1162461--3/16/2006--CUTERA

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{property, intellectual, protect}

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{customer, product, revenue}

{control, financial, internal}

{regulation, change, law}

{personnel, key, retain}

{stock, price, operating}

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The Structure of Skin and Conditions that Affect Appearance The Market for Aesthetic Procedures Aesthetic Procedures for Improving the Skin s Appearance and Their Limitations Tissue Tightening and the Treatment of Wrinkles- Laser and Other Light-Based Aesthetic Treatments FDA s Pre-market Clearance and Approval Requirements Unfavorable results in our intellectual property litigation with Palomar Medical Technologies may result in significant decline to our stock price. Our intellectual property litigation with Palomar is costly and may prevent us from selling many of our products and generating anticipated revenue. We may be involved in future costly intellectual property litigation, which could impact our future business and financial performance. Intellectual property rights may not provide adequate protection for some or all of our products, which may permit third parties to compete against us more effectively. We compete against companies that have longer operating histories, more established products and greater resources, which may prevent us from achieving significant market penetration or increased operating results. Competition among providers of laser and other light-based devices for the aesthetic market is characterized by rapid innovation, and we must continuously develop new products or our revenues may decline. Our ability to compete depends upon our ability to innovate, to develop and commercialize new products and product enhancements, and to identify new markets for our technology. If our public guidance or our future operating performance does not meet investor expectations, our stock price could decline. If we fail to obtain clearance from the U.S. Food and Drug Administration to market our Titan product for additional indications, our revenue from this product may be adversely affected. If we fail to obtain or maintain necessary FDA clearances for our products and indications, if clearances for future products and indications are delayed or not issued, or if there are federal or state level regulatory changes, our commercial operations would be harmed. If we fail to comply with the FDA s Quality System Regulation and laser performance standards, our manufacturing operations could be halted, and our business would suffer. If we modify one of our FDA-approved devices, we may need to seek re-approval, which, if not granted, would prevent us from selling our modified products or cause us to redesign our products. We may be unable to obtain or maintain international regulatory qualifications or approvals for our current or future products and indications, which could harm our business. To successfully market and sell our products internationally, we must address many issues with which we have little or no experience. The expense and potential unavailability of insurance coverage for our customers and our company could adversely affect our ability to sell our products and our financial condition. Because we do not require training for users of our products, and sell our products to non-physicians, there exists an increased potential for misuse of our products, which could harm our reputation and our business. Product liability suits could be brought against us due to a defective design, material or workmanship or misuse of our products and could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates. Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business. Components used in our products are complex in design, and any defects may not be discovered prior to shipment to customers, which could result in warranty obligations, reducing our revenue and increasing our cost. We forecast sales to determine requirements for components and materials used in our products and if our forecasts are incorrect, we may experience either delays in shipments or increased inventory costs. If there is not sufficient demand for the procedures performed with our products, practitioner demand for our products could be inhibited, resulting in unfavorable operating results and reduced growth potential. Lack of demand for our products in the medi-spa market would harm our anticipated revenue growth. If PSS World Medical fails to perform to our expectations, we may fail to achieve anticipated operating results. We depend on skilled and experienced personnel to operate our business effectively. If we are unable to recruit, hire and retain these employees, our ability to manage and expand our business will be harmed, which would impair our future revenue and profitability. Our financial results will be affected by accounting rules governing the recognition of stock-based compensation expense. Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and stock price. Our effective income tax rate may vary significantly Any acquisitions that we make could disrupt our business and harm our financial condition. Anti-takeover provisions in our Amended and Restated Certificate of Incorporation and Bylaws, and Delaware law, contain provisions that could discourage a takeover. We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

Full 10-K form ▸

1162461--3/16/2006--CUTERA_INC