1162461--3/16/2009--CUTERA

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The Structure of Skin and Conditions that Affect Appearance The Market for Non-Surgical Aesthetic Procedures Non-Surgical Aesthetic Procedures for Improving the Skin s Appearance and Their Limitations Laser and Other Light-Based Aesthetic Treatments Technology and Design of Our Systems Multiple Applications Available in a Single System- Treatments for Broad Range of Skin Types and Conditions- 1064 nm Nd:YAG Hand Piece- Post-Warranty Service and Titan Hand Piece Refills FDA s Pre-market Clearance and Approval Requirements Pearl product for the treatment of wrinkles Pearl Fractional product for skin resurfacing and coagulation We are in a difficult economic period, and the uncertainty in the economy may reduce customer demand for our products, cause potential customers to delay their purchase decisions and make it more difficult for some potential customers to obtain credit financing, all of which would adversely affect our business and may increase the volatility of our stock price. We rely heavily on our sales professionals to market and sell our products worldwide. If we are unable to effectively train, retain and manage these employees, our ability to manage our business will be harmed, which would impair our future revenue and profitability. The initiatives that we are implementing in an effort to improve revenue and profitability could be unsuccessful, which could harm our business. A lack of customer demand for our products in any of our markets would harm our revenue. To successfully market and sell our products internationally, we must address many issues that are unique to our international business. We compete against companies that have longer operating histories, newer and different products, and greater resources, each of which may result in a competitive disadvantage to us and harm our business. The aesthetic equipment market is characterized by rapid innovation. To compete effectively, we must develop and acquire new products, market them successfully, and identify new markets for our technology. If there is not sufficient consumer 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. 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. We may incur substantial expenses if our practices are shown to have violated the Telephone Consumer Protection Act, and defending ourselves against the related litigation could distract management and harm our business. Two securities class action lawsuits were filed against us in April and May 2007, respectively, based upon the decreases in our stock price following the announcement of our preliminary first quarter 2007 revenue and earnings, and the announcement of our revised 2007 guidance. Defending ourselves against this litigation could distract management and harm our business. We are exposed to fluctuations in the market values of our portfolio investments, specifically auction rate securities (ARS), and interest rates. Due to failed auctions of our auction rate investments since February 2008, we are unable to readily liquidate our ARS into cash, and in 2008, we took impairment charges. If these auctions continue to fail, we may have to take additional impairment charges, which could reduce future earnings, harm our business and cause our stock price to decline. The price of our common stock may fluctuate substantially. We have a limited number of shares of common stock outstanding, a large portion of which is held by a small number of investors, which could result in the increase in volatility of our stock price. 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. 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, if there are federal or state level regulatory changes or if we are found to have violated applicable FDA marketing rules, 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. Any acquisitions that we make could disrupt our business and harm our financial condition. The expense and potential unavailability of insurance coverage for our customers could adversely affect our ability to sell our products, and therefore our financial condition. Because we do not require training for users of our products, and sell our products at times 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. Any defects in the design, material or workmanship of our products may not be discovered prior to shipment to customers, which could result in warranty obligations that may reduce our future revenue and increase 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. Our gross and operating margins may vary over time. We offer payment terms for qualified customers, In the event that there is a default by any of these customers, this could affect our earnings and could result in an increase in our days sales outstanding. We are subject to fluctuations in the exchange rate of the U.S. dollar and foreign currencies. We may have exposure to additional tax liabilities which could negatively impact our income tax provision, net income, and cash flow. Anti-takeover provisions in our Amended and Restated Certificate of Incorporation and Bylaws, and Delaware law, contain provisions that could discourage a takeover.

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1162461--3/16/2009--CUTERA_INC