COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Operating Leases

The Company entered into agreements to lease office space in Oakwood Village, Ohio, Mountain View, California and Denver, Colorado under noncancelable operating lease agreements. The Company leases and occupies approximately 19,800 square feet of office space in Oakwood Village, Ohio, which expires in October 2026. The Company entered into an office lease agreement to lease approximately 25,500 square feet of office space located in Mountain View, California, with an expiration date of July 2025. Additionally, the Company entered into a lease agreement to lease additional office space in Mountain View, California of approximately 24,600 square feet, which will expire in December 2025. The Company has the option to extend the term of the lease for a period of up to five years. The Company also entered into a sub-lease agreement to lease approximately 19,800 square feet of office space located in Denver, Colorado which commenced in June 2019 and expired in June 2021. Beginning in July 2021, the Company is under a month-to-month tenancy for this office space. On March 3, 2021, the Company entered into a sub-lease agreement to lease approximately 12,800 square feet of office space in Denver, Colorado. This sub-lease commenced on September 1, 2021 and will expire October 31, 2024.

In recognition of the right-of-use assets and the related lease liabilities, the options to extend the lease term have not been included as the Company is not reasonably certain that it will exercise any such option. At September 30, 2021, the weighted-average remaining lease term in years is 3.9 years and the weighted-average discount rate used is 7.6%.

The Company recognized the following lease costs arising from lease transactions (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease cost	$	625	$	781	$	2,134	$	2,344

The Company recognized the following cash flow transactions arising from lease transactions (in thousands):


	Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities	$	2,198	$	2,355
Right-of-use assets obtained in exchange for new operating lease liabilities	1,693		—

At September 30, 2021, the future payments and interest expense for the operating leases are as follows (in thousands):


Year Ending December 31,	Future Payments
The remainder of 2021	$	749
2022	3,264
2023	3,357
2024	3,301
2025	2,096
2026	147
Total undiscounted cash flows	$	12,914
Less: imputed interest	(1,744)
Present value of lease liabilities	$	11,170

Legal Proceedings

In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for legal proceedings when it is probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. When only a range of possible loss can be established, the most probable 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 in the range is accrued.

Class Action Litigation

On September 13, 2019, a class action complaint for violation of federal securities laws was filed in U.S. District Court for the Northern District of Ohio against the Company, its chief executive officer, chief scientific officer, and former chief financial officer. On December 19, 2019, the court appointed Plymouth County Retirement Association as the lead plaintiff, and on February 28, 2020 the lead plaintiff filed an amended complaint asserting securities fraud claims against the Company, its chief executive officer, chief operating officer, chief scientific officer, and former chief executive officer and former chief financial officer. Now captioned Plymouth County Retirement Association v. ViewRay, Inc., et al., the amended complaint alleges that the Company violated federal securities laws by issuing materially false and misleading statements that failed to disclose adverse facts concerning its business, operations, and financial results, and seeks damages, interest, and other relief. The Company filed a motion to dismiss the amended complaint on May 28, 2020. While the initial motion to dismiss was pending, the plaintiff was granted leave to file a second amended complaint. A motion to dismiss the second amended complaint was filed on September 16, 2020. On August 25, 2021, the District Court dismissed the lead plaintiff’s complaint, with prejudice. On September 17, 2021, the lead plaintiff filed notice of its intent to appeal the District Court’s opinion and order dismissing the complaint to the Sixth Circuit Court of Appeals.

The Company believes the appeal is without merit and intends to vigorously defend the litigation.

Stockholder Derivative Lawsuit

On July 22, 2020, a stockholder derivative lawsuit was filed against ViewRay (as a nominal defendant) and certain of its current and former officers and directors in the U.S. District Court for the Northern District of Ohio. This action alleges, purportedly on behalf of ViewRay, that the officers and directors violated Section 14(a) of the Securities Exchange Act of 1934, as amended, breached their fiduciary duties, wasted corporate assets, and were unjustly enriched based on factual assertions substantially similar to those in the class action complaint described above. The complaint seeks, among other things, damages awarded to ViewRay, restitution and disgorgement of profits in an unspecified amount, and corporate reforms. Due to the overlap between the allegations in the derivative complaint and those in the putative securities class action complaint, this lawsuit is presently stayed pending the decision on the appeal by the Sixth Circuit Court of Appeals.

Given the uncertainty and stage of each of the litigation matters described above, at this time the Company is unable to reasonably estimate possible losses or form a judgment that an unfavorable outcome is either probable or remote. However, litigation is subject to inherent uncertainties, and one or more unfavorable outcomes in any claim or litigation against the Company could have a material adverse effect in the period in which they are resolved and on the Company’s business generally. In addition, regardless of their merits or their ultimate outcomes, lawsuits and legal proceedings are costly, divert management attention and may materially adversely affect the Company’s reputation, even if resolved in the Company’s favor.

Purchase Commitments

At September 30, 2021, the Company had $4.9 million in outstanding firm purchase commitments.