COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2019

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, 2019 and 2018 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 year ended December 31, 2019 and 2018 is as follows (in thousands):



Year Ended December 31, 2019	Contingent Consideration Liability Related to Acquisition of Arkis (See Note 4)		Contingent Consideration Liability Related to Acquisition of Derma Sciences (See Note 4)		Location in Financial Statements
	Long-term		Long-term
Balance as of January 1, 2019	$	—	$	230
Additions from acquisition of Arkis	13,100		—
Payments	—		—
Loss from change in fair value of contingent consideration liabilities	1,110		—		Research and development
Balance as of December 31, 2019	$	14,210	$	230



Year Ended December, 2018	Contingent Consideration Liabilities Related to Acquisition of Derma Sciences (See Note 4)						Contingent Consideration Liability Related to Acquisition of Confluent Surgical, Inc.			Location in Financial Statements
	Short-term			Long-term			Short-term
Balance as of January 1, 2018	$	315		$	1,387		$	22,478
Transfers from long-term to current portion	1,387			(1,387		)	—
Payments	(2,000		)	—			(24,000		)
Loss from change in fair value of contingent consideration liabilities	298			230			1,522			Selling, general and administrative
Balance as of December 31, 2018	$	—		$	230		$	—

Confluent Surgical

On January 15, 2014, the Company acquired all outstanding shares of Confluent Surgical, Inc., ("Confluent Surgical"). The purchase price included contingent consideration. The potential maximum undiscounted contingent consideration of $30.0 million consisted of $25.0 million upon obtaining certain U.S. governmental approvals (the "U.S. Contingent Consideration") and $5.0 million upon obtaining certain European governmental approvals, both related to the completion of the transition of the Confluent Surgical business. The fair values of contingent consideration related to the acquisition of Confluent Surgical were estimated using a discounted cash flow model using a discount rate of 2.2%. During the first quarter of 2018, the Company received the U.S. governmental approvals and adjusted the related contingent consideration liability to $19.0 million, which the Company paid in April 2018. During the third quarter of 2018, the Company received certain European governmental approvals. The Company paid the remaining $5.0 million of contingent consideration related to Confluent Surgical in October of 2018.