disclosed to the U.S. Patent andTrademark Office (“USPTO”) which have not been disclosed to the USPTO and which would preclude the grant of a patent inconnection with any patent application of the Company Intellectual Property or could form the basis of a finding of invalidity withrespect to any issued patents of the Company Intellectual Property.4.11Litigation. No action, suit or proceeding by or before any court or governmental agency, authority or body orany arbitrator involving the Company or its property is pending or, to the best knowledge of the Company, threatened that will have aMaterial Adverse Effect, whether or not arising from transactions in the ordinary course of business.4.12Taxes. The Company has filed all tax returns that are required to be filed or has requested extensions thereof(except in any case in which the failure so to file would not have a Material Adverse Effect, whether or not arising from transactions inthe ordinary course of business, except as contemplated in the SEC Documents) and has paid all taxes required to be paid by it and anyother assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any suchassessment, fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect, whether ornot arising from transactions in the ordinary course of business, except as contemplated in the SEC Documents4.13No Material Adverse Change. Since September 30, 2017, there have not been any changes in the authorizedcapital, assets, liabilities, financial condition, business, material contracts or operations of the Company from that reflected in theFinancial Statements except changes in the ordinary course of business which have not been, either individually or in the aggregate,materially adverse to the business, properties, financial condition or results of operations of the Company. 4.14Voting Agreements. Except for the stockholders’ agreement dated as of January 13, 2017, between and amongthe Company and the stockholders named therein, and except for the Securities Purchase Agreement dated as of October 23, 2017, byand among the parties hereto (the “Prior Agreement”), there are no shareholder agreements, voting agreements or other similararrangements with respect to the voting of the Company’s capital stock (i) to which the Company is a party or (ii) to the knowledge ofthe Company, between or among any of the Company’s stockholders.-Amended and Restated Securities Purchase Agreement Page 8 - 4.15Price of Common Stock. The Company has not taken, directly or indirectly, any action designed to cause orresult in, or that has constituted or that might reasonably be expected to constitute the stabilization or manipulation of the price of anysecurities of the Company to facilitate the sale or resale of the Shares.4.16Brokers. Neither the Company nor any of the officers, directors or employees of the Company has employedany broker or finder or other Person in similar capacity in connection with the transaction contemplated by this Agreement.ARTICLE 5REPRESENTATIONS AND WARRANTIES OF THE INVESTOR AND THE GUARANTORThe Investor hereby represents and warrants to the Company as follows:5.1Organization and Qualification. The Guarantor and the Investor are each an entity duly organized, validlyexisting and in good standing under the applicable laws of the jurisdiction of its incorporation or organization (as applicable). TheInvestor is an indirect wholly-owned Subsidiary of the Guarantor. The Guarantor is a company organized under the laws of HongKong and listed on the Stock Exchange of Hong Kong Limited. 5.2Authorization; Enforcement. The execution, delivery and performance by the Investor and the Guarantor of thisAgreement and the consummation of the transactions contemplated hereby and under the Warrant are within the corporate powers ofthe Investor and the Guarantor and have been duly authorized by all necessary corporate action on the part of the Investor and theGuarantor. This Agreement has been duly executed and delivered by the Investor and the Guarantor and constitutes a legal, valid andbinding agreement of each of them, enforceable against each of them in accordance with the terms hereof and thereof, subject toapplicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally.5.3No Conflicts. The execution, delivery and performance by the Investor and the Guarantor of this Agreement andthe consummation of the transactions contemplated hereby and under the Warrant do not and will not: (i) conflict with or violate anyprovision of their respective certificate of incorporation or by-laws or similar organizational documents; (ii) conflict with, or constitute adefault (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination,amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement to which the Investor or theGuarantor is a party or by which any property or asset of the Investor or the Guarantor or any Subsidiary thereof is bound or affected;or (iii) result in a violation of any applicable law, except, in the case of clause (ii) or (iii), to the extent that such conflict or violation hasnot had and would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Investor’s orthe Guarantor’s ability to consummate on a timely basis the transactions contemplated hereby.5.4Governmental Authorization. The execution, delivery and performance by the Investor and the Guarantor of thisAgreement and the consummation of the transactions-Amended and Restated Securities Purchase Agreement Page 9 - contemplated hereby and under the Warrant require no approval or action by or filing with or notice to any Governmental Authority.5.5No Public Sale or Distribution. The Investor is acquiring the Securities and, if and when the Warrant is exercised,the Warrant Shares, in each case, not with a view towards, or for resale in connection with, the public sale or distribution thereof,except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance withapplicable federal and state securities laws, and the Investor does not have a present arrangement to effect any distribution of theSecurities or Warrant Shares to or through any Person. 5.6Broker Fees. Neither the Investor nor the Guarantor has employed any broker, investment banker, finder or otherPerson in a similar capacity in connection with this Agreement or the transactions contemplated hereby. 5.7Ownership of Company Securities. As of the date of this Agreement and excluding the Securities to be issuedhereunder, the Investor (together with any member of the Investor Group) beneficially owns 6,677,975 shares of Common Stock, anddoes not own any other equity or voting securities of the Company, or any options, warrants or other rights to acquire equity or votingsecurities of the Company or any other securities convertible into equity securities of the Company. 5.8Financing. At the Closing, the Investor will have sufficient cash of immediately available U.S. Dollars to enable itto make payment of the Purchase Price.5.9Experience of the Investor and the Guarantor. Each of the Investor and the Guarantor, either alone or togetherwith its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable ofevaluating the merits and risks of the prospective investment in the Securities and the Warrant Shares, and has so evaluated the meritsand risks of such investment prior to entry into this Agreement. Each of the Investor and the Guarantor understands that it must bearthe economic risk of this investment in the Securities, and is able to bear such risk and is able to afford a complete loss of suchinvestment. Each of the Investor and the Guarantor is, and will continue to be, solely responsible for making its own independentanalysis of and investigations into the status, creditworthiness, prospects, business, operations, assets and condition of the Companyand its Subsidiaries and for making its own decision as to the purchase of, or the taking of any action in connection with, the Securitiesor the Warrant Shares.5.10Access to Information. Each of the Investor and the Guarantor acknowledges that it has had the opportunity toreview this Agreement and all publicly available records and filings by the Company, and has been afforded: (i) the opportunity to asksuch questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms andconditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about theCompany and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it toevaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquirewithout unreasonable effort or expense that is necessary to make an-Amended and Restated Securities Purchase Agreement Page 10 - informed investment decision with respect to the investment. Each of the Investor and the Guarantor also acknowledges that theCompany would not enter into this transaction in the absence of the Investor’s representations and acknowledgments set forth underSection 5.10 and this Section 5.11 and that these provisions, including such representations and acknowledgments, are a fundamentalinducement to the Company, and that the Company would not enter into this transaction but for this inducement.ARTICLE 6OTHER AGREEMENTS OF THE PARTIES6.1Lock-Up. The Investor hereby agrees not to sell, transfer or otherwise dispose of, directly or indirectly, anySecurities or Warrant Shares (including by entry into any swap or other arrangement that transfers to another Person any of theeconomic consequences of ownership of Securities or Warrant Shares) until 180 days after the Closing Date, except: (i) in connectionwith, or after the closing of, a Change of Control Transaction; (ii) a transfer to an Affiliate of the Investor that is organized under thelaws of any state in the United States of America, provided such Affiliate agrees in writing to be bound by the terms of Sections 6.1and ​6.2 hereunder; (iii) a transfer to an Affiliate of the Investor that is not organized under the laws of any state in the United States ofAmerica, provided that the Company provides prior written consent to such transfer (such consent not to be unreasonably withheld),and provided such Affiliate agrees in writing to be bound by the terms of Sections 6.1 and ​6.2 hereunder; (iv) with prior Boardapproval; or (v) upon a final non-appealable order issued by a Governmental Authority in the United States of America or the People’sRepublic of China.6.2Standstill. The Investor agrees that from the date hereof and until one year following the date hereof (the“Standstill Period”), it will not, and will also ensure that no member of the Investor Group nor any Person acting on behalf of or inconcert with the Investor nor any member of the Investor Group, will directly or indirectly, without the prior written consent of theCompany: (i) acquire, agree to acquire, propose, seek or offer to acquire, or facilitate the acquisition or ownership of, any securities ofthe Company or any of its Subsidiaries, or any warrant, option or other direct or indirect right to acquire any such securities that (takentogether with all Shares, Warrant Shares and other voting securities held by the Investor Group) exceeds 25% of the then outstandingshares of Common Stock; (ii) enter, agree to enter, propose, seek or offer to enter into or facilitate any merger, business combination,recapitalization, restructuring or other extraordinary transaction involving the Company or any of its Subsidiaries; (iii) initiate,encourage, make, or in any way participate or engage in, any “solicitation” of “proxies” as such terms are used in the proxy rules of theCommission to vote, or seek to advise or influence any Person with respect to the voting of, any voting securities of the Company; (iv)file with the Commission a proxy statement or any supplement thereof or any other soliciting material in respect of the Company or itsstockholders that would be required to be filed with the Commission pursuant to Rule 14a-12 or other provisions of the Exchange Act;(v) except as set forth in Sections 6.3 or 6.4 of the Prior Agreement, nominate or recommend for nomination a Person for election atany stockholder meeting at which directors of the Company’s board of directors are to be elected; (vi) submit any stockholder proposalfor consideration at, or bring any other business before, any Company stockholder meeting; (vii) form, join or in any-Amended and Restated Securities Purchase Agreement Page 11 - way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of theCompany; (ix) call, request the calling of, or otherwise seek or assist in the calling of a special meeting of the stockholders of theCompany; (x) otherwise act, alone or in concert with others, to seek to control or influence the management or the policies of theCompany; (xi) disclose any intention, plan or arrangement prohibited by, or inconsistent with, the foregoing; or (xii) advise, assist orencourage or enter into any discussions, negotiations, agreements or arrangements with any other Persons in connection with theforegoing.6.3Waiver and Amendment of Prior Agreement. Each of the parties hereto hereby agrees to (i) waive the provisionsof Section 6.2 of the Prior Agreement to the extent such Section would otherwise prohibit the acquisition by the Investor of theSecurities and the Warrant Shares pursuant to this Agreement and the Warrant and (ii) amend Section 6.2 of the Prior Agreement toreplace the reference to “19.9%” therein with “25%”, effective immediately.6.4Observer Right. As long as the Investor and its Affiliates collectively beneficially own at least 90% of the Sharespurchased by them under this Agreement, the Company shall invite one representative of the Investor (or an Affiliate of the Investor)(the “Observer”) to attend all meetings of the Board in a nonvoting observer capacity and, concurrently with the delivery to themembers of the Board, give to such Observer copies of all notices, minutes, consents, and other materials that it provides to itsdirectors; provided, however, that the Board shall have a right to approve the Observer (such approval not to be unreasonably withheldor delayed); provided, further, that the Observer executes and delivers to the Company a customary confidentiality agreement prior toattending any Board meetings or receiving any such materials. If the Board does not approve of any Observer, then the Investor mayselect another individual for Board approval until an Observer is approved. 6.5Publicity; Press Releases. The Company and the Investor shall consult with each other before issuing any pressreleases with respect to the transactions contemplated hereby, and the Company and the Investor shall not issue any such press releaseor otherwise make any such public statement or filing in connection with the transactions contemplated by this Agreement without theprior consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed, except for (a) the filingscontemplated under Section 6.7, (b) one or more prospectus supplements and/or free writing prospectuses relating to the S-3Registration Statements and (c) any other disclosure that is required by applicable law (including the rules of any applicable stockexchange), in which case the disclosing party shall provide the other party with prior notice of such public statement, filing orcommunication, and an opportunity to review such public statement, filing or communication.6.6Confidentiality After the Date Hereof. The Investor covenants that until such time as the transactionscontemplated by this Agreement are publicly disclosed by the Company, the Investor will maintain the confidentiality of all disclosuresmade to it in connection with this transaction (including the existence and terms of this transaction).6.7Securities Laws Disclosure. The Company will timely and no later than four (4) Business Days from the date ofthis Agreement file a Current Report on Form 8-K and/or an Amendment to Current Report on Form 8-K/A with the Commissiondescribing the terms of the-Amended and Restated Securities Purchase Agreement Page 12 - Transaction Documents (and including as exhibits to such Current Report on Form 8-K any agreements required to be filed inconnection therewith).6.8Series A Preferred Stock. (a)The Board has approved, and the Company shall file prior to the Closing, a Certificate of Designationsin respect of the Series A Convertible Preferred Stock (the “Certificate”) in accordance with the Amended and Restated Certificate ofIncorporation of the Company and the General Corporation Law of the State of Delaware, in substantially the form attached hereto asExhibit B. (b)The parties hereto agree that the Preferred Shares shall be deemed to be “Shares” for all purposes underthe Registration Rights Agreement. ARTICLE 7GUARANTEE.7.1Guarantee. The Guarantor hereby absolutely, unconditionally and irrevocably guarantees to the Company,as the primary obligor and not merely as surety, the due and timely observance, payment (to the extent applicable), performance anddischarge of the Investor’s obligations under this Agreement (the “Obligations”), including without limitation the payment of thePurchase Price at the Closing. If the Investor fails to perform any of the Obligations when due pursuant to the terms of this Agreement,then the Guarantor’s liabilities to the Company hereunder in respect of such Obligations shall, at the Company’s option, becomeimmediately due and the Company may at any time and from time to time, at the Company’s option, take any and all actions availablehereunder or under applicable law in respect of such Obligations, including, if applicable, collecting the Purchase Price from theGuarantor. In furtherance of the foregoing, the Guarantor acknowledges that the Company may, in its sole discretion, bring andprosecute a separate action or actions against the Guarantor in respect of the Obligations, regardless of whether any action is broughtagainst the Investor. ARTICLE 8INDEMNIFICATION8.1Indemnification by the Company. From the Closing Date until the one year anniversary of the Closing Date(except indemnification for inaccuracies in the Company Fundamental Representations, which shall not be subject to such time limit),the Company agrees to indemnify and hold harmless the Investor and each person, if any, who controls the Investor within themeaning of the Securities Act (each, an “Indemnified Party”), against any losses, claims, damages, liabilities or expenses, joint orseveral, to which such Indemnified Party may become subject under the any federal or state statutory law or regulation, or at commonlaw (including in settlement of any litigation, if such settlement is effected with the prior written consent of the Company), insofar assuch losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based inwhole or in part on-Amended and Restated Securities Purchase Agreement Page 13 - any inaccuracy in the representations and warranties of the Company contained in this Agreement or any failure of the Company toperform its obligations hereunder, and will reimburse each Indemnified Party for legal and other expenses reasonably incurred as suchexpenses are reasonably incurred by such Indemnified Party in connection with investigating, defending, settling, compromising orpaying such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such caseto the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) the failure of such IndemnifiedParty to comply with the covenants and agreements contained in this Agreement, or (ii) the inaccuracy of any representations made bysuch Indemnified Party herein.ARTICLE 9MISCELLANEOUS9.1Fees and Expenses. Each party shall bear its own costs and expenses in connection with entry into thisAgreement and the transactions contemplated hereby, including attorneys’ fees. The Company shall pay any transfer agent fees, stamptaxes and other taxes and duties levied in connection with the sale and issuance of the Securities or the Warrant Shares.9.2Entire Agreement. This Agreement and the other documents delivered in connection herewith, including theWarrant, the Registration Rights Agreement and the Schedule of Exceptions, constitute the full and entire understanding andagreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral orwritten, with respect to such matters.9.3Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be sent ormailed by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, and shall bedeemed given when so received in the case of mail or courier, and addressed as follows:Notices for the Company:2 Thermo Fisher WayOakwood Village, Ohio 44146Attention: Chris A. Raanes, CEOFacsimile: 800-417-3459Email: craanes@viewray.com and 815 E Middlefield Rd,Mountain View, CA 94043Attention: Chris A. Raanes, CEOFacsimile: 800-417-3459Email: craanes@viewray.com with a copy (which shall not constitute notice) to:-Amended and Restated Securities Purchase Agreement Page 14 - Davis Polk & Wardwell LLP1600 El Camino Real, Menlo Park, CA 94025Attention: Alan DenenbergFacsimile: 650-752-2111Email: alan.denenberg@davispolk.com Notices for the Investor: 2101 ICBC Tower3 Garden RoadCentral, Hong Kong.Attention: Angel Sze, Company SecretaryFacsimile: +852-2509-9028Email: angelsze@fosun.com Notices for the Guarantor: 2101 ICBC Tower3 Garden RoadCentral, Hong Kong.Attention: Angel Sze, Company SecretaryFacsimile: +852-2509-9028Email: angelsze@fosun.com with a copy (which shall not constitute notice) to:DLA Piper LLP (US)555 Mission Street, Suite 2400San Francisco, CA 94105Attention: Paul P ChenFacsimile: 415-659-7348Email: paul.chen@dlapiper.com Any party may give any notice, request, demand, claim or other communication hereunder using any other means (includingpersonal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request,demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party forwhom it is intended. 9.4Amendments; Waivers. No provision of this Agreement may be waived or amended except in a writteninstrument signed, in the case of an amendment, by each of the parties hereto, or in the case of a waiver, by the party against whom thewaiver is to be effective. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall bedeemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition orrequirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise ofany such right. -Amended and Restated Securities Purchase Agreement Page 15 - 9.5Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shallnot be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the languagechosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. The partiesacknowledge and agree that: (i) each party and its counsel have reviewed the terms and provisions of this Agreement and havecontributed to its drafting; and (ii) the normal rule of construction, to the effect that any ambiguities are resolved against the draftingparty, shall not be employed in the interpretation of this Agreement.9.6Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and theirsuccessors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without theprior written consent of the Investor, and the Guarantor may not assign this Agreement or any rights or obligations hereunder withoutthe prior written consent of the Company. With the consent of the Company, which shall not be unreasonably withheld, the Investormay assign any or all of its rights under this Agreement to any Person to whom the Investor assigns or transfers any Securities,provided, that the Investor may assign any or all rights under this Agreement to an Affiliate of the Investor without the consent of theCompany, and provided, further: (i) such transferor agrees in writing with the transferee or assignee to assign such rights, and a copy ofsuch agreement is furnished to the Company after such assignment; (ii) the Company is furnished with written notice of the name andaddress of such transferee or assignee; (iii) following such transfer or assignment, the further disposition of such securities by thetransferee or assignee is restricted under the Securities Act and applicable state securities laws, unless such disposition was madepursuant to an effective registration statement or an exemption under the Securities Act; (iv) such transferee agrees in writing to bebound, with respect to the transferred Securities, by the provisions of each of the Transaction Documents that apply to the Investor; and(v) such transfer shall have been made in accordance with the applicable requirements of this Agreement and with all laws applicablethereto.9.7No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respectivesuccessors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.9.8Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordancewith the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of theState of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State ofDelaware. Each of the parties hereto irrevocably: (i) consents to the exclusive jurisdiction and venue of the Delaware Court ofChancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines toaccept jurisdiction over a particular matter, any state or federal court within the State of Delaware) in connection with any matter basedupon or arising out of the Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers,shareholders, employees or agents) or the matters contemplated by this Agreement; (ii) agrees that process may be served upon them inany manner authorized by the laws of the State of Delaware for such persons; and (iii) waives and covenants not to assert or plead anyobjection it may now or hereafter have, to the laying of the venue of any such suit, action or proceeding in any such court-Amended and Restated Securities Purchase Agreement Page 16 - or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum, all to the fullest extentpermitted by applicable law. Any party may make service on another party by sending or delivering a copy of the process to the partyto be served at the address and in the manner provided for the giving of notices in Section 9.3. Nothing in this Section 9.8 however,shall affect the right of any party to serve legal process in any other manner permitted by law.9.9WAIVER OF JURY TRIAL. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALLRIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN ANY JURISDICTION BETWEEN THE PARTIESARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THISAGREEMENT.9.10Survival. The representations and warranties contained herein shall survive the Closing. The agreements andcovenants contained herein shall survive the Closing in accordance with their respective terms. 9.11Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken togethershall be considered one and the same agreement and shall become effective when counterparts have been signed by each party anddelivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature isdelivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the partyexecuting (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attachedsignature page were an original thereof.9.12Severability. If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, thevalidity, illegality and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected orimpaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor,and upon so agreeing, shall incorporate such substitute provision in this Agreement.9.13Replacement of Shares. If the Shares or the Warrant Shares are certificated and any certificate or instrumentevidencing any Shares or Warrant Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued inexchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, butonly upon receipt of evidence reasonably satisfactory to the Company and the Company’s transfer agent of such loss, theft ordestruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnifyand hold harmless the Company and the Company’s transfer agent for any losses in connection therewith or, if required by the transferagent, a bond in such form and amount as is required by the transfer agent. The applicants for a new certificate or instrument undersuch circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares or WarrantShares. If a replacement certificate or instrument evidencing any Shares or Warrant Shares is requested due to a mutilation thereof, theCompany may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.-Amended and Restated Securities Purchase Agreement Page 17 - 9.14Remedies; Specific Performance. The rights and remedies of the parties shall be cumulative (and notalternative). The parties agree that irreparable damage would occur if any provision of this Agreement were not performed inaccordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of theTransaction Documents or to enforce specifically the performance of the Transaction Documents, in addition to any other remedy towhich they are entitled to at law or in equity, in each case without the requirement of posting any bond or other type of security. Eachof the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basisthat any other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for anyreason at law or in equity.[Signatures follow]-Amended and Restated Securities Purchase Agreement Page 18 -  IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Securities Purchase Agreement to beduly executed by their respective authorized signatories as of the date first indicated above. Company:ViewRay, Inc.By: Chris A. RaanesName: Chris A. RaanesTitle: President and CEO -Amended and Restated Securities Purchase Agreement Page 19 -  Investor:Strong Influence LimitedBy: Kevin XieName: Kevin XieTitle: Managing Director Guarantor:Fosun International LimitedBy: Kevin XieName: Kevin XieTitle: Managing Director [Signature page to Amended and Restated Securities Purchase Agreement] Exhibit A Form of Warrant  Exhibit B Form of Certificate of Designations Exhibit 10.41 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENTThis Amended and Restated Registration Rights Agreement (the “Agreement”) is made and entered into as of this 5th day ofMarch, 2018 by and among ViewRay, Inc., a Delaware corporation (the “Company”), and Strong Influence Limited, a British VirginIslands corporation (the “Holder”).RECITALSWHEREAS, the parties hereto entered into a Registration Rights Agreement dated as of February 25, 2018 (the “OriginalAgreement”);WHEREAS, the parties hereto desire to amend and restate the Original Agreement in its entirety as set forth herein;NOW,THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuableconsideration the receipt and adequacy of which are hereby acknowledged, the Company and the Holder hereby agree to amend andrestate the Original Agreement in its entirety as set forth herein: The parties hereby agree as follows: 1.Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Amended and RestatedSecurities Purchase Agreement, dated March 5, 2018, between the Company and the Holder (the “PurchaseAgreement”) shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, thefollowing terms shall have the respective meanings set forth in this Section 1:“Advice” shall have the meaning set forth in Section 7(j).“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or moreintermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed underRule 405 under the Securities Act. “Beneficially Owns” (including the terms “Beneficial Ownership,” “Beneficially Owned” or “Beneficially Owning”) shallmean beneficial ownership within the meaning of Rule 13d-3 under the Exchange Act.“Change of Control” shall mean a sale, conveyance or other disposition of all or substantially all of the property or businessof the Company (other than to a wholly-owned subsidiary of the Company), or a merger or consolidation with or into any othercorporation or other business transaction or series of transactions as a result of which stockholders of the Company immediately priorto the transaction would hold less than a majority of the voting interests of the Company (or successor or parent company thereof) afterthe transaction; provided, that a Change of Control shall not include any transaction or series of related transactions principally for bonafide equity financing purposes. “Commission” means the United States Securities and Exchange Commission, or any successor entity or entities, including,if applicable, the staff of the Commission.“Common Stock” means the common stock, par value $0.01 per share, of the Company.“Control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, director indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership ofvoting securities, by contract or otherwise.“Effectiveness Date” means: (a) with respect to the Initial Registration Statement required to be filed hereunder, the150th calendar day following the Closing Date, (b) with respect to any additional Registration Statements which may be requiredpursuant to Section 2, the 120th calendar day following the date on which the Company first knows, or reasonably should have known,that such additional Registration Statement is required under such Section (or the 150th calendar day following such date in the eventsuch additional Registration Statement is reviewed by the Commission). If the Effectiveness Date falls on a Saturday, Sunday or otherdate that the Commission is closed for business, the Effectiveness Date shall be extended to the next day on which the Commission isopen for business.“Effectiveness Period” shall have the meaning set forth in Section 2(a).“Exchange Act” means the Securities Exchange Act of 1934, as amended.“Filing Date” means: (a) with respect to the Initial Registration Statement, the 60th calendar day following the Closing Date,and (b) with respect to any additional Registration Statements that may be required pursuant to Section 2 hereof, the 60th calendar dayfollowing the date on which the Company first knows, or reasonably should have known, that such additional Registration Statementis required under such Section.“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.“Indemnified Party” shall have the meaning set forth in Section 6(c).“Indemnifying Party” shall have the meaning set forth in Section 6(c).“Initial Registration Statement” shall mean the initial Registration Statement required to be filed to cover the resale by theHolder of the Registrable Securities pursuant to Section 2(a).“Losses” shall have the meaning set forth in Section 6(a).“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture,limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.-2-“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation orpartial proceeding, such as a deposition), whether commenced or threatened.“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus thatincludes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule430A or Rule 430B promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectussupplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement,and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated byreference or deemed to be incorporated by reference in such Prospectus.“Registrable Securities” means (i) the Shares issued pursuant to the Purchase Agreement, (ii) shares of Common Stockissued upon conversion of the Series A Convertible Preferred Stock, (iii) the Warrant Shares issued upon exercise of the Warrant and(iv) any other shares of Common Stock issued as or issuable upon conversion or exercise of any warrant, right or other security whichis issued as a dividend or other distribution with respect to, in exchange for or in replacement of the Shares or the Warrant Shares;provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be requiredto maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) aRegistration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under theSecurities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective RegistrationStatement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities are eligible forresale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in awritten opinion letter to such effect, addressed, delivered and acceptable to the Company’s transfer agent and the affected Holder, asreasonably determined by the Company, upon the advice of counsel to the Company.“Registration Statement” means each of the following: (i) an initial registration statement which is required to register theresale of the Registrable Securities, and (ii) each additional registration statement, if any, contemplated by Section 2, and including, ineach case, the Prospectus, amendments and supplements to each such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in suchregistration statement.“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amendedfrom time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as suchRule.“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amendedfrom time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as suchRule.-3-“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amendedfrom time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as suchRule.“Securities Act” means the Securities Act of 1933, as amended.“Shares” shall have the meaning set forth in the Purchase Agreement.“Trading Day” means any day on which the Common Stock is traded on the Nasdaq Global Market, or, if the NasdaqGlobal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities marketon which the Common Stock is then traded.“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.“Voting Shares” shall mean shares of Company voting securities, whether now owned or hereafter acquired. 2.Registration.a)On or prior to each Filing Date, the Company shall prepare and file with the Commission a RegistrationStatement covering the resale of all of the Registrable Securities that are not then registered on an existing and effective RegistrationStatement for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement filed hereunder shall beon Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which casesuch registration shall be on another form appropriate for such purpose) and shall contain (except if otherwise required pursuant towritten comments received from the Commission upon a review of such Registration Statement) the “Plan of Distribution” insubstantially the form attached hereto as Exhibit A. The Company shall use its commercially reasonable efforts to cause a RegistrationStatement filed under this Agreement to be declared effective under the Securities Act promptly but, in any event, no later than theEffectiveness Date for such Registration Statement, use its commercially reasonable efforts to keep the Registration Statementcontinuously effective under the Securities Act until the earlier of (i) the date that is three (3) years after the Closing Date and (ii) thedate on which all securities covered by this Agreement have ceased to be Registrable Securities (the “Effectiveness Period”). b)Notwithstanding the foregoing, the Company shall be entitled to suspend the effectiveness of theRegistration Statement at any time prior to the expiration of the Effectiveness Period for up to an aggregate of 30 consecutive TradingDays or an aggregate of 50 Trading Days (which need not be consecutive) in any given 360-day period if the Company furnishes tothe Holder a certificate signed by the Chief Executive Officer or equivalent senior executive officer of the Company advising theHolder of the occurrence of any event of the kind described in Section 3(c)(ii)-(v) (a “Shelf Suspension”). The Shelf Suspension shallnot contain any material, non-public information of the Company. It is agreed and understood that the Company shall, from time totime, be obligated to file one or more additional Registration Statements to cover any Registrable Securities which are not registered forresale pursuant to a pre-existing Registration Statement.-4-c)Notwithstanding anything contained herein to the contrary, in the event that the Commission limits theamount of Registrable Securities that may be included and sold by the Holder in any Registration Statement, including the InitialRegistration Statement, pursuant to Rule 415 or any other basis, the Company may reduce the number of Registrable Securitiesincluded in such Registration Statement on behalf of the Holder in whole or in part. In such event the Company shall give the Holderprompt notice of the number of such Reduction Securities excluded and the Company will not be liable for any damages under thisAgreement in connection with the exclusion of such Reduction Securities. The Company shall use its commercially reasonable effortsat the first opportunity that is permitted by the Commission to register for resale the Reduction Securities. Such new RegistrationStatement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3,in which case such registration shall be on another form appropriate for such purpose) and shall contain (except if otherwise requiredpursuant to written comments received from the Commission upon a review of such Registration Statement) the “Plan of Distribution”in substantially the form attached hereto as Exhibit A. The Company shall use its commercially reasonable efforts to cause each suchRegistration Statement to be declared effective under the Securities Act as soon as possible but, in any event, no later than theEffectiveness Date, and shall use its commercially reasonable efforts to keep such Registration Statement continuously effective underthe Securities Act during the entire Effectiveness Period, subject to Section 7(j) hereof. Notwithstanding the foregoing, the Companyshall be entitled to a Shelf Suspension for such Registration Statement.d)If: (i) the Initial Registration Statement is not filed with the Commission on or prior to the Filing Date,(ii) the Initial Registration Statement is not declared effective by the Commission (or otherwise does not become effective) on or priorto the Effectiveness Date or (iii) after the date it is declared effective by the Commission and except as provided in Section 3(i), suchRegistration Statement ceases for any reason (including without limitation by reason of a stop order, or the Company’s failure to updatethe Registration Statement), to remain continuously effective as to all Registrable Securities included in such Registration Statement or(iv) the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1) as a result of which the Holderare unable to sell Registrable Securities under Rule 144 (or any successor rule thereto), (any such failure or breach in clauses (i)through (iv) above being referred to as an “Event,” and, for purposes of clauses (i), (ii), (iii) or (iv), that date on which such Eventoccurs being referred to as an “Event Date”), then in addition to any other rights the Holder may have hereunder or under applicablelaw, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have beencured by such date) until the earlier of (1) the applicable Event is cured or (2) the Registrable Securities are eligible for resale pursuantto Rule 144 without manner of sale or volume restrictions or the current public information requirement, the Company shall pay to theHolder an amount in cash, as liquidated damages and not as a penalty (“Liquidated Damages”), equal to one percent (1%) of theaggregate purchase price paid by the Holder pursuant to the Purchase Agreement for any unregistered Registrable Securities then heldby the Holder. The parties agree that (1) notwithstanding anything to the contrary herein or in the Purchase Agreement, no LiquidatedDamages shall be payable with respect to any period after the expiration of the Effectiveness Period (except in respect of an Eventdescribed in Section 2(d)(iv) herein), (it being understood that this sentence shall not relieve the Company of any Liquidated Damagesaccruing prior to the Effectiveness Deadline) and in no event shall, the aggregate amount of Liquidated Damages-5-payable to a Holder exceed, in the aggregate, five percent (5%) of the aggregate purchase price paid by the Holder pursuant to thePurchase Agreement) and (2) in no event shall the Company be liable in any thirty (30) day period for Liquidated Damages under thisAgreement in excess of one percent (1%) of the aggregate purchase price paid by the Holder pursuant to the Purchase Agreement. The Liquidated Damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cureof an Event, except in the case of the first Event Date. The Company shall not be liable for Liquidated Damages under this Agreementas to any Registrable Securities which are not permitted by the Commission to be included in a Registration Statement. In such case,the Liquidated Damages shall be calculated to only apply to the percentage of Registrable Securities which are permitted to be includedin such Registration Statement. The Effectiveness Deadline for a Registration Statement shall be extended without default orLiquidated Damages hereunder in the event that the Company’s failure to obtain the effectiveness of the Registration Statement on atimely basis results from the failure of a Purchaser to timely provide the Company with information requested by the Company andnecessary to complete the Registration Statement in accordance with the requirements of the Securities Act (in which the EffectivenessDeadline would be extended with respect to Registrable Securities held by such Purchaser). 3.Registration Procedures.In connection with the Company’s registration obligations hereunder, the Company shall:a)Not less than five (5) Trading Days prior to the filing of a Registration Statement or any relatedProspectus or any amendment or supplement thereto, the Company shall furnish to the Holder copies of all such documents proposedto be filed (other than those incorporated by reference). Notwithstanding the foregoing, the Company shall not be required to furnishto the Holder any prospectus supplement being prepared and filed solely to name new or additional selling security holders unless suchHolders are named in such prospectus supplement. In addition, in the event that any Registration Statement is on a form which doesnot permit applicable incorporation by reference, the Company shall not be required to furnish to the Holder any prospectussupplement containing information included in a report or proxy statement filed under the Exchange Act that would be incorporated byreference in such Registration Statement if such Registration Statement were on another form which permits incorporation byreference. The Company shall duly consider any comments made by the Holder and received by the Company not later than two (2)Trading Days prior to the filing of the Registration Statement, but shall not be required to accept any such comments to which itreasonably objects.b)(i) Prepare and file with the Commission such amendments, including post-effective amendments, toeach Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statementcontinuously effective as to the applicable Registrable Securities for its Effectiveness Period and prepare and file with the Commissionsuch additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) causethe related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended tobe filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission withrespect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible provide the Holder true and-6-complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to the Holderas selling stockholder but not any comments that would result in the disclosure to the Holder of material and non-public informationconcerning the Company; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act withrespect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.c)Notify the Holder as promptly as reasonably possible (and, in the case of (i)(A) below, not less thanthree (3) Trading Days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1)Trading Day following the day: (i)(A) when a Prospectus or any prospectus supplement (but only to the extent notice is required underSection 3(a) above) or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifiesthe Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing onsuch Registration Statement (in which case the Company shall provide true and complete copies thereof and all written responsesthereto to the Holder that pertains to the Holder as selling stockholder or to the Plan of Distribution, but not information which theCompany believes would constitute material and non-public information); and (C) with respect to each Registration Statement or anypost-effective amendment, when the same has been declared effective; (ii) of any request by the Commission or any other Federal orstate governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional informationthat pertains to the Holder as selling stockholder or the Plan of Distribution; (iii) of the issuance by the Commission of any stop ordersuspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of anyProceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualificationor exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of anyProceeding for such purpose; (v) of the occurrence of any event or passage of time that makes the financial statements included orincorporated by reference in a Registration Statement ineligible for inclusion or incorporation by reference therein or any statementmade in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by referenceuntrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, inthe case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material factor omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstancesunder which they were made, not misleading; and (vi) of the occurrence or existence of any pending corporate development withrespect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in thebest interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided, that any and all ofsuch information shall remain confidential to the Holder until such information otherwise becomes public, unless disclosure by aHolder is required by law; provided, further, that notwithstanding the Holder’s agreement to keep such information confidential, theHolder makes no acknowledgement that any such information is material, non-public information.d)Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) anyorder suspending the effectiveness of a Registration Statement, or (ii)-7-any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, atthe earliest practicable moment.e)Furnish to the Holder, without charge, at least one (1) conformed copy of each Registration Statementand each amendment thereto and all exhibits to the extent reasonably requested by such Person (including those previously furnishedor incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Company shall haveno obligation to provide any document pursuant to this clause that is available on the EDGAR system.f)Promptly deliver to the Holder, without charge, as many copies of each Prospectus or Prospectuses(including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request. Subject toSection 7(j) hereof, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by theselling Holder in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment orsupplement thereto.g)Prior to any public offering of Registrable Securities, use its commercially reasonable efforts to registeror qualify or cooperate with the selling Holder in connection with the registration or qualification (or exemption from such registrationor qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of those jurisdictions within theUnited States as the Holder reasonably requests in writing to keep each such registration or qualification (or exemption therefrom)effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition insuch jurisdictions of the Registrable Securities covered by the Registration Statements; provided, that the Company shall not berequired to qualify generally to do business in any jurisdiction where it is not then so qualified or subject the Company to any materialtax in any such jurisdiction where it is not then so subject.h)Cooperate with the Holder to facilitate the timely preparation and delivery of certificates representingRegistrable Securities to be delivered to a transferee pursuant to the Registration Statements, which certificates shall be free, to theextent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in suchdenominations and registered in such names as the Holder may request. i)Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as reasonably possible,prepare a supplement or amendment, including a post-effective amendment, to the affected Registration Statements or a supplement tothe related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other requireddocument so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a materialfact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstancesunder which they were made, not misleading.j)The Company may require each selling Holder to furnish to the Company a certified statement as to thenumber of shares of Common Stock beneficially owned by the Holder and any Affiliate thereof, the natural persons thereof that havevoting and dispositive-8-control over the shares and any other information with respect to the Holder as the Commission requests. 4.Holder’s Obligations. Any sale of any Registrable Securities by the Holder shall constitute a representationand warranty by the Holder that the information regarding the Holder is as set forth in the Prospectus delivered by the Holder inconnection with such disposition, and that such Prospectus does not as of the time of such sale contain any untrue statement of amaterial fact regarding the Holder or omit to state any material fact regarding the Holder necessary to make the statements in suchProspectus, in the light of the circumstances under which they were made, not misleading, solely to the extent such facts are basedupon information regarding the Holder furnished in writing to the Company by the Holder for use in such Prospectus.5.Registration Expenses. All fees and expenses incident to the Company’s performance of or compliance withits obligations under this Agreement (excluding any underwriting discounts and selling commissions) shall be borne by the Companywhether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in thepreceding sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses(A) with respect to filings required to be made with the Principal Market on which the Common Stock is then listed for trading, and(B) in compliance with applicable state securities or Blue Sky laws), (ii) printing expenses (including, without limitation, expenses ofprinting certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by theHolder of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and deliveryexpenses, (iv) reasonable fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company sodesires such insurance, and (vi) reasonable fees and expenses of all other Persons retained by the Company in connection with theconsummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internalexpenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, withoutlimitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annualaudit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange asrequired hereunder. In no event shall the Company be responsible for any broker or similar commissions of the Holder or, except tothe extent provided for in the Transaction Documents, any legal fees or other costs of the Holder.6.Indemnification.a)Indemnification by the Company. The Company shall, notwithstanding any termination of thisAgreement, indemnify and hold harmless the Holder, the officers, directors, agents, partners, members, stockholders and employees ofthe Holder, each Person who controls the Holder (within the meaning of Section 15 of the Securities Act or Section 20 of theExchange Act) and the officers, directors, agents, partners, members, stockholders and employees of each such controlling Person, tothe fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, withoutlimitation, reasonable costs of preparation and reasonable attorneys’ fees) and expenses-9-(collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained inany Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto (it being understoodthat the Holder has approved Exhibit A hereto for this purpose), or arising out of or relating to any omission or alleged omission of amaterial fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form ofprospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, butonly to the extent, that (1) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely uponinformation regarding the Holder furnished in writing to the Company by the Holder expressly for use therein, or to the extent thatsuch information relates to the Holder or the Holder’s proposed method of distribution of Registrable Securities and was reviewed andexpressly approved in writing by the Holder expressly for use in the Registration Statement, such Prospectus or such form ofProspectus or in any amendment or supplement thereto (it being understood that the Holder has approved Exhibit A hereto for thispurpose) or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by the Holder of anoutdated or defective Prospectus after the Company has validly notified the Holder in writing (in accordance with Section 13(h) below)that the Prospectus is outdated or defective and prior to the receipt by the Holder of an Advice (as defined below) or an amended orsupplemented Prospectus, but only if and to the extent that following the receipt of the Advice or the amended or supplementedProspectus the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holderpromptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactionscontemplated by this Agreement.b)Indemnification by Holder. The Holder shall, notwithstanding any termination of this Agreement,severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person whocontrols the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors,officers, agents, partners, members, stockholders or employees of such controlling Persons, to the fullest extent permitted by applicablelaw, from and against all Losses, as incurred, arising solely out of or based solely upon: (x) for so long as the Company is not a“Seasoned Issuer” and the prospectus delivery requirements of the Securities Act apply to sales by the Holder, the Holder’s failure tocomply with the prospectus delivery requirements of the Securities Act or (y) any untrue statement of a material fact contained in anyRegistration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising solely out ofor based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein (in thecase of any Prospectus, or any form of prospectus or supplement thereto, in light of the circumstances under which they were made)not misleading to the extent, but only to the extent that, (1) such untrue statements or omissions are based solely upon informationregarding the Holder furnished in writing to the Company by the Holder expressly for use therein, or to the extent that suchinformation relates to the Holder or the Holder’s proposed method of distribution of Registrable Securities and was reviewed andexpressly approved in writing by the Holder expressly for use in the Registration Statement, such Prospectus or such form ofProspectus or in any amendment or supplement thereto (it being understood that the Holder has approved Exhibit A hereto for thispurpose) or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by the Holder of anoutdated or defective Prospectus after the Company has validly notified the-10-Holder in writing (in accordance with Section 13(h) below) that the Prospectus is outdated or defective and prior to the receipt by theHolder of an Advice or an amended or supplemented Prospectus, but only if and to the extent that following the receipt of the Adviceor the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been corrected. In noevent shall the liability of the Holder hereunder be greater in amount than the dollar amount of the net proceeds received by the Holderupon the sale of the Registrable Securities giving rise to such indemnification obligation.c)Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against anyPerson entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whomindemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including theemployment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred inconnection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve theIndemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finallydetermined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shallhave proximately and materially adversely prejudiced the Indemnifying Party.An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in thedefense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) theIndemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly toassume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any suchProceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Partyand the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist ifthe same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Partynotifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, theIndemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the IndemnifyingParty); provided, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys atany time for all Indemnified Parties pursuant to this Section 6(c). The Indemnifying Party shall not be liable for any settlement of anysuch Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall,without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which anyIndemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability onclaims that are the subject matter of such Proceeding. Each Indemnified Party shall furnish such information regarding itself or theclaim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection withdefense of such claim and litigation resulting therefrom.All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connectionwith investigating or preparing to defend such Proceeding in-11-a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of writtennotice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled toindemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse allsuch fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnificationhereunder).d)Contribution. If a claim for indemnification under Section 6(a) or 6(b) is unavailable to anIndemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such IndemnifiedParty, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as isappropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements oromissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such IndemnifyingParty and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including anyuntrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, orrelates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access toinformation and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a resultof any Losses shall be deemed to include, subject to the limitations set forth in Section 6(c), any reasonable attorneys’ or otherreasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have beenindemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance withits terms.The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determinedby pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in theimmediately preceding paragraph. Notwithstanding the provisions of this Section 6(d), no Holder shall be required to contribute, in theaggregate, any amount in excess of the amount by which the proceeds actually received by the Holder from the sale of the RegistrableSecurities subject to the Proceeding exceeds the amount of any damages that the Holder has otherwise been required to pay by reasonof such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (withinthe meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of suchfraudulent misrepresentation.The indemnity and contribution agreements contained in this Section 6 are in addition to any liability that the IndemnifyingParties may have to the Indemnified Parties and are not in diminution or limitation of the indemnification provisions under the PurchaseAgreement.7.Miscellaneous.a)Amendments and Waivers. Any term of this Agreement may be amended and the observance of anyterm of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only withthe written consent of the Company and the Holder.-12-b)Notices. All notices and other communications provided for or permitted hereunder shall be made as setforth in Section 9.3 of the Purchase Agreement.c)Compliance. The Holder covenants and agrees that it will comply with the prospectus deliveryrequirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the RegistrationStatement.d)Assignments and Transfers by Holder. The provisions of this Agreement shall be binding upon andinure to the benefit of the Holder and its respective successors and assigns. A Holder may transfer or assign, in whole or from time totime in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by the Holder to suchperson, provided that the Holder complies with all laws applicable thereto and provides written notice of assignment to the Companypromptly after such assignment is effected.e)Furnishing of Information. The Holder shall furnish in writing to the Company such informationregarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, asshall be reasonably requested by the Company to effect the registration of such Registrable Securities and shall execute suchdocuments in connection with such registration as the Company may reasonably request, including, without limitation, a customaryselling stockholder questionnaire.f)Assignments and Transfers by the Company. This Agreement may not be assigned by the Company(whether by operation of law or otherwise) without the prior written consent of the Holder; provided, however, that in the event thatthe Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the CommonStock is converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall,by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall bedeemed to refer to such Person and the term “Registrable Securities” shall be deemed to include the securities received by the Holder inconnection with such transaction unless such securities are otherwise freely tradable by the Holder after giving effect to suchtransaction.g)Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of andbe binding upon the respective successors and permitted assigns of the parties. Nothing in this Agreement, express or implied, isintended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies,obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.h)Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of which shallbe deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be delivered viafacsimile or other form of electronic communication, which shall be deemed an original.i)Termination of Registration Rights. For the avoidance of doubt, it is expressly agreed and understoodthat (i) in the event that there are no Registrable Securities-13-outstanding as of a Filing Date, then the Company shall have no obligation to file, caused to be declared effective or to keep effectiveany Registration Statement hereunder (including any Registration Statement previously filed pursuant to this Agreement) and (ii) allregistration rights granted to the Holder hereunder shall terminate in their entirety effective on the first date on which there shall ceaseto be any Registrable Securities outstanding. If not previously terminated pursuant to the foregoing sentence, it is expressly agreed andunderstood that all registration rights granted to the Holder pursuant to this Agreement shall terminate as to the Holder on the date thatis ten (10) years following the date of this Agreement.j)Discontinued Disposition. The Holder agrees by its acquisition of such Registrable Securities that, uponreceipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c), the Holder will forthwithdiscontinue disposition of such Registrable Securities under the Registration Statement until the Holder’s receipt of the copies of thesupplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the “Advice”) by the Company thatthe use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filingsthat are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company mayprovide appropriate stop orders to enforce the provisions of this paragraph.k)Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only andare not to be considered in construing or interpreting this Agreement.l)Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdictionshall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainingprovisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicablelaw, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in anyother jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders anyprovisions hereof prohibited or unenforceable in any respect.m)Further Assurances. The parties shall execute and deliver all such further instruments and documentsand take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence thefulfillment of the agreements herein contained.n)Entire Agreement. This Agreement is intended by the parties as a final expression of their agreementand intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subjectmatter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to suchsubject matter.o)Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by,and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principlesthereof. Each of the parties hereto-14-irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the UnitedStates District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to orarising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action orproceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of noticesunder this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action orproceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of anysuch suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceedingbrought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANYRIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO OR ARISING OUT OF THISAGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND REPRESENTS THAT COUNSEL HASBEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.-15-IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute thisAgreement as of the date first above written.The Company:VIEWRAY INC. By:/s/ Chris A. RaanesName: Chris A. RaanesTitle: President and Chief Executive Officer -16-HOLDER IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute thisAgreement as of the date first above written.The Holder:STRONG INFLUENCE LIMITED By:Kevin XieName: Kevin XieTitle:Managing Director-17-Exhibit APlan of DistributionThe selling stockholder, which as used herein includes donees, pledgees, transferees or other successors-in-interest sellingshares of common stock or interests in shares of common stock (collectively, “securities”) received after the date of this prospectusfrom a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwisedispose of any or all of their securities on any stock exchange, market or trading facility on which the securities are traded or in privatetransactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailingmarket price, at varying prices determined at the time of sale, or at negotiated prices.The selling stockholder may use any one or more of the following methods when disposing of securities: -ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; -block trades in which the broker-dealer will attempt to sell the securities as agent, but may position and resella portion of the block as principal to facilitate the transaction; -purchases by a broker-dealer as principal and resale by the broker-dealer for its account; -an exchange distribution in accordance with the rules of the applicable exchange; -privately negotiated transactions; -short sales effected after the date the registration statement of which this Prospectus is a part is declaredeffective by the SEC; -through the writing or settlement of options or other hedging transactions, whether through an optionsexchange or otherwise; -broker-dealers may agree with the selling stockholder to sell a specified number of such securities at astipulated price per share; -a combination of any such methods of sale; and -any other method permitted by applicable law.The selling stockholder may, from time to time, pledge or grant a security interest in some or all of the securities owned bythem and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell thesecurities, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicableprovision of the Securities Act amending the list of selling stockholder to include the pledgee, transferee or other successors in interest as selling stockholder under this prospectus. The selling stockholder alsomay transfer the securities in other circumstances, in which case the transferees, pledgees or other successors in interest will be theselling beneficial owners for purposes of this prospectus.In connection with the sale of our common stock or interests therein, the selling stockholder may enter into hedgingtransactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in thecourse of hedging the positions they assume. The selling stockholder may also sell securities short and deliver these securities to closeout their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The sellingstockholder may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one ormore derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by thisprospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented oramended to reflect such transaction).The aggregate proceeds to the selling stockholder from the sale of the common stock offered by them will be the purchaseprice of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and,together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directlyor through agents. We will not receive any of the proceeds from this offering. Upon any exercise of the warrants by payment of cash,however, we will receive the exercise price of the warrants.The selling stockholder also may resell all or a portion of the securities in open market transactions in reliance upon Rule 144under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.The selling stockholder and any underwriters, broker-dealers or agents that participate in the sale of the common stock orinterests therein may be "underwriters" within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions,concessions or profit they earn on any resale of the securities may be underwriting discounts and commissions under the SecuritiesAct. Selling stockholder who are "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to theprospectus delivery requirements of the Securities Act.To the extent required, the securities of our common stock to be sold, the names of the selling stockholder, the respectivepurchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discountswith respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effectiveamendment to the registration statement that includes this prospectus.In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictionsonly through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has beenregistered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.-19-We have advised the selling stockholder that the anti-manipulation rules of Regulation M under the Exchange Act mayapply to sales of securities in the market and to the activities of the selling stockholder and their affiliates. In addition, to the extentapplicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the sellingstockholder for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholder mayindemnify any broker-dealer that participates in transactions involving the sale of the securities against certain liabilities, includingliabilities arising under the Securities Act.We have agreed to indemnify the selling stockholder against liabilities, including liabilities under the Securities Act and statesecurities laws, relating to the registration of the securities offered by this prospectus.We have agreed with the selling stockholder to keep the registration statement of which this prospectus constitutes a parteffective until the earlier of (i) the date that such securities become eligible for resale without volume or manner-of-sale restrictions andwithout current public information pursuant to Rule 144 and certain other conditions have been satisfied, or (ii) all of the securitieshave been sold or otherwise disposed of pursuant to the registration statement of which this prospectus forms a part or in a transactionin which the transferee receives freely tradable securities. -20-Exhibit 10.42WARRANT NO. 2018-1NUMBER OF SHARES: 1,418,116DATE OF ISSUANCE: March 5, 2018(subject to adjustment hereunder)EXPIRATION DATE: March 5, 2025 WARRANT TO PURCHASE SHARES OF COMMON STOCK OFVIEWRAY, INC.This Warrant is issued to Strong Influence Limited, a British Virgin Islands corporation, or its registered assigns (including any successors orassigns, the “Purchaser”), pursuant to that certain Amended and Restated Securities Purchase Agreement, dated as of March 5, 2018, among ViewRay, Inc., aDelaware corporation (the “Company”), the Purchaser and Fosun International Limited, a company organized under the laws of Hong Kong (the “PurchaseAgreement”), and is subject to the terms and conditions of the Purchase Agreement.1.EXERCISE OF WARRANT.(a)Number and Exercise Price of Warrant Shares; Expiration Date. Subject to the terms and conditions set forth herein and set forth in thePurchase Agreement, the Purchaser is entitled to purchase from the Company from time to time all or any portion of 1,418,116 shares of the Company’sCommon Stock, $0.01 par value per share (the “Common Stock”) (as adjusted from time to time pursuant to the provisions of this Warrant) (the “WarrantShares”), at a purchase price of $8.31 per share (the “Exercise Price”), commencing on the date of issuance of this Warrant through and including 5:00 p.m.New York City time on March 5, 2025 (the “Expiration Date”) (subject to earlier termination of this Warrant as set forth herein).(b)Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 1(a) above, the Purchaser mayexercise this Warrant in accordance with Section 6 hereof, at its option by either:(1)wire transfer to the Company or cashier’s check drawn on a United States and made payable to the order of theCompany, or(2)exercising of the right to credit the Exercise Price against the Fair Market Value of the Warrant Shares (asdefined below) at the time of exercise (the “Net Exercise”) pursuant to Section ​1(c).Notwithstanding anything herein to the contrary, the Purchaser shall not be required to physically surrender this Warrant to the Company untilthe Purchaser has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Purchaser shallsurrender this Warrant to the Company for cancellation not later than the close of business on the day that is three (3) trading days after the date the finalNotice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Sharesavailable hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicablenumber of Warrant Shares purchased. The Purchaser and the Company shall maintain records showing the number of Warrant Shares purchased and the dateof such purchases.(c)Net Exercise. If the Company shall receive written notice from the Purchaser at the time of exercise of this Warrant that the holder electsto Net Exercise all or any portion of this Warrant, the Company shall deliver to such Purchaser (without payment by the Purchaser of any exercise price incash) that number of Warrant Shares computed using the following formula:Where X =The number of Warrant Shares to be issued to the Purchaser. Y =The number of Warrant Shares for which this Warrant may be exercised or, if only a portion of the Warrant is beingexercised, the number of Warrant Shares for which such portion of this Warrant is being exercised (at the date of suchexercise). A=The Fair Market Value of one (1) share of Common Stock (at the date of such calculation). B =The Exercise Price (as adjusted to the date of such calculations).The “Fair Market Value” of one share of Common Stock shall mean (x) if the Common Stock is traded on a securities exchange, the unweightedaverage of the closing bid prices over the consecutive twenty (20) day period ending on the date of exercise or (y) if the Common Stock is traded over-the-counter, the unweighted average of the closing bid and asked prices quoted on the over the-counter system over the consecutive twenty (20) day periodending on the date of exercise; or, if fair market value cannot be calculated as of such date on either of the foregoing bases, the price determined in good faithby the Company’ s Board of Directors .(d)Deemed Exercise. In the event that, immediately prior to the close of business on the Expiration Date, the Fair Market Value of one shareof Common Stock (as determined in accordance with Section ​1(c) above) is greater than the then applicable Exercise Price, this Warrant shall be deemed to beautomatically exercised on a net exercise issue basis pursuant to Section 1(c) above, and the Company shall deliver the applicable number of Warrant Sharesto the Purchaser pursuant to the provisions of Section ​1(c) above and this Section l(d).2.CERTAIN ADJUSTMENTS.(a)Adjustment of Number of Warrant Shares and Exercise Price. The number and kind of Warrant Shares purchasable upon exercise of thisWarrant and the Exercise Price shall be subject to adjustment from time to time as follows:(1)Subdivisions, Combinations and Other Issuances. If the Company shall at any time after the Date of Issuance butprior to the Expiration Date subdivide its shares of capital stock of the same class as the Warrant Shares, by split-up or otherwise , or combine such shares ofcapital stock, or issue additional shares of capital stock as a dividend with respect to any shares of such capital stock, the number of Warrant Shares issuableon the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in thecase of a combination. Appropriate adjustments shall also be made to the Exercise Price payable per share, but the aggregate Exercise Price payable for thetotal number of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 2(a)(1) shall becomeeffective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event thatno record date is fixed, upon the making of such dividend.(2)Reorganizations. In case of any reclassification, capital reorganization or change in the capital stock of theCompany (other than as a result of a subdivision, combination or stock dividend provided for in Section 2(a)(1) above) that occurs after the Date of Issuance,then, as a condition of such reclassification, reorganization or change, lawful provision shall be made, and duly executed documents evidencing the samefrom the Company or its successor shall be delivered to the Purchaser, so that the Purchaser shall thereafter have the right at any time prior to the expiration ofthis Warrant to purchase (whether in cash or by Net Exercise), at a total price equal to that payable upon the exercise of this Warrant, the kind and amount ofshares of stock and/or other securities or property (including, if applicable, cash) receivable in connection with such reclassification, reorganization orchange by a holder of the same number and type of securities as were purchasable as Warrant Shares by the Purchasers immediately prior to suchreclassification, reorganization or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Purchaser so thatthe provisions2hereof shall thereafter be applicable with respect to any shares of stock or other securities or property deliverable upon exercise hereof, and appropriateadjustments shall be made to the Exercise Price payable hereunder, provided the aggregate Exercise Price shall remain the same (and, for the avoidance ofdoubt, this Warrant shall be exclusively exercisable for such shares of stock and/or other securities or property from and after the consummation of suchreclassification or other change in the capital stock of the Company).(b)Notice to Holder. If, while this Warrant is outstanding, the Company declares a dividend or any other distribution ofcash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchaseany capital stock of the Company or any subsidiary, authorizes or approves, enters into any agreement contemplating or solicits stockholder approval forany Change of Control (as defined below) or authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then theCompany shall deliver, pursuant to and consistent with the second sentence of Section 11 hereof, to the holder a notice in writing of such transaction at least15 business days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote withrespect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate actionrequired to be described in such notice.(c)Calculations. All calculations under this Section 2 shall be made to the nearest cent or the nearest 1 / 100th of a share, as the case maybe. For purposes of this Section 2, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of thenumber of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.(d)Treatment of Warrant upon a Change of Control.(1)This Warrant will expire automatically immediately prior to the consummation of a Change of Control.(2)As used in this Warrant, a “Change of Control” shall mean a merger or consolidation of the Company withanother corporation (other than a merger effected exclusively for the purpose of changing the domicile of the Company), the sale, assignment, transfer,conveyance or other disposal of all or substantially all of the properties or assets or all or a majority of the outstanding voting shares of capital stock of theCompany, a purchase, tender or exchange offer accepted by the holders of a majority of the outstanding voting shares of capital stock of the Company, or a “person” or “group” (as these terms are used for purposes of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”)) is or shall become the “ beneficial owner” (as defined in Rule l3d-3 under the Exchange Act), directly or indirectly at least a majority of the votingpower of the capital stock of the Company. 3.NO FRACTIONAL SHARES. No fractional Warrant Shares or scrip representing fractional shares of Common Stock will be issued uponexercise of this Warrant. In lieu of any fractional shares of Common Stock which would otherwise be issuable, the Company shall pay cash in an amountequal to the product of such fractional share multiplied by the Fair Market Value of one Warrant Share.4.NO STOCKHOLDER RIGHTS. Until the exercise of this Warrant or any portion of this Warrant, the Purchaser shall not have, nor exercise,any rights as a stockholder of the Company (including without limitation the right to notification of stockholder meetings or, except as otherwise set forth inthis Warrant, the right to receive any notice or other communication concerning the business and affairs of the Company).5.RESERVATION OF STOCK. The Company covenants that, during the period during which this Warrant is exercisable, the Company willreserve from its authorized and unissued Common Stock a sufficient number of shares of Common Stock (or other securities, if applicable) to provide for theissuance of Warrant Shares (or other securities) upon the exercise of this Warrant.6.MECHANICS OF EXERCISE.3(a)Delivery of Warrant Shares Upon Exercise. The provisions of the second sentence of Section 11 hereof notwithstanding, this Warrantmay be exercised by the holder hereof, in whole or in part, by delivering to the Company (or such other office or agency of the Company as it may designateby notice in writing to the registered holder at the address of the holder appearing on the books of the Company) a completed and duly executed copy of theNotice of Exercise in the form attached hereto as Exhibit A by facsimile or e-mail attachment together with payment in full of the Exercise Price (unless theholder has elected to Net Exercise) then in effect with respect to the number of Warrant Shares as to which the Warrant is being exercised. This Warrant shallbe deemed to have been exercised immediately upon the close of business on the date of its surrender for exercise as provided above, and the person entitledto receive the Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business onsuch date. Warrant Shares purchased hereunder shall be transmitted without a restrictive legend by the Company’s transfer agent to the holder by creditingthe account of the holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system if the Company is thena participant in such system and either there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the WarrantShares by the holder or the shares are eligible for resale by the holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise bybook entry or by physical delivery to the address specified by the holder in the Notice of Exercise by the end of the day on the date that is three trading daysfrom the delivery to the Company of the Notice of Exercise and payment of the aggregate Exercise Price (unless exercised by means of a Net Exercisepursuant to Section ​1(c)). The Warrant Shares shall be deemed to have been issued, and the holder or any other person so designated to be named therein shallbe deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company ofthe Exercise Price (or by Net Exercise) and all taxes required to be paid by the holder, if any, prior to the issuance of such shares, having been paid.(b)Holder’s Exercise Limitations. A holder shall not have the right to exercise this Warrant, pursuant to Section 1 orotherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the holder (together with theholder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of theBeneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficiallyowned by the holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which suchdetermination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining,nonexercised portion of this Warrant beneficially owned by the holder or any of its affiliates and (ii) exercise or conversion of the unexercised ornonconverted portion of any other securities of the Company (including, without limitation, any other convertible notes or convertible preferred stock orwarrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the holder or any of itsaffiliates. Except as set forth in the preceding sentence, for purposes of this section, beneficial ownership shall be calculated in accordance with Section 13(d)of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the holder that the Company is not representing to theholder that such calculation is in compliance with Section 13(d) of the Exchange Act and the holder is solely responsible for any schedules required to befiled in accordance therewith. To the extent that the limitation contained in this Section 6(b) applies, the determination of whether this Warrant is exercisable(in relation to other securities owned by the holder together with any affiliates) and of which portion of this Warrant is exercisable shall be in the solediscretion of the holder, and the submission of a Notice of Exercise shall be deemed to be the holder’s determination of whether this Warrant is exercisable (inrelation to other securities owned by the holder together with any affiliates) and of which portion of this Warrant is exercisable, in each case subject to theBeneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have noliability for exercise of the Warrant that are not in compliance with the Beneficial Ownership Limitation. In addition, a determination as to any group statusas contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Forpurposes of this Section 6(b), in determining the number of outstanding shares of Common Stock, a holder may rely on the number of outstanding shares ofCommon Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recentpublic announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of sharesof Common Stock outstanding. Upon the written request of a holder, the Company shall within three trading days confirm in writing to the holder the numberof shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to theconversion or exercise of4securities of the Company, including this War rant, by the holder or its affiliates since the date as of which such number of outstanding shares of CommonStock was reported. The “Beneficial Ownership Limitation” shall be 19.9% of the number of shares of the Common Stock outstanding immediately aftergiving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Purchaser shall have the right at any time to increase ordecrease the Beneficial Ownership Limitation provided herein (in no event to exceed 19.9%), provided that any such increase or decrease will not beeffective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a mannerotherwise than in strict conformity with the terms of this Section ​6(b) to correct this paragraph (or any portion hereof) which may be defective or inconsistentwith the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to suchlimitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.7.CERTIFICATE OF ADJUSTMENT. Whenever the Exercise Price or number or type of securities issuable upon exercise of this Warrant isadjusted, as herein provided, the Company shall, at its expense, promptly deliver to the Purchaser a certificate of an officer of the Company setting forth thenature of such adjustment and showing in detail the facts upon which such adjustment is based.8.REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction ormutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactoryinform and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense willexecute and deliver, in lieu thereof, a new Warrant of like tenor.9.TRADING DAYS. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall beother than a day on which the Common Stock is traded on the Nasdaq Global Market, or, if the Nasdaq Global Market is not the principal trading market forthe Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, then such action may be takenor such right may be exercised on the next succeeding day on which the Common Stock is so traded.10.TRANSFERS; EXCHANGES.(a)Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Purchaser with respect toany or all of the Warrant Shares for which such Warrant may be exercised hereunder. Upon a transfer of this Warrant as an entirety by Purchaser, uponsurrender of this Warrant to the Company, together with the Notice of Assignment in the form attached hereto as Exhibit B duly completed and executed onbehalf of the Purchaser, the Company shall issue a new Warrant of the same denomination to the assignee. Upon a transfer of this Warrant with respect to aportion of the Warrant Shares purchasable hereunder, upon surrender of this Warrant to the Company, together with the Notice of Assignment in the formattached hereto as Exhibit B duly completed and executed on behalf of the Purchaser, the Company shall issue a new Warrant to the assignee, in suchdenomination as shall be requested by the Purchaser, and shall issue to the Purchaser a new Warrant covering the number of shares in respect of which thisWarrant shall not have been transferred.(b)This Warrant is exchangeable, without expense, at the option of the Purchaser, upon presentation and surrender hereof to the Companyfor other warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stockpurchasable hereunder. This Warrant may be divided or combined with other warrants that carry the same rights upon presentation hereof at the principaloffice of the Company together with a written notice signed by the Purchaser hereof specifying the denominations in which new Warrants are to be issued tothe Purchaser. The term “Warrants” as used herein includes any warrants into which this Warrant may be divided or exchanged.11.MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware,without the application of principles of conflicts of laws that would result in any law other than the laws of the State of Delaware. All notices, requests,consents and other communications hereunder shall be in writing, shall be sent by confirmed facsimile or electronic mail, or mailed by first-class registered orcertified airmail, or nationally recognized overnight express courier, postage prepaid, and shall be deemed given when so sent in the case of facsimile orelectronic mail transmission, or when so received in the case5of mail or courier, and addressed as follows: if to the Company, at 2 Thermo Fisher Way, Oakwood Village, Ohio, Attention: Chief Financial Officer,Facsimile: (800) 417- 3459, Email: abansal@viewray.com.com; with a copy to (which shall not constitute notice) Davis Polk & Wardwell LLP, 1600 ElCamino Real, Menlo Park, California, Attention: Alan F. Denenberg, Facsimile: (650) 752-2111, E-Mail: alan.denenberg@davispolk.com and if to thePurchaser, at such address or addresses (including copies to counsel) as may have been furnished by the Purchaser to the Company in writing, including byconfirmed facsimile or electronic mail. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of anyother provision hereof.[Signature Page Follows] 6IN WITNESS WHEREOF, this Common Stock Purchase Warrant is issued effective as of the date first set forth above.VIEWRAY, INC.By:/s/ Chris A. RaanesName:Chris A. RaanesTitle:President and Chief Executive Officer [Signature Page to ViewRay, Inc. Warrant]EXHIBIT ANOTICE OF INTENT TO EXERCISE(To be signed only upon exercise of Warrant)To: ViewRay, Inc.The undersigned, the Purchaser of the attached Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for,and to purchase thereunder, ___________________ (______) shares of Common Stock of ViewRay, Inc. and (choose one)_________ herewith makes payment of ________________ Dollars ($_______) thereofor_________ elects to Net Exercise the Warrant pursuant to Section 1(b)(2) thereof.The undersigned requests that the certificates or book entry position evidencing the shares to be acquired pursuant to such exercise be issued inthe name of and delivered to the following holder, whose address isBy its signature below the undersigned hereby represents and warrants that the Representations and Warranties made by the “Investor” (as suchterm is defined in the Purchase Agreement) in Section 5 of the Purchase Agreement are true and correct as of the date hereof and hereby agrees to be bound bythe terms and conditions of the attached Warrant as of the date hereof.DATED: ______________________________(Signature must conform in all respects to name of thePurchaser as specified on the face of the Warrant) «Purchaser»Address: 8EXHIBIT BNOTICE OF ASSIGNMENT FORMFOR VALUE RECEIVED, [__] (the “Assignor”) hereby sells, assigns and transfers all of the rights of the undersigned Assignor under the attachedWarrant with respect to the number of shares of common stock of ViewRay, Inc. (the “Company”) covered thereby set forth below, to the following“Assignee” and, in connection with such transfer, represents and warrants to the Company that the transfer is in compliance with applicable federal and statesecurities laws:NAME OF ASSIGNEE ADDRESS/FAX NUMBERNumber of shares: Signature: Dated: Witness: ASSIGNEE ACKNOWLEDGMENTThe undersigned Assignee acknowledges that it has reviewed the attached Warrant and by its signature below it hereby makes each of theRepresentations and Warranties made by the “Investor” (as such term is defined in the Purchase Agreement) in Section 5 of the Purchase Agreement as of thedate hereof and hereby agrees to be bound by the terms and conditions of the Warrant as of the date hereof.Signature:By: Its: Address: Exhibit 21 Subsidiaries EntityJurisdiction of OrganizationViewRay Technologies, Inc. (formerly known as ViewRay Incorporated)Delaware Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statements No. 333-215815, No. 333-216797, No. 333-217416, and No.333-222264 on Form S-3, Registration Statements No. 333-210472 and No. 333-216794 on Form S-8, of our report dated March 12,2018, relating to the consolidated financial statements of ViewRay, Inc. and its subsidiary (the “Company”) appearing in this AnnualReport on Form 10-K of the Company for the year ended December 31, 2017. /s/ Deloitte & Touche LLPSan Francisco, CAMarch 12, 2018 Exhibit 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TOEXCHANGE ACT RULE 13a-14(a)/15d-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Chris A. Raanes, certify that:1. I have reviewed this Annual Report on Form 10-K of ViewRay, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 12, 2018 /s/ Chris A. Raanes Chris A. Raanes Title: Chief Executive Officer and President(Principal Executive Officer) Exhibit 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TOEXCHANGE ACT RULE 13a-14(a)/15d-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Ajay Bansal, certify that:1. I have reviewed this Annual Report on Form 10-K of ViewRay, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 12, 2018 /s/ Ajay Bansal Ajay Bansal Title: Chief Financial Officer(Principal Financial Officer) Exhibit 32.1 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers ofViewRay, Inc., a Delaware corporation (the “Company”), hereby does certify that:(i) the Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements ofSection 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. The foregoing certification (i) is given to such officer’s knowledge, based upon such officer’s investigation as such officer reasonably deemappropriate; and (ii) is being furnished solely pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002) and is not being filed as part ofthe Report or as a separate disclosure document and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, asamended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporationlanguage contained in such filing. VIEWRAY, INC. Dated: March 12, 2018By: /s/ Chris A. Raanes Name: Chris A. Raanes Title: Chief Executive Officer(Principal Executive Officer) Dated: March 12, 2018By: /s/ Ajay Bansal Name: Ajay Bansal Title: Chief Financial Officer(Principal Financial Officer) 

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