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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to_____.
Commission File Number: 000-50644
Cutera, Inc.
(Exact name of registrant as specified in its charter)
Delaware77-0492262
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3240 Bayshore Blvd., Brisbane, California 94005
(Address of principal executive offices)
(415) 657-5500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.001 par value)CUTRThe NASDAQ Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    x    No    ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x     No    ¨
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 growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer☐Accelerated filer ☒
Non-accelerated filer☐Smaller 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 revised financial 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    x
The number of shares of Registrant’s common stock issued and outstanding as of August 5, 2024, was 20,127,842.


CUTERA, INC.
FORM 10-Q
TABLE OF CONTENTS
Page


In this Quarterly Report on Form 10-Q, “Cutera,” “the Company,” “we,” “us” and “its” refer to Cutera, Inc. and its consolidated subsidiaries.

This report may contain references to its proprietary intellectual property, including among others, trademarks for its systems and ancillary products, “ACUTIP 500®,” “AVI™,” “AVICLEAR®,” “AVICOOL®,” “AVIANALYTICS™,” “CUCF®,” “CUTERA®,” “CUTERA UNIVERSITY CLINICAL FORUM®,” “ENLIGHTEN®,” “EXCEL HR®,” “EXCEL V®,” “GENESIS™,” “LASER GENESIS™,” “LIMELIGHT®,” “PICO GENESIS®,” “PICO TONING®,” “PROWAVE 770®,” “SOLERA®,” “TITAN®,” “TRUBODY®,” “TRUSCULPT FLEX®,” “TRUFLEX™,” “TRUSCULPT®,” “TRUSCULPT ID®,” and “XEO®.”
These trademarks and trade names are the property of Cutera or the property of its consolidated subsidiaries and are protected under applicable intellectual property laws. Solely for convenience, its trademarks and tradenames referred to in this Quarterly Report on Form 10-Q may appear without the ® or symbols, but such references are not intended to indicate in any way that the Company will not assert, to the fullest extent under applicable law, its rights to these trademarks and tradenames.

2
PART I.     FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS (UNAUDITED)
CUTERA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share, per share data and par value)
(Unaudited)
June 30,
2024		December 31,
2023
Assets
Current assets:
Cash and cash equivalents$83,115 $143,612 
Accounts receivable, net of allowance for credit losses of $14,811 and $9,878, respectively
34,554 43,121 
Inventories
80,353 62,600 
Other current assets and prepaid expenses12,961 19,852 
Total current assets210,983 269,185 
Long-term inventories
13,825 16,283 
Property and equipment, net28,140 37,275 
Deferred tax assets508 579 
Restricted cash1,196 — 
Goodwill1,339 1,339 
Operating lease right-of-use assets, net11,388 10,055 
Other long-term assets8,916 11,575 
Total assets$276,295 $346,291 
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable$17,617 $19,829 
Accrued liabilities30,356 55,055 
Operating lease liabilities3,382 2,441 
Deferred revenue8,798 10,422 
Total current liabilities60,153 87,747 
Deferred revenue, net of current portion1,507 1,494 
Operating lease liabilities, net of current portion9,223 8,887 
Convertible notes, net of unamortized debt issuance costs of $9,284 and $10,430, respectively
419,841 418,695 
Other long-term liabilities1,242 1,298 
Total liabilities491,966 518,121 
Commitments and Contingencies (Note 12)
Stockholders’ deficit:
Common stock, $0.001 par value; authorized: 50,000,000 shares; issued and outstanding: 20,108,406 and 19,960,622 shares at June 30, 2024 and December 31, 2023, respectively
20 20 
Additional paid-in capital135,114 131,496 
Accumulated deficit(350,805)(303,346)
Total stockholders’ deficit(215,671)(171,830)
Total liabilities and stockholders’ deficit$276,295 $346,291 

See Accompanying Notes to Condensed Consolidated Financial Statements.

3
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Net revenue:
Products$28,357 $56,175 $61,472 $105,296 
Service6,020 5,650 11,698 11,055 
Total net revenue34,377 61,825 73,170 116,351 
Cost of revenue:
Products23,765 32,051 47,054 62,110 
Service2,968 3,691 6,053 6,526 
Total cost of revenue26,733 35,742 53,107 68,636 
Gross profit7,644 26,083 20,063 47,715 
Operating expenses:
Sales and marketing20,664 33,271 44,341 62,783 
Research and development4,463 5,784 9,464 12,252 
General and administrative4,321 18,191 17,202 30,444 
Gain on early termination of distribution agreement
— — (9,708)— 
Total operating expenses29,448 57,246 61,299 105,479 
Loss from operations(21,804)(31,163)(41,236)(57,764)
Interest and other expense, net:
Amortization of debt issuance costs(575)(557)(1,146)(1,109)
Interest on convertible notes(2,959)(2,958)(5,898)(5,897)
Interest income1,025 2,179 2,480 4,658 
Other expense, net(387)(453)(1,703)(616)
Total interest and other expense, net(2,896)(1,789)(6,267)(2,964)
Loss before income taxes(24,700)(32,952)(47,503)(60,728)
Income tax (benefit) expense
(19)326 (44)598 
Net loss$(24,681)$(33,278)$(47,459)$(61,326)
Net loss per share:
Basic$(1.23)$(1.68)$(2.37)$(3.09)
Diluted$(1.23)$(1.68)$(2.37)$(3.09)
Weighted-average number of shares used in per share calculation:
Basic 20,091 19,858 20,041 19,819 
Diluted20,091 19,858 20,041 19,819 
See Accompanying Notes to Condensed Consolidated Financial Statements.

4
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Net loss$(24,681)$(33,278)$(47,459)$(61,326)
Other comprehensive income:
Net change in unrealized gain on available-for-sale investments, net of tax
— 12 — 98 
Other comprehensive income, net of tax
— 12 — 98 
Comprehensive loss$(24,681)$(33,266)$(47,459)$(61,228)
See Accompanying Notes to Condensed Consolidated Financial Statements.

5
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(In thousands, except share amounts)
(Unaudited)

Three and Six Months Ended June 30, 2024
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Deficit
SharesAmount
Balance at March 31, 202420,067,941 $20 $133,541 $(326,124)$— $(192,563)
Issuance of common stock in settlement of restricted and performance stock units, net of shares withheld for employee taxes40,465 — (20)— — (20)
Stock-based compensation expense— — 1,593 — — 1,593 
Net loss— — — (24,681)— (24,681)
Balance at June 30, 202420,108,406 $20 $135,114 $(350,805)$— $(215,671)

Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Deficit
SharesAmount
Balance at December 31, 202319,960,622 $20 $131,496 $(303,346)$— $(171,830)
Issuance of common stock in settlement of restricted and performance stock units, net of shares withheld for employee taxes147,784 — (84)— — (84)
Stock-based compensation expense— — 3,702 — — 3,702 
Net loss— — — (47,459)— (47,459)
Balance at June 30, 202420,108,406 $20 $135,114 $(350,805)$— $(215,671)
    
See Accompanying Notes to Condensed Consolidated Financial Statements.

6
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(In thousands, except share amounts)
(Unaudited)

Three and Six Months Ended June 30, 2023
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Deficit
SharesAmount
Balance at March 31, 202319,785,107 $20 $126,504 $(168,561)$(8)$(42,045)
Issuance of common stock for employee purchase plan51,786 — 711 — — 711 
Exercise of stock options3,459 — 38 — — 38 
Issuance of common stock in settlement of restricted and performance stock units, net of shares withheld for employee taxes61,248 — (789)— — (789)
Stock-based compensation expense— — 1,550 — — 1,550 
Net change in unrealized gain on available-for-sale investments— — — — 12 12 
Net loss— — — (33,278)— (33,278)
Balance at June 30, 202319,901,600 $20 $128,014 $(201,839)$4 $(73,801)

Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Deficit
SharesAmount
Balance at December 31, 202219,668,603 $20 $125,406 $(140,513)$(94)$(15,181)
Issuance of common stock for employee purchase plan51,786 — 711 — — 711 
Exercise of stock options9,234 — 147 — — 147 
Issuance of common stock in settlement of restricted and performance stock units, net of shares withheld for employee taxes171,977 — (3,186)— — (3,186)
Stock-based compensation expense— — 4,936 — — 4,936 
Net change in unrealized gain on available-for-sale investments— — — — 98 98 
Net loss— — — (61,326)— (61,326)
Balance at June 30, 202319,901,600 $20 $128,014 $(201,839)$4 $(73,801)
    
See Accompanying Notes to Condensed Consolidated Financial Statements.

7
CUTERA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
20242023
Cash flows from operating activities
Net loss$(47,459)$(61,326)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation3,702 4,936 
Depreciation and amortization3,795 3,238 
Amortization of contract acquisition costs2,769 4,069 
Amortization of discount on convertible notes and debt issuance costs1,146 1,109 
Accretion of discount on investment securities and investment income, net— 146 
Deferred tax assets71 43 
Provision for credit losses4,808 1,914 
Changes in assets and liabilities:
Accounts receivable3,634 (10,031)
Inventories(8,582)(536)
Other current assets and prepaid expenses6,892 (776)
Other long-term assets(330)(4,782)
Accounts payable(2,212)(1,666)
Accrued liabilities(24,441)(3,806)
Operating leases, net(56)(30)
Deferred revenue(1,611)509 
Net cash used in operating activities(57,874)(66,989)
Cash flows from investing activities
Acquisition of property and equipment(1,217)(25,108)
Proceeds from disposal of property and equipment
63 — 
Proceeds from maturities of marketable investments— 152,859 
Purchase of marketable investments— (23,467)
Net cash provided by (used in) investing activities(1,154)104,284 
Cash flows from financing activities
Proceeds from exercise of stock options and employee stock purchase plan— 858 
Taxes paid related to net share settlement of equity awards(84)(3,186)
Payments on finance lease obligations(189)(237)
Net cash used in financing activities
(273)(2,565)
Net increase (decrease) in cash, cash equivalents and restricted cash(59,301)34,730 
Cash, cash equivalents, and restricted cash at beginning of period143,612 146,624 
Cash, cash equivalents, and restricted cash at end of period$84,311 $181,354 
Supplemental non-cash operating, investing, and financing activities:
Assets acquired under finance lease$— $68 
Assets acquired under operating lease$2,749 $57 
Acquisition of property and equipment$— $6,301 
Supplemental disclosure of cash flow information:
Cash paid for interest$3,553 $5,731 
Cash paid for income taxes$986 $483 
See Accompanying Notes to Condensed Consolidated Financial Statements.

8
CUTERA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.         Summary of Significant Accounting Policies 
Description of Operations and Principles of Consolidation
Cutera, Inc. (“Cutera” or the “Company”) develops, manufactures, distributes, and markets energy-based product platforms for medical practitioners, enabling them to offer treatments to their customers. In addition, the Company distributes third-party manufactured skincare products, until the termination of distribution agreement in February 2024, and Secret PRO and Secret RF systems and consumables. The Company currently markets the following system platforms: AviClear, enlighten, excel HR, excel V/V+, truSculpt, Secret PRO, Secret DUO, Secret RF, xeo, and xeo+ — each of which enables medical practitioners to perform procedures including treatment for acne, body contouring, skin resurfacing and revitalization, hair and tattoo removal, removal of benign pigmented lesions, and vascular conditions. Several of the Company’s systems offer multiple hand pieces and applications, providing customers the flexibility to upgrade their systems.
The sale of systems, hand pieces, upgrade of systems, and leasing and direct sales of AviClear devices (collectively “Systems” revenue); replacement hand pieces, truSculpt cycle refills, truFlex cycle refills, AviClear treatment fees, and single use disposable tips applicable to Secret systems (collectively “Consumables” revenue); and the distribution of third-party manufactured skincare products (“Skincare”) revenue are collectively classified as “Products” revenue. In addition to Products revenue, the Company generates revenue from the sale of post-warranty service contracts and service parts and labor for the repair and maintenance of products that are out of warranty, all of which are collectively classified as “Service” revenue.
The Company’s corporate headquarters and U.S. operations are located in Brisbane, California, where the Company conducts manufacturing, warehousing, research and development, regulatory, sales and marketing, service, and administrative activities. The Company also maintains regional distribution centers (“RDCs”) in select locations across the U.S. These RDCs serve as forward warehousing for systems and service parts in various geographies. The Company markets, sells and services the Company’s products through direct sales and service employees in North America (including Canada), Australia, New Zealand, Austria, France, Germany, Hong Kong, Japan, Switzerland, the United Kingdom and the Republic of Ireland. Sales and services outside of these direct markets are made through a worldwide distributor network in over 38 countries. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of intercompany transactions and balances.
Liquidity and Management’s Plans
When preparing financial statements, management has the responsibility to evaluate if the Company has adequate liquidity to continue to operate for at least the next twelve months. In performing this assessment, management considered the Company's current financial condition and liquidity sources, including current funds, forecasted future cash flows and unconditional obligations due over the next twelve months. In addition, management evaluated the history of the Company's financial performance, and determined that the Company has had a historic trend of operating losses, which continues to have an unfavorable impact on the Company's overall liquidity. Most recently, the Company reported net losses of $47.5 million for the six months ended June 30, 2024 and $162.8 million for the year ended December 31, 2023.
These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these condensed consolidated financial statements. The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.
The Company’s continued operations will depend on several factors, including but not limited to, growth of revenues from its revised business model for AviClear, which entails transitioning from a lease model to a direct sales model, maintaining or increasing revenues from sales of legacy systems, consumables and services, achieving cost savings as a result of workforce reductions implemented in the fourth quarter of 2023 and implementing further cost savings initiatives, restructuring of supplier and manufacturing relationships, and initiatives to improve inventory and receivables management. Failure to increase revenue, achieve cost savings, raise additional financing or re-finance the existing convertible notes when they become due, would adversely affect the Company’s ability to achieve its intended business objectives. There can be no assurances that financing will be available on terms favorable to the Company, if at all, and delays may occur in completing the operating activities.

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Basis of Presentation
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements included in this report reflect all adjustments necessary for a fair statement of its condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, and its condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss, condensed consolidated statements of changes in stockholders' deficit, and condensed consolidated statements of cash flows, for the three and six months ended June 30, 2024, and 2023, respectively. The December 31, 2023 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The results for interim periods are not necessarily indicative of results for the entire year or any other interim period. All intercompany accounts and transactions have been eliminated upon consolidation. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s previously filed audited financial statements and the related notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on May 10, 2024.
Reclassification
The Company reclassified the interest expense portion previously recorded in interest income (expense), net to other income (expense), net on the condensed consolidated statement of operations. Corresponding reclassifications of prior period amounts have been made in the Company's condensed consolidated statement of operations to conform to the current period presentation. These reclassifications had no effect on the reported net loss.
Risks and Uncertainties
The Company's future results of operations involve a number of risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of the Company's products, stability of global financial markets, cybersecurity breaches and other disruptions that could compromise the Company’s information or results, business disruptions that are caused by natural disasters or pandemic events, management of international activities, competition from substitute products and larger companies, the Company's ability to obtain and maintain regulatory approvals, government regulations and oversight, patent and other types of litigation, the Company's ability to protect proprietary technology from counterfeit versions of the Company's products and its intellectual property rights generally, the successful execution of new product launches, the continuation of strategic relationships, such as the Company's distribution of third-party products, and dependence on key individuals.
Accounting Policies
These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the SEC applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Company uses the same accounting policies in preparing quarterly and annual financial statements.
Leases
The Company incurred costs to fulfill its lease agreement obligations with its AviClear device lessees. These costs consisted of freight, installation, and training. In addition to these mobilization costs, the Company incurred commission costs associated with the placement of the AviClear device. The Company capitalized commission costs and made a policy election to capitalize the mobilization costs.
The Company determined to cease new leases of the AviClear device in 2023 and, therefore the Company no longer capitalizes additional mobilization costs and commission costs related to placements of the AviClear device, which were recorded in other long-term assets on the Company's condensed consolidated balance sheets and were amortized over the expected lease term. The amortization of the remaining mobilization costs and amortization of deferred commission costs are recorded in cost of revenue and sales and marketing, respectively, in the Company's condensed consolidated statement of operations. Total capitalized mobilization costs were $1.1 million and $2.1 million as of June 30, 2024 and December 31, 2023, respectively. Total capitalized commissions as of June 30, 2024, and December 31, 2023, were $1.9 million and $2.7 million, respectively,

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and are included in other long-term assets on the Company’s condensed consolidated balance sheet.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenue and expenses during the reported periods. Actual results could differ materially from those estimates.
On an ongoing basis, management evaluates its estimates, including those related to warranty obligations, sales commissions, allowance for credit losses, sales allowances, fair value of investments, valuation of inventories, fair value of goodwill, useful lives of property and equipment, impairment testing for long-lived assets, implicit and incremental borrowing rates related to the Company’s leases, variables used in calculating the fair value of the Company's equity awards, expected achievement of performance-based vesting criteria and management performance bonuses, assumptions used in operating and sales-type lease classifications, the standalone selling price of the Company's products and services, the period of benefit used to capitalize and amortize contract acquisition costs, variable considerations, contingent liabilities, recoverability of deferred tax assets, residual value of leased equipment, lease term and effective income tax rates. Management bases estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Distribution of Third-Party Products
The Company generated revenue from the distribution of skincare products, which were manufactured by ZO Skin Health, Inc. (“ZO”), and sold in the Japanese market. In the three and six months ended June 30, 2024, revenue from the distribution of skincare products was nil and $4.2 million, respectively. In the six months ended June 30, 2023, revenue from the distribution of skincare products was $17.6 million, representing 15% of the Company’s consolidated revenue.
On February 28, 2024, the Company and its Japanese subsidiary, Cutera KK, entered into a termination agreement (the “Termination Agreement”) with ZO USA and its Japanese subsidiary, ZO Skin Health GK (“ZO Japan” and together with ZO USA and their affiliates, “ZO”), which, among other things, (i) terminates all agreements related to the distribution by the Company of ZO’s products in Japan effective immediately, (ii) provides for the orderly transition of the distribution of ZO products to ZO, (iii) transfers certain Company employees dedicated to the distribution of ZO products to ZO, (iv) transfers certain customer contracts related to ZO products from the Company to ZO and (v) transfers certain inventory and assets related to the distribution of ZO products from the Company to ZO. The Termination Agreement requires ZO to pay the Company $5.75 million within three business days of the execution of the Termination Agreement and make a second payment of $5.75 million, less any offsets under the Termination Agreement (including, but not limited to, 42.2% of the Company’s net revenue for sales of ZO products under the Distribution Agreement between January 1, 2024 and February 28, 2024), upon the earlier of (a) the completion the transition of regulatory and distribution activities such that ZO is able to fulfill product orders by customers in Japan, as determined by ZO and the Company, and (b) June 14, 2024. The Company received the first payment of $5.75 million on February 29, 2024, and received a second payment of $2.37 million on April 1, 2024, which was net of $1.6 million in amounts owed by Cutera. In the three months ended March 31, 2024, the Company recorded a net gain of $9.7 million resulting from the early termination proceeds received and transfer of certain assets and liabilities as gain on early termination of distribution agreement on the Company's condensed consolidated statement of operations.
The Company generates revenue from the distribution of the Secret systems, which are manufactured by ilooda Co. Ltd. (“ilooda”). The Company is the exclusive distributor for all systems sold in the United States, Canada, the United Kingdom; the exclusive distributor for certain systems in France, and Spain; and the non-exclusive distributor for systems sold in Austria and Germany. In the three months ended June 30, 2024, and June 30, 2023, revenue from the distribution of Secret products represented 7% and 2%, respectively, of the Company’s consolidated revenue. The Company‘s ilooda distribution agreement expires in June 30, 2026.
Termination of Manufacturing Service Agreement
In November 2023, the Company communicated its intention not to renew its existing manufacturing service agreement (“Manufacturing Service Agreement”) with Jabil Inc. (“Jabil”), a third-party manufacturing provider that manufactured excel V+ and AviClear devices for the Company. At the time of the communication of non-renewal, the Company concluded that it would have an obligation to purchase unshipped inventory from Jabil. The Company subsequently received claims from Jabil related to other amounts associated with the termination and entered into settlement discussions with Jabil.

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On February 28, 2024, the Company and Jabil signed a settlement agreement (“Settlement Agreement”) for the non-renewal of its existing Manufacturing Service Agreement. The Settlement Agreement provided for a payment by Cutera to Jabil of $19.5 million, to be offset by $1.3 million in amounts owed by Jabil. The $19.5 million payment to Jabil relates to the Company's receipt of $13.5 million of inventories, $0.3 million of equipment, and the payment of $5.7 million for expenses either previously incurred by Jabil or associated with the non-renewal of the Manufacturing Services Agreement.
The Company recorded the net balance of the $19.5 million payment owed to Jabil and the $15.1 million aggregate of inventories, equipment, and other amounts owed to Cutera, in accrued liabilities on the consolidated balance sheet at December 31, 2023. The $5.7 million for expenses incurred by Jabil was recorded in cost of revenue on the consolidated statements of operations in the twelve months ended December 31, 2023. As of June 30, 2024, all amounts owed to Jabil have been paid and inventories have been received.

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Note 2.         Cash, Cash Equivalents, Restricted Cash and Marketable Investments
The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and re-evaluates such designation at each balance sheet date.
The Company’s marketable securities have been classified and accounted for as available-for-sale securities. Investments with remaining maturities of more than one year are viewed by the Company as available to support current operations and are classified as current assets under the caption marketable investments in the accompanying consolidated balance sheets. Investments in available-for-sale debt securities are measured at fair value under the guidance in ASC 320. Credit losses on impaired available-for-sale debt securities are recognized through an allowance for credit losses. Under ASC 326, credit losses recognized on an available-for-sale debt security should not reduce the net carrying amount of the available-for-sale debt security below its fair value. Any changes in fair value unrelated to credit are recognized as an unrealized gain or loss in other comprehensive income.
The Company's cash, cash equivalents, and restricted cash were $84.3 million and $143.6 million as of June 30, 2024 and December 31, 2023, respectively. There were no marketable investments as of those dates. There was $1.2 million of restricted cash as of June 30, 2024.

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Note 3.         Fair Value of Financial Instruments
The Company measures certain financial assets at fair value, including cash and cash equivalents.
The fair value hierarchy contains the following three levels of inputs that may be used to measure fair value, in accordance with ASC 820:
•Level 1 inputs, which include quoted prices in active markets for identical assets or liabilities;
•Level 2 inputs, which include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and
•Level 3 inputs, which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies, or similar valuation techniques, as well as significant management judgment or estimation.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk in its assessment of fair value.
As of June 30, 2024, financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows (in thousands):
June 30, 2024Level 1
Cash equivalents:
      Money market funds $61,498 
As of December 31, 2023, financial assets and liabilities measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows (in thousands):
December 31, 2023Level 1
Cash equivalents:
      Money market funds $123,387 
The Company's cash and cash equivalents, accounts receivable, and accounts payable are reflected on the accompanying consolidated balance sheets at cost, which approximated estimated fair value due to short-term nature of such accounts, using Level 1 inputs.
See Note 13. Debt for the carrying amount and estimated fair value of the Company’s 2.25% Convertible Senior Notes due 2026 (the “2026 Notes”), the 2.25% Convertible Senior Notes due 2028 (the “2028 Notes”), and the 4.00% Convertible Senior Notes due 2029 (the “2029 Notes”).

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Note 4.         Balance Sheet Details
Inventories
Inventories consist of the following (in thousands):
June 30,
2024		December 31,
2023
Raw materials$48,462 $36,970 
Work in process4,030 889 
Finished goods27,861 24,741 
Total$80,353 $62,600 
Valuation adjustments for excess and obsolete inventory, reflected as a reduction of inventories at June 30, 2024 and December 31, 2023, were $16.3 million and $13.0 million, respectively.
Other current assets and prepaid expenses
Other current assets and a prepaid expenses consist of the following (in thousands):
June 30,
2024		December 31,
2023
Deposits with vendors$5,630 $9,501 
Prepayments4,559 3,819 
Sale tax and VAT receivable2,392 6,307 
Other380 225 
Total$12,961 $19,852 
Long-term inventories
The Company’s long-term inventories relate to AviClear devices, and parts for device manufacturing, not expected to be sold in the twelve months ended June 30, 2025. Long-term inventories consist of the following (in thousands):
June 30,
2024		December 31,
2023
Raw materials$9,175 $8,672 
Work in process— 2,049 
Finished goods4,650 5,562 
Total$13,825 $16,283 
Valuation adjustments for excess and obsolete inventory, reflected as a reduction of long-term inventories at June 30, 2024 and December 31, 2023, were $16.5 million and $12.8 million, respectively.


15
Property and Equipment, net
Property and equipment, net consists of the following (in thousands):
June 30,
2024		December 31,
2023
AviClear devices$30,369 $38,490 
Machinery and equipment5,545 4,944 
Office equipment and furniture1,537 1,884 
Leasehold improvements1,294 1,010 
Assets under construction959 1,274 
39,704 47,602 
Less: Accumulated depreciation(11,564)(10,327)
Property and equipment, net$28,140 $37,275 

Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
June 30,
2024		December 31,
2023
Bonus and payroll-related accruals$10,970 $13,949 
Sales and marketing accruals4,080 4,929 
Product warranty3,010 2,593 
Accrued sales tax2,597 6,325 
Accrued interest1,485 1,304 
Jabil settlement obligation, net— 8,908 
Liability for inventory in transit— 5,461 
Other accrued liabilities8,214 11,586 
Total$30,356 $55,055 

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Note 5.         Product Warranty
The Company has a direct field service organization in North America (including Canada). Internationally, the Company provides direct service support in Australia, Austria, Belgium, France, Germany, Hong Kong, Japan, the Netherlands, New Zealand, Spain, and Switzerland. In several other countries, where the Company does not have a direct presence, the Company provides service through a network of distributors and third-party service providers.
After the original warranty period, maintenance and support are offered on an extended service contract basis or on a time and materials basis. The Company estimates cost to repair or replace products under standard warranty at the time of sale. Costs incurred in connection with extended service contracts are generally recognized at the time when costs are incurred.
The following table provides the changes in the product warranty accrual for the three and six months ended June 30, 2024 and 2023 (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Beginning Balance$2,472 $3,154 $2,593 $3,254 
Add: Accruals for warranties issued during the period1,463 1,534 2,619 2,550 
Less: Settlements made during the period(925)(1,584)(2,202)(2,700)
Ending Balance$3,010 $3,104 $3,010 $3,104 

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Note 6.         Deferred Revenue
The Company records deferred revenue when revenue is to be recognized subsequent to invoicing. For extended service contracts, the Company generally invoices customers at the beginning of the extended service contract term. The Company’s extended service contracts typically have one to three-year terms. Deferred revenue also includes payments for training not yet delivered.
The following table provides changes in the deferred revenue balance for the three and six months ended June 30, 2024 and 2023 (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Beginning balance$10,455 $13,699 $11,916 $13,498 
Add: Payments received from current period sales6,460 5,939 9,480 11,087 
Less: Revenue recognized from current period sales(1,725)(589)(1,882)(2,291)
Less: Revenue recognized from beginning balance(3,170)(5,042)(7,494)(8,287)
Pending lease cancellations(1,715)— (1,715)— 
Ending balance$10,305 $14,007 $10,305 $14,007 
Approximately 85% of the Company’s deferred revenue balance of $10.3 million as of June 30, 2024 will be recognized over the next 12 months.
The fixed annual license fees received related to the AviClear contracts are deferred and recognized over the annual lease periods. The AviClear deferred license fee balance included in the total deferred revenue balance at June 30, 2024, and December 31, 2023 was $0.9 million and $2.1 million, respectively.
Costs for extended service contracts were $2.2 million and $3.8 million for the three and six months ended June 30, 2024, respectively, and were $2.1 million and $3.7 million for the three and six months ended June 30, 2023, respectively, and were recorded in cost of revenue on the condensed consolidated statements of operations.

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Note 7.         Revenue
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company’s performance obligations are satisfied either over time or at a point in time. Revenue from performance obligations that are transferred to customers over time accounted for approximately 14% and 13%, respectively, of the Company's total revenue for the three and six months ended June 30, 2024, and 9% for each of the three and six months ended June 30, 2023.
The Company has certain system sale arrangements that contain multiple products and services. For these bundled sale arrangements, the Company accounts for individual products and services as separate performance obligations if they are distinct. The Company’s products and services are distinct if a customer can benefit from the product or service on its own or with other resources that are readily available to the customer, and if the Company’s promise to transfer the products or service to the customer is separately identifiable from other promises in the sale arrangements. The Company’s system sale arrangements can include all or a combination of the following performance obligations: the system and software license (considered one performance obligation), system accessories (hand pieces), training, AviClear license agreements, other accessories, extended service contracts, marketing services, and time and materials services.
For the Company’s system sale arrangements that include an extended service contract, the period of service commences at the expiration of the Company’s standard warranty offered at the time of the system sale. The Company considers the extended service contracts terms in the arrangements that are legally enforceable to be performance obligations. Other than extended service contracts and marketing services, which are satisfied over time, the Company generally satisfies all performance obligations at a point in time. Systems, system accessories (hand pieces), service contracts, training, and time and materials services are also sold on a stand-alone basis. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative standalone selling price basis.
Nature of Products and Services
Systems
Systems revenue is generated from the sale of systems and from the sale of upgrades to existing systems. A system consists of a console that incorporates a universal graphic user interface, a laser or other energy-based module, control system software and high voltage electronics, as well as one or more hand pieces. In certain applications, the laser or other energy-based module is contained in the hand piece, rather than within the console.
The Company offers customers the ability to select the system that best fits their practice at the time of purchase and then to cost-effectively add applications to their system as their practice grows. This provides customers the flexibility to upgrade their systems whenever they choose and provides the Company with a source of additional Systems revenue.
The system or upgrade and the right to use the embedded software represent a single performance obligation as the software license is integral to the functionality of the system or upgrade.
For systems sold directly to end-customers that are credit approved, revenue is recognized when the Company transfers control to the end-customer, which occurs when the product is shipped to the customer or when the customer receives the product, depending on the nature of the arrangement. When collectability is not established in advance of receipt of payment from the customer, revenue is recognized upon the later of the receipt of payment or the satisfaction of the performance obligation. For systems sold through credit approved distributors, revenue is recognized at the time of shipment to the distributor.
The Company leases certain AviClear devices to customers and receives a fixed annual license fee over the term of the arrangement and variable lease income related to treatments performed by the lessee. In the fourth quarter of 2023, the Company announced a change in the AviClear business strategy and moved towards a direct sales model rather than a leasing model, whereby certain existing lessees were offered an option to purchase the leased AviClear device. The Company classifies its lease income and direct sales as product revenue and classifies the AviClear lease contracts as operating leases for the devices under the leasing model. The fixed annual license fee is recognized evenly over the period of the lease contract on a straight-line basis. The treatment fee is recognized as consumable revenue in the period the treatment protocol is initiated.

The Company's payment terms for its system consoles and other accessories require payment within 30 days of shipment. Certain international distributor arrangements allow for longer payment terms.

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Consumables and other accessories
The Company classifies its customers' purchases of replacement cycles for truSculpt and truFlex, as well as replacement hand pieces, xeo and truSculpt 3D hand pieces, AviClear treatment fee revenue, and single use disposable tips applicable to Secret PRO, and Secret RF as Consumable revenue. The Secret PRO, Secret DUO, and Secret RF products' single use disposable tips must be replaced after every treatment. The Company’s systems offer multiple hand pieces and applications, which allow customers to upgrade their systems. Revenue for consumables and other accessories is recognized when products are shipped to customers.
Skincare products
The Company generated revenue from the distribution of skincare products, which were manufactured by ZO Skin Health, Inc. (“ZO”), and sold in the Japanese market to medical offices and licensed physicians. The Company warranted that the skincare products are free of significant defects in workmanship and materials for 90 days from shipment. The Company acted as the principal in this arrangement, as the Company determined the price to charge customers for the skincare products and controlled the products before they were transferred to the customer. The Company recognized revenue for skincare products at a point in time upon shipment.
On February 28, 2024, the Company entered into a termination agreement with ZO, which terminated all agreements related to the distribution by the Company of ZO’s products in Japan, as disclosed in Note 1. During the three months ended June 30, 2024, revenue from the distribution of skincare products was nil due to the termination of all agreements.
Extended service contract
The Company offers post-warranty services to its customers through extended service contracts that cover parts and labor for a term of one to three years. Service contract revenue is recognized over time, using a time-based measure of progress, as customers benefit from the service throughout the service period. The Company also offers services on a time and materials basis for systems and detachable hand piece replacements. Revenue related to services performed on a time and materials basis is recognized when performed.
Training
Sales of systems to customers include training on the use of the system to be provided within 90 days of purchase. The Company considers training a separate performance obligation as customers can immediately benefit from the training, and training is also sold separately from systems. The Company recognizes revenue for training when the training is provided.
Significant Judgments
The Company determines standalone selling price ("SSP") for each performance obligation as follows:
•Systems: The SSPs for systems are based on directly observable sales in similar circumstances to similar customers.
•Extended warranty/Service contracts: SSP is based on observable price when sold on a standalone basis to similar customers.
Deferred Sales Commissions
Incremental costs of obtaining a contract related to the sale of a system, which consist primarily of commissions and related payroll taxes, are capitalized, and amortized on a straight-line basis over the expected period of benefit, except for costs that are recognized when the product is sold. The Company uses the portfolio method to recognize the amortization expense related to these capitalized costs related to initial contracts and such expense is recognized over a period associated with the revenue of the related portfolio, which is generally two to three years.
Total capitalized commissions as of June 30, 2024 and December 31, 2023 were $1.9 million and $2.4 million, respectively, and are included in other long-term assets on the Company’s condensed consolidated balance sheet. Amortization expense for these assets was $0.4 million and $1.0 million during the three and six months ended June 30, 2024, respectively, and $0.6 million and $1.3 million for the three and six months ended June 30, 2023, respectively. The amortization related to these capitalized costs is included in sales and marketing expense on the Company’s condensed consolidated statement of operations.

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Note 8.         Stockholders’ Equity and Stock-based Compensation Expense
The Company’s equity incentive plans are broad-based, long-term programs intended to attract and retain talented employees and align stockholder and employee interests. The 2019 Equity Incentive Plan (the "2019 Plan") and the 2023 Inducement Equity Plan (the "2023 Plan") provides for the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), performance stock units ("PSUs"), and other stock or cash awards.
Activity under the Company's equity incentive plans is summarized as follows:
Shares Available
for Grant
Balance, December 31, 20233,554,537 
Options and stock awards granted(1,304,378)
Stock awards canceled / forfeited / expired142,537 
Options canceled / forfeited / expired135,107 
Balance, June 30, 20242,527,803 
The equity plans deduct the shares available for issuance by the gross number of shares for which an award is exercised or vests, not the net number of shares actually issued upon exercise, in the event the exercise price is paid in shares of the Company's common stock or shares are withheld to satisfy tax withholding obligations. Any RSU or PSU shares granted on or after July 13, 2023 were counted against the shares available for grant at a ratio of 1.65 shares for every one share granted.
At the Company’s Annual Stockholder Meeting on July 15, 2024, the Company’s stockholders voted to increase the total number of shares of common stock available for issuance under the 2019 Plan by 2,395,273 shares. The 2023 Plan was terminated effective July 15, 2024, and had 2,304,580 shares available for issuance at that date.
On May 22, 2024, the Company’s Compensation Committee approved a modification of the vesting targets related to three PSU grants and one stock option grant issued to senior management employees. The original vesting targets were based on the closing price of the Company’s common stock. These targets were modified to targets based on the Company’s market capitalization. The incremental stock compensation expense related to this modification was not material.
Options Outstanding
Number of Stock Options OutstandingWeighted Average Exercise PriceWeighted Average Remaining Term
 (in Years)
Balance, December 31, 20231,282,240 $17.97 8.21
Options granted1,154,500 $2.18 
Options exercised— $— 
Options canceled / forfeited / expired(135,107)$18.86 
Balance, June 30, 20242,301,633 $10.00 7.46
Stock Awards Outstanding
Number of Awards OutstandingWeighted Average Grant Date Fair Value per Share
Balance, December 31, 2023909,862$20.46 
Stock awards granted127,739$2.13 
Awards vested(188,072)$25.38 
Stock awards canceled / forfeited / expired(132,537)$22.16 
Balance, June 30, 2024716,992$15.66 
Stock-based Compensation Expense
Stock-based compensation expense by financial statement line item recognized during the six months ended June 30, 2024 and 2023 was as follows (in thousands):

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Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Cost of revenue$144 $361 $293 $725 
Sales and marketing404 1,283 970 2,431 
Research and development264 415 569 1,108 
General and administrative781 (509)1,870 672 
Total stock-based compensation expense$1,593 $1,550 $3,702 $4,936 

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Note 9.     Net Loss Per Share

As of June 30, 2024, the Company’s Convertible Notes were potentially convertible into 8,696,792 shares of common stock.

The denominator for diluted net loss per share does not include any effect from the capped call transactions the Company entered into concurrently with the issuances of convertible notes, as this effect would be anti-dilutive. In the event of conversion of a convertible note, shares delivered to the Company under the capped call will offset the dilutive effect of the shares that the Company would issue under the convertible notes. In the six months ended June 30, 2024 and June 30, 2023, the if-converted method was not applied as the effect would have been anti-dilutive.

For the six months ended June 30, 2024 and June 30, 2023, a basic loss per common share and diluted loss per common share are the same in each period as the inclusion of any potentially issuable shares would be anti-dilutive.
The following table sets forth the computation of basic and diluted net loss and the weighted average number of shares used in computing basic and diluted net loss per share (in thousands, except per share data):
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Numerator:
Net loss used in calculating net loss per share, basic $(24,681)$(33,278)$(47,459)$(61,326)
Denominator:
Weighted average shares of common stock outstanding used in computing net loss per share, basic20,091 19,858 20,041 19,819 
Dilutive effect of incremental shares and share equivalents:
     Convertible notes— — — — 
Options— — — — 
RSUs— — — — 
PSUs— — — — 
ESPP— — — — 
Weighted average shares of common stock outstanding used in computing net loss per share, diluted20,091 19,858 20,041 19,819 
Net loss per share:
Net loss per share, basic $(1.23)$(1.68)$(2.37)$(3.09)
Net loss per share, diluted$(1.23)$(1.68)$(2.37)$(3.09)
The following numbers of shares outstanding, prior to the application of the treasury stock method and the if-converted method, were excluded from the computation of diluted net loss per common share for the periods presented because including them would have had an anti-dilutive effect (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Capped call10,780 10,780 10,780 10,780 
Convertible notes8,697 8,697 8,697 8,697 
Options2,302 694 2,302 694 
RSU's527 489 527 489 
PSU's190 265 190 265 
ESPP— 45 — 45 
Total22,496 20,970 22,496 20,970 

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Note 10.     Income Taxes
For the three and six months ended June 30, 2024, the Company's income tax benefit for both periods was less than $0.1 million, compared to income tax expense of $0.3 million and $0.6 million respectively, for the three and six months ended June 30, 2023.
The Company's income tax (benefit) expense for the six months ended June 30, 2024 and 2023 is due to income taxes in foreign jurisdictions. The Company continues to maintain a full valuation allowance on its U.S. deferred tax assets.

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Note 11.     Leases
Lessee
The Company is a party to certain operating and finance leases for vehicles, office space and storage facilities. The Company’s material operating leases consist of office space, as well as storage facilities and finance leases consist of automobile leases. The Company’s leases generally have remaining terms of one to 7 years, some of which include options to renew the leases for up to five years. The Company leases space for operations in the United States, Japan, Belgium, France, and Spain.
The Company determines if a contract contains a lease at inception. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent the right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates the incremental secured borrowing rates corresponding to the maturities of the leases. The Company based the rate estimates on prevailing financial market conditions, credit analysis, and management judgment.
Tenant incentives used to fund leasehold improvements are recognized when earned and reduce the Company’s right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term. 
Supplemental balance sheet information related to leases was as follows (in thousands):
LeasesClassificationJune 30,
2024		December 31,
2023
Assets
Right-of-use assetsOperating lease right-of-use assets$11,388 $10,055 
Finance leaseProperty and equipment, net1,309 2,516 
Total leased assets$12,697 $12,571 

LiabilitiesClassificationJune 30,
2024		December 31,
2023
Operating lease liabilities
Operating lease liabilities, currentOperating lease liabilities$3,382 $2,441 
Operating lease liabilities, non-currentOperating lease liabilities, net of current portion9,223 8,887 
Total Operating lease liabilities$12,605 $11,328 
Finance lease liabilities
Finance lease liabilities, currentAccrued liabilities$714 $825 
Finance lease liabilities, non-currentOther long-term liabilities723 1,064 
Total Finance lease liabilities$1,437 $1,889 

Lease costs during the three and six months ended June 30, 2024 and 2023 (in thousands) was as follows:
Three Months Ended
June 30,		Six Months Ended
June 30,
Lease costsClassification2024202320242023
Finance lease costAmortization expense$250 $148 $524 $298 
Finance lease costInterest for finance lease$37 $18 $79 $38 
Operating lease costOperating lease expense$1,093 $889 $2,062 $1,780 

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Cash paid for amounts included in the measurement of lease liabilities during the six months ended June 30, 2024 and 2023 was as follows (in thousands):
Six Months Ended
June 30,
Cash paid for amounts included in the measurement of lease liabilitiesClassification20242023
Operating cash flowFinance lease$36 $38 
Financing cash flowFinance lease$189 $237 
Operating cash flowOperating lease$986 $686 
Operating leases
Maturities of operating facility leases were as follows as of June 30, 2024 (in thousands):
As of June 30, 2024Amount
Remainder of 2024$1,969 
20254,059 
20264,034 
20273,295 
2028323 
2029 and thereafter142 
Total lease payments13,822 
Less: imputed interest1,217 
Present value of lease liabilities$12,605 
Finance Leases
As of June 30, 2024, the Company was committed to minimum lease payments for vehicles leased under long-term non-cancelable finance leases as follows (in thousands):
As of June 30, 2024Amount
Remainder of 2024$433 
2025697 
2026424 
202717 
Total lease payments1,571 
Less: imputed interest134 
Present value of lease liabilities$1,437 
    
Weighted-average remaining lease term and discount rate, as of June 30, 2024, were as follows:
Lease Term and Discount RateJune 30, 2024
Weighted-average remaining lease term (years)
Operating leases3.5
Finance leases2.0
Weighted-average discount rate
Operating leases5.6 %
Finance leases9.5 %
Lessor - AviClear
Lessor revenue

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The Company leases the AviClear device to customers and receives a fixed annual license fee over the term of the arrangement and variable revenue related to the number of treatments performed by the lessee. The contractual term of the lease agreement is three years with a one-year auto-renewal feature. Certain lease agreements' terms in excess of one year can be terminated without financial penalty, and these agreements are accounted for as having a lease term of one year. The AviClear lease agreements are accounted for as operating leases. The fixed annual license fee is recognized evenly throughout the period of the lease agreement on a straight-line basis. The treatment revenue is recognized in the period the lessee has the ability to perform the patient treatment.
The following table summarizes the amount of operating lease income included in product revenue in the accompanying condensed consolidated statements of operations (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
AviClear operating lease license fee revenue$432 $1,367 $1,594 $2,592 
AviClear operating lease revenue715 3,236 1,901 5,939 
Total AviClear revenue$1,147 $4,603 $3,495 $8,531 
The AviClear device being leased has an estimated useful life of seven years.
The following is the minimum future lease payments as of June 30, 2024, under non-cancelable operating leases, assuming the minimum contractual lease term (in thousands):
As of June 30, 2024Amount
Remainder of 2024$3,941 
20253,050 
Total
$6,991 
Practical Expedients
The Company elected to apply a practical expedient to operating leases and elected not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer. As such, updates or upgrades on a when-and-if available basis to the AviClear device are combined with the operating lease revenue. The combined component is being accounted for under ASC 842. Additionally, the Company made an accounting policy election to present AviClear revenue net of sales and other similar taxes.
Capitalized sales commissions
Sales commissions related to obtaining AviClear lease agreements are accounted for as initial direct costs and are capitalized and amortized on a straight-line basis over the lease term. Amortization expenses for these assets were $0.5 million and $0.8 million for the three and six-month periods ended June 30, 2024, and $1.1 million and $2.2 million for the comparative periods ended June 30, 2023, and were included in sales and marketing expense on the Company’s condensed consolidated statement of operations. Total capitalized commissions as of June 30, 2024, and December 31, 2023, were $1.9 million and $2.7 million, respectively, and are included in other long-term assets on the Company’s condensed consolidated balance sheet.
Lease installment costs
The Company capitalizes fulfillment costs incurred before AviClear lease commencement and these costs include freight, installation, and training costs. Amortization expenses for these assets were $0.4 million and $1.0 million for the three and six-month periods ended June 30, 2024 and $0.5 million and $1.0 million  for the comparative periods ended June 30, 2023, and were included in cost of revenue on the Company’s condensed consolidated statement of operations. Total lease installment costs as of June 30, 2024, and December 31, 2023, were $1.1 million and $2.1 million, respectively, and are included in other long-term assets on the Company’s condensed consolidated balance sheet.

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Note 12.     Commitments and Contingencies
The Company is named from time to time as a party to other legal proceedings, product liability, intellectual property disputes, commercial disputes, employee disputes, and contractual lawsuits. A liability and related charge are recorded to earnings in the Company’s consolidated financial statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information, including discussion with outside legal counsel. If a reasonable estimate of a known or probable loss cannot be made, but a range of probable losses can be estimated, the low-end of the range of losses is recognized if no amount within the range is a better estimate than any other. If a material loss is reasonably possible, but not probable and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. The Company expenses legal fees as incurred. Certain of the cases below are still in the preliminary stages, and the Company is not able to quantify the extent of its potential liability, if any, other than as described. The outcome of litigation is inherently unpredictable and subject to significant uncertainties. If any of these matters are resolved adversely to the Company, this could have a material adverse effect on its business, financial condition, results of operations, and cash flows. In addition, defending these legal proceedings is likely to be costly, which may have a material adverse effect on the Company's financial condition, results of operations and cash flows, and may divert management's attention from the day-to-day operations of its business.
On January 31, 2020, the Company filed a lawsuit against Lutronic Aesthetics in the United States District Court for the Eastern District of California. Lutronic employs numerous former Cutera employees. The complaint against Lutronic generally alleges claims for (1) misappropriation of trade secrets in violation of state and federal law; (2) violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"); (3) interference with contractual relations; (4) interference with prospective economic advantage; (5) unfair competition; and (6) aiding and abetting. On March 13, 2020, the court entered a temporary restraining order ("TRO") against Lutronic generally prohibiting it from using or disseminating the Company's confidential, proprietary, or trade secret information. The order also prohibited Lutronic, for two years, from using such information for the purpose of soliciting, or conducting business with, certain specified customers. On April 9, 2020, the parties stipulated to the entry of a preliminary injunction providing for the same relief afforded by the TRO. On August 4, 2022, Cutera filed a second amended complaint. In addition to the above referenced claims, Cutera alleged claims for violation of the Lanham Act, unlawful business practices, false advertising and trademark infringement. On April 27, 2023, Lutronic filed a complaint for trade libel, intentional interference with prospective economic advantage, misappropriation of trade secrets and unfair business practices against Cutera in California State Court. On May 31, 2024 (the “Settlement Date”), Cutera, Inc. (the “Company”) reached a settlement agreement with Lutronic Aesthetics, Inc., regarding all outstanding litigation and arbitration matters involving the parties, Larry Laber and James Bartholomeusz. Under the terms of the settlement agreement, Lutronic agreed to pay the Company $5.75 million within thirty days of the Settlement Date and was recorded in General and Administrative expenses. Both parties agreed to the dismissal with prejudice of all pending actions and a mutual release, but denied all allegations of wrongful acts or omissions alleged in the pending actions against each party and agreed that the settlement was not an acknowledgement of any liability, fault, part or present wrongdoing, or violation of any law, rule, regulation or policy by either party or their respective affiliates, representatives or agents. As of July 3, 2024, all cases were officially dismissed.
In March 2023, Serendia, LLC (“Serendia”), filed patent infringement complaints against the Company with the International Trade Commission (“ITC”) and in U.S. District Court for the District of Delaware alleging infringement of six Serendia patents by the Secret RF and Secret Pro systems, which the Company distributes in the U.S. on behalf of Ilooda Co. Ltd., a Korean company (“ilooda”). The manufacturer of these products, ilooda, is obligated to defend the Company against these claims and, as a result, the Company has not incurred significant external legal costs. Serendia and ilooda have agreed to a settlement of the ITC investigation, the Delaware litigation and any other past, present and future suits or claims related to the six Serendia patents and the Secret RF and Secret Pro systems. The settlement of these matters includes a non-exclusive, worldwide, fully paid up license from Serendia to ilooda to the six Serendia patents related to the Secret RF and Secret Pro systems, which are distributed by the Company. The ITC investigation as to ilooda and the Company was terminated as of April 10, 2024 and the Delaware litigation was dismissed as of April 3, 2024.
On April 11, 2023, J. Daniel Plants, the Company’s former Executive Chairperson, and David Mowry, the Company’s former Chief Executive Officer, filed a complaint in the Delaware Court of Chancery against directors Gregory Barrett, Sheila Hopkins, Timothy O’Shea, Juliane Park and Janet Widmann, as defendants, and the Company, as nominal defendant (the “Delaware Litigation”) seeking a declaration that the individual defendants breached their fiduciary duties and enjoining them from enforcing the nomination deadline under the Company’s Amended and Restated Bylaws in connection with the 2023 annual meeting of stockholders, or in the alternative, a declaration that the Company must hold a special meeting of the stockholders on June 2, 2023. Mr. Plants and Mr. Mowry filed a motion for expedited proceedings with their complaint. Mr. Plants and Mr. Mowry subsequently agreed that the determination made by the Special Committee of the Board to hold a special meeting of the stockholders on June 9, 2023 mooted their request in the Delaware Litigation for a declaration that the

28
Company hold a special meeting of the stockholders. On April 18, 2023, the Court of Chancery denied Mr. Plants and Mr. Mowry’s motion for expedited proceedings.
On May 16, 2023, Mr. Mowry filed a letter with the Court of Chancery disclosing that he had resolved his dispute with the defendants and agreed to dismiss his claims with prejudice. On May 17, 2023, the Court of Chancery granted an order for voluntary dismissal of Mr. Mowry as a plaintiff in the Delaware Litigation. Mr. Plants subsequently publicly voiced opposition to certain aspects of the Company's corporate governance and strategy but did not submit a notice of nomination of director candidates for the Company’s 2023 annual meeting of stockholders and did not purport to nominate any director candidates at the Company’s annual meeting of stockholders held on July 13, 2023. Due to Plaintiff’s failure to amend his Complaint within the time required by the Court’s order dated October 6, 2023, the Delaware Litigation was dismissed with prejudice.
On October 5, 2023, Mr. Plants filed a Sarbanes-Oxley (“SOX”) discrimination claim (the “SOX Whistleblower Complaint”) with the U.S. Department of Labor Occupational Safety and Health Administration (“OSHA”). Mr. Plants alleges that he was terminated on April 11, 2023, in retaliation for reporting to the Board of Directors (the “Board”) his concerns that budgeting and guiding to higher forecasts for 2023 would be misleading to shareholders. The SOX Whistleblower Complaint referenced the April 3, 2023 letter from Mr. Plants to the Company’s Board that articulated Mr. Plants’ concerns. The Company received notice of the SOX Whistleblower Complaint on November 8, 2023.
On December 7, 2023, Mr. Plants made an arbitration demand in JAMS against the Company, Mr. Barrett, Ms. Hopkins, Mr. O’Shea, Ms. Park and Ms. Widmann for claims related to the termination of his employment (the “Arbitration Demand”). Mr. Plants alleges several claims: breach of his change of control and severance agreement; wrongful termination; retaliation in violation of California’s whistleblower laws; retaliation in violation of SOX; defamation/libel; tortious interference with prospective economic advantage; and breach of oral contract. He seeks compensatory, special, and punitive damages, as well as reinstatement, civil penalties, and attorneys’ fees and costs. Mr. Plants and the Company have agreed to a settlement of all claims against the Company and the parties listed in the Arbitration Demand. The OSHA investigation was officially closed on April 26, 2024, and the JAMS arbitration was dismissed as of April 19, 2024.
As of June 30, 2024, and December 31, 2023, the Company had accrued $2.5 million and $3.3 million, respectively, related to various pending commercial and product liability lawsuits. The Company does not believe that a material loss in excess of accrued amounts is reasonably likely.
As of June 30, 2024, the Company had $5.7 million of non-cancelable inventory purchase obligations with a certain vendor due in 2024.

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Note 13.     Debt
Convertible notes, net of unamortized debt issuance costs
The following table presents the outstanding principal amount and carrying value of the Company’s Convertible Notes (in thousands):

June 30,
2024		December 31,
2023
Notes due in 2026
Outstanding principal amount$69,125 $69,125 
Unamortized debt issuance costs(845)(1,084)
Carrying Value$68,280 $68,041 
Notes due in 2028
Outstanding principal amount$240,000 $240,000 
Unamortized debt issuance costs(5,105)(5,714)
Carrying Value$234,895 $234,286 
Notes due in 2029
Outstanding principal amount$120,000 $120,000 
Unamortized debt issuance costs(3,334)(3,632)
Carrying Value$116,666 $116,368 
Convertible notes, net$419,841 $418,695 

Issuance of convertible notes due in 2026
In March 2021, the Company issued $138.3 million aggregate principal amount of 2026 Notes in a private placement offering. In May 2022, the Company entered into privately-negotiated exchange agreements with certain holders of the Company’s outstanding 2026 Notes. Following the exchange, approximately $69.1 million in aggregate principal amount of the 2026 Notes remained outstanding.
The 2026 Notes bear interest at a rate of 2.25% per year payable semiannually in arrears on March 15 and September 15 of each year. Upon conversion, the 2026 Notes will be convertible into either cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. The Convertible notes are presented as Convertible notes, net of unamortized debt issuance costs, on the condensed consolidated balance sheet. The aggregate proceeds from the offering were approximately $133.6 million, net of issuance costs, including initial purchaser fees.
Each $1,000 principal amount of the 2026 Notes is initially convertible into 30.1427 shares of the Company’s common stock, which is equivalent to a conversion price of approximately $33.18 per share. The conversion rate for the 2026 Notes is subject to adjustment for certain events as set forth in the indenture governing the 2026 Notes. The 2026 Notes will mature on March 15, 2026, unless earlier converted, redeemed, or repurchased in accordance with the terms of the 2026 Notes.
Issuance of convertible notes due in 2028
In May 2022, the Company issued $240.0 million aggregate principal amount of 2028 Notes. A total of $230.0 million of aggregate principal amount of 2028 Notes was issued in a private placement offering and concurrently with this private placement, the Company entered into a purchase agreement with Voce Capital Management LLC ("Voce"), an entity affiliated with J. Daniel Plants, the Company’s former Executive Chairperson, pursuant to which the Company issued to Voce $10.0 million aggregate principal amount of 2028 Notes on the same terms and conditions. The 2028 Notes are presented as Convertible notes, net of unamortized debt issuance costs, on the condensed consolidated balance sheet. The aggregate proceeds from the offering of 2028 Notes were approximately $232.4 million, net of issuance costs, including initial purchaser fees.


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The 2028 Notes bear interest at a rate of 2.25% per year payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2022. Upon conversion, the 2028 Notes will be convertible into either cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. Each $1,000 principal amount of the 2028 Notes is initially convertible into 18.9860 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $52.67 per share. The conversion rate for the 2028 Notes is subject to adjustment for certain events as set forth in the indenture governing the 2028 Notes. The 2028 Notes will mature on June 1, 2028, unless earlier converted, redeemed, or repurchased in accordance with the terms of the 2028 Notes.
Issuance of convertible notes due in 2029
In December 2022, the Company issued $120.0 million aggregate principal amount of 2029 Notes in a private placement offering. The 2029 Notes bear interest at a rate of 4.00% per year payable semiannually in arrears on June 1 and December 1 of each year. Upon conversion, the 2029 Notes will be convertible into either cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. The convertible notes are presented as Convertible notes, net of unamortized debt issuance costs, on the condensed consolidated balance sheet. The aggregate proceeds from the offering were approximately $115.8 million, net of issuance costs, including initial purchaser fees.
Each $1,000 principal amount of the 2029 Notes is initially convertible into 17.1378 shares of the Company’s common stock, which is equivalent to a conversion price of approximately $58.35 per share. The conversion rate for the 2029 Notes is subject to adjustment for certain events as set forth in the indenture governing the 2029 Notes. The 2029 Notes will mature on June 1, 2029, unless earlier converted, redeemed, or repurchased in accordance with the terms of the 2029 Notes.

2026 Notes exchange
In May 2022, the Company entered into privately-negotiated exchange agreements with certain holders of the Company’s outstanding 2026 Notes with respect to the exchange of $45.8 million in cash (excluding $0.3 million in cash for the payment of accrued interest) and 1,354,348 shares of common stock for $69.1 million in aggregate principal amount of the Company’s outstanding 2026 Notes (the “2026 Notes Exchange”). Immediately following the closing of the 2026 Notes Exchange, approximately $69.1 million in aggregate principal amount of the 2026 Notes remained outstanding.

Conversion and other features

2026 Notes:
Holders may convert their 2026 Notes at their option prior to the close of business on the business day immediately preceding December 15, 2025, in multiples of $1,000 principal amount, only under the following circumstances:
•During any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding fiscal quarter, is greater than or equal to 130% of the conversion price for the 2026 Notes on each applicable trading day;
•During the five-business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day;
•The Company calls such 2026 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
•Upon the occurrence of specified corporate events.
On or after December 15, 2025, and until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2026 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
The circumstances described in the bullets of the paragraph above were not met during the second quarter of 2024. As of June 30, 2024, the 2026 Notes are not convertible. The 2026 Notes may become convertible in future periods. Upon any conversion requests of the 2026 Notes, the Company would be required to pay or deliver, as the case may be, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election with respect to such

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conversion requests. To the extent there are any conversion requests during the twelve months ending June 30, 2025, the Company intends to settle such conversion requests in shares of common stock. Therefore, as of June 30, 2024, the 2026 Notes have been included as Long-term debt on the condensed consolidated balance sheet.
On or after March 20, 2024, the Company may redeem for cash all or any portion of the 2026 Notes, at the Company’s option, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company elects to redeem fewer than all of the outstanding 2026 Notes, at least $50.0 million aggregate principal amount of 2026 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.
If a specified corporate event occurs, 2026 Note holders have the option to require the Company to repurchase any portion or all of their 2026 Notes in $1,000 principal increments for cash. The price for such repurchase is calculated as 100% of the principal amounts of 2026 Notes, plus accrued and unpaid interest to the day immediately preceding the Fundamental Change repurchase date. Additionally, holders of the 2026 Notes who convert in connection with a fundamental change are, under certain circumstances, entitled to an increase in conversion rate.
The 2026 Notes are general senior unsecured obligations that rank senior to any of the Company’s indebtedness that is explicitly subordinated to the 2026 Notes. The 2026 Notes have equal rank in right of payment with all existing and future unsecured indebtedness that is not subordinated to the 2026 Notes (including the 2028 Notes and 2029 Notes). The 2026 Notes will be junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness.
The estimated fair value of the 2026 Notes was approximately $23.3 million as of June 30, 2024, which the Company determined through consideration of market prices. The fair value measurement is classified as Level 2, as defined in Note 3.
2028 Notes:

Holders may convert their 2028 Notes at their option, in multiples of $1,000 principal amount, only under the following circumstances:
•During any fiscal quarter commencing after the fiscal quarter ending on September 30, 2022 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding fiscal quarter, is greater than or equal to 130% of the conversion price for the 2028 Notes on each applicable trading day;
•During the five-business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of 2028 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day;
•The Company calls such 2028 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
•Upon the occurrence of specified corporate events.
On or after March 1, 2028, and until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2028 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
The circumstances described in the bullets in the paragraph above were not met during the second quarter of 2024. As of June 30, 2024, the 2028 Notes are not convertible. The 2028 Notes may become convertible in future periods. Upon any conversion requests of the 2028 Notes, the Company would be required to pay or deliver, as the case may be, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election with respect to such conversion requests. To the extent there are any conversion requests during the twelve months ending June 30, 2025, the Company intends to settle such conversion requests in shares of common stock. Therefore, as of June 30, 2024, the 2028 Notes have been included as long-term debt on the condensed consolidated balance sheet.


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The Company may not redeem the 2028 Notes prior to June 5, 2025. On or after June 5, 2025, the Company may redeem for cash all or any portion of the 2028 Notes, at the Company’s option, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company elects to redeem fewer than all of the outstanding 2028 Notes, at least $100.0 million aggregate principal amount of 2028 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.
If a specified corporate event occurs, note holders have the option to require the Company to repurchase any portion or all of their 2028 Notes in $1,000 principal increments for cash. The price for such repurchase is calculated as 100% of the principal amounts of 2028 Notes, plus accrued and unpaid interest to the day immediately preceding the Fundamental Change repurchase date. Additionally, holders of the 2028 Notes who convert in connection with a fundamental change are, under certain circumstances, entitled to an increase in conversion rate.
The 2028 Notes are general senior unsecured obligations that rank senior to any of the Company’s indebtedness that is explicitly subordinated to the 2028 Notes. The 2028 Notes have equal rank in right of payment with all existing and future unsecured indebtedness that is not subordinated to the 2028 Notes (including the 2026 Notes and 2029 Notes). The 2028 Notes will be junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness.
The estimated fair value of the 2028 Notes was approximately $48.1 million as of June 30, 2024, which the Company determined through consideration of market prices. The fair value measurement is classified as Level 2, as defined in Note 3.
2029 Notes:
Holders may convert their 2029 Notes at their option prior to the close of business on the business day immediately preceding March 1, 2029 in multiples of $1,000 principal amount, only under the following circumstances:
•During any fiscal quarter commencing after the fiscal quarter ending March 31, 2023 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding fiscal quarter, is greater than or equal to 130% of the conversion price for the 2029 Notes on each applicable trading day;
•During the five-business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of 2029 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day;
•