Balance Sheet Components

6 Months Ended

Jun. 30, 2022

Balance Sheet Related Disclosures [Abstract]

Inventories

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


	June 30,		December 31,
	2022		2021
Raw materials	$	1,481	$	2,109
Work in progress		4,157		4,796
Finished goods		47,163		46,009
	$	52,801	$	52,914

Property and Equipment

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


	June 30,			December 31,
	2022			2021
Leasehold improvements	$	3,692		$	2,734
Manufacturing equipment and tooling		10,011			9,922
Computer equipment		1,661			1,672
Software		6,347			6,379
Furniture and fixtures		1,205			1,542
		22,916			22,249
Less accumulated depreciation		(10,077	)		(8,251	)
	$	12,839		$	13,998

Depreciation expense for the three months ended June 30, 2022 and 2021 was $0.7 million and $0.8 million, respectively. Depreciation expense for both the six months ended June 30, 2022 and 2021 was $1.5 million.

Goodwill and Other Intangible Assets, net

Following the sale of the miraDry business, the Company has one reporting unit, Plastic Surgery, formerly known as Breast Products. The Company evaluates goodwill for impairment at least annually on October 1st and whenever circumstances suggest that goodwill may be impaired.

The carrying amount of goodwill as of June 30, 2022 and December 31,2021 were as follows (in thousands):


	Plastic Surgery
Balances as of December 31, 2021
Goodwill		23,480
Accumulated impairment losses		(14,278	)
Goodwill, net	$	9,202
Balances as of June 30, 2022
Goodwill		23,480
Accumulated impairment losses		(14,278	)
Goodwill, net	$	9,202

The components of the Company’s other intangible assets consist of the following (in thousands):


	Average
	Amortization		June 30, 2022
	Period		Gross Carrying		Accumulated			Intangible
	(in years)		Amount		Amortization			Assets, net
Intangibles with definite lives
Customer relationships		10	$	4,940	$	(4,359	)	$	581
Trade names - finite life		12		800		(422	)		378
Manufacturing know-how		19		8,240		(2,065	)		6,175
Developed technology		8		20,660		(1,271	)		19,389
Total definite-lived intangible assets			$	34,640	$	(8,117	)	$	26,523

Intangibles with indefinite lives
Trade names - indefinite life	—			450		—			450
Total indefinite-lived intangible assets			$	450	$	—		$	450


	Average
	Amortization		December 31, 2021
	Period		Gross Carrying		Accumulated			Intangible
	(in years)		Amount		Amortization			Assets, net
Intangibles with definite lives
Customer relationships		10	$	4,940	$	(4,224	)	$	716
Trade names - finite life		12		800		(389	)		411
Manufacturing know-how		19		8,240		(1,652	)		6,588
Developed technology		8		20,600		-			20,600
Total definite-lived intangible assets			$	34,580	$	(6,265	)	$	28,315

Intangibles with indefinite lives
Trade names - indefinite life	—			450		—			450
Total indefinite-lived intangible assets			$	450	$	—		$	450

Amortization expense for the three months ended June 30, 2022 and 2021 were $0.9 million and $0.3 million, respectively. Amortization expense for the six months ended June 30, 2022 and 2021 was $1.9 million and $0.6 million, respectively. The following table summarizes the future estimated amortization expense relating to the Company's definite-lived intangible assets as of June 30, 2022 (in thousands):


	Amortization
Period	Expense
2022	$	2,458
2023		3,594
2024		3,449
2025		3,306
2026		3,133
Thereafter		10,583
	$	26,523

Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following (in thousands):


	June 30,		December 31,
	2022		2021
Payroll and related expenses	$	1,967	$	1,975
Accrued severance		1,308		248
Accrued commissions		1,771		4,329
Accrued bonuses		1,268		3,213
Deferred and contingent consideration, current portion		2,712		2,431
Lease liabilities		1,581		1,666
Other		6,646		7,436
	$	17,253	$	21,298

Accrued warranties

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


	Six Months Ended June 30,
	2022			2021
Balance as of January 1	$	2,505		$	1,934
Warranty costs incurred during the period		(266	)		(109	)
Changes in accrual related to warranties issued during the period		513			432
Changes in accrual related to pre-existing warranties		12			12
Balance as of June 30	$	2,764		$	2,269

As of June 30, 2022 and 2021, both balances are included in “Warranty reserve” on the condensed consolidated balance sheets.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1 — Quoted prices in active markets for identical assets or liabilities.

•

Level 2 — Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Contingent consideration

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 108%. 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 20.0%.

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

The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31,2021 and indicate the level of the fair value hierarchy utilized to determine such fair value (in thousands):


	Fair Value Measurements as of
	June 30, 2022 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Liability for contingent consideration	$	—	$	—	$	2,805	$	2,805
	$	—	$	—	$	2,805	$	2,805


	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

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
Balance, December 31, 2021	$	3,114
Change in fair value		(309	)
Balance, June 30, 2022	$	2,805

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 condensed consolidated balance sheets.