COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

In consideration for certain technology, manufacturing, distribution, and selling rights and licenses granted to the Company, the Company has agreed to pay royalties on sales of certain products that it sells. The royalty payments that the Company made under these agreements were not significant for any of the periods presented.

The Company is subject to various claims, lawsuits and proceedings in the ordinary course of the Company's business, including claims by current or former employees, distributors and competitors and with respect to its products and product liability claims, lawsuits and proceedings, some of which have been settled by the Company. In the opinion of management, such claims are either adequately covered by insurance or otherwise indemnified, or are not expected, individually or in the aggregate, to result in a material, adverse effect on the Company's financial condition. However, it is possible that the

Company's results of operations, financial position and cash flows in a particular period could be materially affected by these contingencies.

The Company accrues for loss contingencies when it is deemed probable that a loss has been incurred and that loss is estimable. The amounts accrued are based on the full amount of the estimated loss before considering insurance proceeds and do not include an estimate for legal fees expected to be incurred in connection with the loss contingency. The Company consistently accrues legal fees expected to be incurred in connection with loss contingencies as those fees are incurred by outside counsel as a period cost.

Contingent Consideration

The Company determined the fair value of contingent consideration during the twelve-month period ended December 31, 2022 and 2021 to reflect the change in estimate, additions, payments, transfers and the time value of money during the period.

A reconciliation of the opening balances to the closing balances of these Level 3 measurements for the years ended December 31, 2022 and 2021 is as follows (in thousands):


Year ended December 31, 2022	Contingent Consideration Liability Related to Acquisition of:
	Arkis (See Note 4)				Location in Financial Statements	Derma Sciences		ACell Inc. (See Note 4)				SIA				Location in Financial Statements
	Short-term		Long-term			Long-term		Short-term		Long-term		Long-term
Balance as of January 1, 2022	$	3,691	$	11,408		$	230	$	—	$	21,800	$	—
Additions	—		—			—				—		57,607
Transfers from long-term to current portion	—		—			—		4,885		(4,885)		—
Change in fair value of contingent consideration liabilities	(846)		(1,358)		Research and development	—		(4,885)		(13,215)		—				Selling, general and administrative
Balance as of December 31, 2022	$	2,845	$	10,050		$	230	$	—	$	3,700	$	57,607	$	—


Year ended December 31, 2021	Contingent Consideration Liability Related to Acquisition of:
	Arkis (See Note 4)				Location in Financial Statements	Derma Sciences		ACell Inc. (See Note 4)		Location in Financial Statements
	Short-term		Long-term			Long-term		Long-term
Balance as of January 1, 2021	$	3,415	$	11,746		$	230	$	—
Additions	—		—			—		23,900
Transfers from long-term to current portion	276		(276)			—		—
Change in fair value of contingent consideration liabilities	—		$	(62)	Research and development	—		(2,100)		Selling, general and administrative
Balance as of December 31, 2021	$	3,691	$	11,408		$	230	$	21,800

Derma Sciences

The Company assumed contingent consideration incurred by Derma Sciences, Inc. ("Derma Sciences") related to its acquisitions of BioD and the intellectual property related to Medihoney products. The Company accounted for the contingent liabilities by recording their fair value on the date of the acquisition based on a probability weighted income approach. The Company has already paid $33.3 million related to the aforementioned contingent liabilities. One contingent milestone remains which relates to net sales of Medihoney™ products exceeding certain amounts defined in the agreement between the Company and Derma Sciences. The potential maximum undiscounted payment amounts to $3.0 million. The estimated fair value as of December 31, 2022 and 2021 was $0.2 million.

Arkis BioSciences, Inc.

As part of the acquisition of Arkis BioSciences, Inc. ("Arkis"), the Company is required to pay the former shareholders of Arkis up to $25.5 million based on the timing of certain development milestones of $10 million and commercial sales milestones of $15.5 million, respectively. The Company used a probability weighted income approach to calculate the fair value of the contingent consideration that considered the possible outcomes of scenarios related to each specified milestone. The Company estimated the fair value of the contingent consideration to be $13.1 million at the acquisition date. The estimated the fair value as of December 31, 2022 was $12.9 million. The Company recorded $2.8 million in accrued expenses and other current liabilities and $10.1 million in other liabilities at December 31, 2022 in the consolidated balance sheets of the Company.