Inventories, net consist of the following (in thousands):


	December 31,		December 31,
	2021		2020
Raw materials	$	2,109	$	3,788
Work in progress		4,796		10,710
Finished goods		41,982		21,254
Finished goods - right of return		4,027		3,416
	$	52,914	$	39,168

At December 31, 2021 and 2020, approximately $8.0 million and $5.7 million, respectively, of inventory was held on consignment at doctors’ offices, clinics, and hospitals. The value and quantity at any one location is not significant.

Property and equipment, net consist of the following (in thousands):


	December 31,			December 31,
	2021			2020
Leasehold improvements	$	2,734		$	2,523
Manufacturing equipment and tooling		9,922			8,529
Computer equipment		1,672			2,522
Software		6,379			3,010
Furniture and fixtures		1,542			1,040
		22,249			17,624
Less accumulated depreciation		(8,251	)		(5,323	)
	$	13,998		$	12,301

Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was $3.1 million, $2.0 million and $0.8 million, respectively. There have been no impairments recorded during the years ended December 31, 2021, 2020 and 2019.

Accrued and other current liabilities consist of the following:


	December 31,		December 31,
	2021		2020
Payroll and related expenses	$	5,188	$	3,003
Accrued severance		248		2,900
Accrued commissions		4,329		4,734
Accrued manufacturing		121		225
Deferred and contingent consideration, current portion		2,431		10,146
Audit, consulting and legal fees		185		48
Accrued sales and marketing expenses		159		300
Lease liabilities		1,666		1,588
Other		6,971		5,464
	$	21,298	$	28,408

The following table provides a rollforward of the accrued warranties (in thousands):


	Year Ended December 31,
	2021			2020
Balance as of January 1	$	1,934		$	1,397
Warranty costs incurred during the period		(399	)		(122	)
Changes in accrual related to warranties issued during the period		933			589
Changes in accrual related to pre-existing warranties		37			70
Balance as of December 31	$	2,505		$	1,934

As of December 31, 2021, and 2020, both balances are included in “Warranty reserve and other long-term liabilities”.

The contingent consideration balance consists of milestone payments related to the acquisition of AuraGen and future royalty payments related to the acquisition of BIOCORNEUM.

The Company assessed the fair value of all contingent consideration using a Monte-Carlo simulation model. The contingent consideration related to AuraGen is based on the achievement of certain clinical endpoints following the completion of a study measuring retention rates using the fat grafting products. The significant assumptions utilized in the fair value measurement was the probable retention rate based on historical data and the Company's equity volatility of 95%. Any subsequent changes to the fair value of contingent consideration will be recorded as an adjustment to the carrying value of the assets acquired.

The contingent consideration related to the acquisition of BIOCORNEUM consists of royalty obligations based on future net sales for a defined term, beginning in 2024. The significant assumption utilized in the fair value measurement was the discount rate, which was 21.0%.

As these inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3.

Prior to the amendment in September 2021 discussed in Note 7, the Company assessed on a quarterly basis the fair value of the derivative liability associated with the conversion feature in the convertible note due in 2025. The conversion feature was initially bifurcated and recorded as a derivative liability on the condensed consolidated balance sheets with a corresponding discount at the date of issuance that netted against the principal amount of the note. The Company utilized a binomial lattice method to determine the fair value of the conversion feature, which utilized inputs including the common stock price, volatility of common stock, the risk-free interest rate and the probability of conversion to common shares at the Base Conversion Rate in the event of a major transaction (e.g. a change in control). As the probability of conversion is a significant unobservable input, the overall fair value measurement of the conversion feature was classified as Level 3. As a result of the amendment, the conversion feature met the criteria for equity classification and has been reclassified to “Additional paid in capital” on the consolidated balance sheet.

The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of December 31, 2021 and 2020 and indicate the level of the fair value hierarchy utilized to determine such fair value (in thousands):


	Fair Value Measurements as of
	December 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Liability for contingent consideration	$	—	$	—	$	3,114	$	3,114
	$	—	$	—	$	3,114	$	3,114


	Fair Value Measurements as of
	December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Liability for contingent consideration	$	—	$	—	$	7,026	$	7,026
Liability for derivative		—		—		26,570		26,570
	$	—	$	—	$	33,596	$	33,596

The following table provides a rollforward of the aggregate fair values of the Company’s liabilities for which fair value is determined by Level 3 inputs (in thousands):


	Contingent consideration liability			Derivative liability
Balance, December 31, 2020	$	7,026		$	26,570
Additions		2,615			—
Change in fair value		442			14,460
Settlements		(6,969	)		—
Reclassification to equity		—			(41,030	)
Balance, December 31, 2021	$	3,114		$	—

The liability for the current portion of contingent consideration is included in “Accrued and other current liabilities” and the long-term portion is included in “deferred and contingent consideration” in the consolidated balance sheets.

The Company recognizes changes in the fair value of the derivative liability in “Change in fair value of derivative liability” in the consolidated statement of operations and changes in the contingent consideration are recognized in “General and administrative” expense in the consolidated statement of operations.