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Commitments and Contingencies
 12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
Leases COMMITMENTS AND CONTINGENCIES
LEASES
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 automobiles. The Company’s leases generally have remaining terms of one to 10 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. In addition to the above facility leases, the Company also routinely leases automobiles for certain sales and field service employees under finance leases.
In February 2016, the FASB issued ASU 2016-2, "Leases," (also known as ASC Topic 842) which requires, among other items, lease accounting to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosures are enhanced to better present the amount, timing and uncertainty of cash flows arising from leases.
The Company adopted ASU 2016-2, as of January 1, 2019, using the modified retrospective method, to all leases existing at the date of initial application. The comparative period information has not been restated and continues to be reported under the accounting standards in effect for the period presented. The new standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward the Company’s historical conclusions about lease identification, lease classification and initial direct costs. The Company also elected the practical expedient related to land easements, allowing the Company to carry forward the Company’s accounting treatment for land easements on existing agreements. The Company did not elect the practical expedient to use hindsight in determining the lease term.
The adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of $10.2 million and $10.1 million, respectively, as of January 1, 2019, based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The difference between the additional lease assets and lease liabilities resulted from rent-free periods which were previously recorded as deferred rent. The Company’s accounting for finance leases remained substantially unchanged. The standard had no material impact on the Company’s consolidated net earnings, results of operations, comprehensive loss, statements of changes in equity, and cash flows.
Effect of Adoption of the New Lease Standard (ASC Topic 842) on Consolidated Financial Statements
The following table summarizes the effects of adopting Topic 842 on the Company’s consolidated balance sheet as of January 1, 2019 (in thousands):
As reported under
Topic 842		AdjustmentsBalances under
Prior GAAP
Operating lease right-of-use assets$10,049 $(10,049)$— 
Operating lease liabilities(2,430)2,430 — 
Other long-term liabilities*— 140 140 
Operating lease liabilities, net of current portion(7,759)7,759 — 
*Deferred rent included in other long-term liabilities
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.
The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, 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. 
Below is supplemental balance sheet information related to leases (in thousands):
Year Ended December 31,
20212020
AssetsClassification
Right-of-use assetsOperating lease right-of-use assets$14,627 $17,076 
Finance leaseProperty and equipment, net392 467 
Total leased assets$15,019 $17,543 

Year Ended December 31,
20212020
LiabilitiesClassification
Operating lease liabilities
Operating lease liabilities, currentOperating lease liabilities$2,419 $2,260 
Operating lease liabilities , non-currentOperating lease liabilities, net of current portion13,483 15,950 
Total Operating lease liabilities$15,902 $18,210 
Year Ended December 31,
Classification20212020
Finance lease liabilities
Finance lease liabilities, currentAccrued liabilities$554 $370 
Finance lease liabilities, non-currentOther long-term liabilities730 241 
Total Finance lease liabilities$1,284 $611 
Lease costs during the twelve months ended  December 31, 2021 and December 31, 2020 (in thousands): 
Year Ended December 31,
202120202019
Finance lease costAmortization expense$484 $431 $704 
Finance lease costInterest for finance lease$59 $63 $88 
Operating lease costOperating lease expense$3,542 $3,275 $2,892 
Cash paid for amounts included in the measurement of lease liabilities during the twelve months ended December 31, 2021 and December 31, 2020 were as follows (in thousands):
Year Ended December 31,
202120202019
Operating cash flowFinance lease$56 $63 $88 
Financing cash flowFinance lease$462 $537 $649 
Operating cash flowOperating lease$3,092 $2,139 $2,820 
Maturities of lease liabilities 
Maturities of operating lease liabilities were as follows as of December 31, 2021 (in thousands):
Amount
2022$3,121 
20233,160 
20242,874 
20252,875 
20262,970 
Thereafter3,338 
Total lease payments18,338 
Less: imputed interest(2,436)
Present value of lease liabilities$15,902 
Vehicle Leases
As of December 31, 2021, the Company was committed to minimum lease payments for vehicles leased under long-term non-cancelable finance leases as follows (in thousands):
Amount
2022$601 
2023347 
2024409 
202522 
Total lease payments1,379 
Less: imputed interest(95)
Present value of lease liabilities$1,284 
Weighted-average remaining lease term and discount rate, as of December 31, 2021, were as follows:
Lease Term and Discount Rate
Weighted-average remaining lease term (years)
Operating leases5.8
Finance leases2.1
Weighted-average discount rate
Operating leases4.8 %
Finance leases6.7 %
Lessor Information related to the Company’s system leasing
During fiscal year ended December 31, 2020, the Company entered into leasing transactions, in which the Company is the lessor, offered through the Company's membership program. The Company's leases for equipment rentals were all accounted for as operating leases during the second and third quarters of 2020.
During the fourth quarter ended December 31, 2020, certain of the membership program agreements were amended, granting the customers the exclusive right and option to purchase the leased system from the Company, at any time during the period of twelve months from signing the amended agreement. For contracts signed under the amended membership agreement, the Company classified and accounted for the arrangements as sales-type leases as of December 31, 2020, as the Company determined it is reasonably certain that the customer will exercise the purchase option.
For the sales-type leases, the net investment of the Company’s lease receivable is measured at the commencement date and is included in the consolidated balance sheets as a component of Other current assets and prepaid expenses. As of December 31, 2020, the Company recorded $0.7 million of revenue for the sales-type leases in the consolidated statement of operations and the related lease receivable in other current assets of the consolidated balance sheet. There was no revenue recognized from the sales-type lease arrangement in fiscal year 2021. During fiscal year 2021 the company received a full payment of $0.4 million from customers who exercised the purchase option. As of December 31, 2021, the lease receivable balance included in Other current assets of the consolidated balance sheet was $0.3 million.
The revenue related to non-lease components, which comprise service contracts and consumables, are deferred and recognized either over time or at the point of delivery. The non-lease component revenue amount as of December 31, 2021 was immaterial.
Equipment lease revenue for operating lease agreements is recognized over the life of the lease. The following table summarizes the amount of operating lease income included in product revenue in the accompanying consolidated statements of operations (in thousands):
Year Ended December 31, 2021Year Ended December 31, 2020
Operating lease income from equipment rentals$149 $367 
Purchase Commitments
The Company maintains certain open inventory purchase commitments with its suppliers to ensure a smooth and continuous supply for key components. The Company’s liability in these purchase commitments is generally restricted to an agreed-upon period. These periods can vary among different suppliers. Although open purchase orders are considered enforceable and legally binding, the terms generally allow the Company the option to cancel, reschedule, and adjust their requirements based on the Company's business needs prior to the delivery of goods or performance of services.
Indemnifications
In the normal course of the Company’s business, the Company enters into agreements that contain a variety of representations, warranties, and indemnification obligations. For example, the Company has entered into indemnification agreements with each of its directors and executive officers and certain key employees. The Company’s exposure under its various indemnification obligations is unknown and not reasonably estimable as they involve future claims that may be made against the Company. As such, the Company has not accrued any amounts for such obligations.
Contingencies
The Company is named from time to time as a party to other legal proceedings, product liability, commercial disputes, employee disputes, and contractual lawsuits in the normal course of business. 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.
In November 2019, the Company’s former Executive Vice President and CFO Sandra A. Gardiner announced her resignation from the Company. On November 7, 2019, Ms. Gardiner filed an arbitration demand against the Company in connection with the terms of her employment and resignation. The Company settled this matter with Ms. Gardiner during the second quarter of 2020 with a cash payment of $0.4 million and issuance of 15,408 shares of common stock.
As of December 31, 2021 and 2020, the Company had accrued $0.7 million and $0.4 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 possible.
On January 31, 2020, Cutera 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 against Lutronic generally prohibiting it from using or disseminating Cutera confidential, proprietary, or trade secret information. The order also prohibits Lutronic, for 2 years, from using such information for the purpose of soliciting, or conducting business with, certain specified customers. At the parties’ request, the Court subsequently entered a preliminary injunction providing for the same restrictions in the restraining order. On February 9, 2022, Cutera filed a motion seeking leave from the court to file a second amended complaint. In addition to the above-referenced claims against Lutronic Aesthetics, the proposed amended complaint alleges additional claims against it, including (1) violation of the Lanham Act; (2) unlawful business practices; (3) false advertising; and (4) trademark infringement. The proposed amended complaint also seeks to add Lutronic Corporation (the Korean parent company of Lutronic Aesthetics) as an additional defendant, and also alleges against it the above-described claims for misappropriation of trade secrets, violation of RICO, interference with contractual relations and prospective economic advantage, unfair competition, and aiding and abetting. Discovery is ongoing. No trial date has been scheduled.