Commitments and Contingencies

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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

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.