UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: June 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35280

VERICEL CORPORATION

(Exact name of registrant as specified in its charter)


Michigan						94-3096597
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

64 Sidney Street

Cambridge, MA 02139

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (617) 588-5555

Securities registered pursuant to Section 12(b) of the Act:


Title of Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock (No par value)	VCEL	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of July ~~30, 2021, 46,631,158~~29, 2022, 47,177,974 shares of Common Stock, no par value per share, were outstanding.

Table of Contents

VERICEL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3

	Condensed Consolidated Balance Sheets ~~as of~~ ~~June 30, 2021 and December 31, 2020~~	3

	Condensed Consolidated Statements of Operations ~~for the three and six months ended June 30, 2021 and 2020~~	4

	Condensed Consolidated Statements of Comprehensive Loss ~~for the three and six months ended June 30, 2021 and 2020~~	5

	Condensed Consolidated Statements of ~~Shareholders'~~Shareholders’ Equity ~~from December 31, 2020 to~~ ~~June 30, 2021 and from December 31, 2019 to~~ ~~June 30, 2020~~	6

	Condensed Consolidated Statements of Cash Flows ~~for the six months ended June 30, 2021 and 2020~~	7

	Notes to Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2829

Item 4.	Controls and Procedures	2829

	PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

~~Item 1B.~~	~~Unresolved Staff Comments~~	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3330

Item 3.	Defaults Upon Senior Securities	3330

Item 4.	Mine Safety Disclosures	3330

Item 5.	Other Information	3330

Item 6.	Exhibits	3431

Exhibit Index		3431

Signatures		3533

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

VERICEL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands)


		June 30,		December 31,			June 30,		December 31,
		2021		2020			2022		2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	51,761	$	33,620	Cash and cash equivalents	$	56,054	$	68,330
Short-term investments	Short-term investments	39,214		42,187		Short-term investments	44,638		35,068
Accounts receivable (net of allowance for doubtful accounts of $3 and $143, respectively)		31,732		34,504
Accounts receivable (net of allowance for doubtful accounts of $40 and $40, respectively)						Accounts receivable (net of allowance for doubtful accounts of $40 and $40, respectively)	33,664		37,437
Inventory	Inventory	12,959		9,356		Inventory	15,929		13,381
Other current assets	Other current assets	2,854		3,893		Other current assets	4,809		4,246
Total current assets	Total current assets	138,520		123,560		Total current assets	155,094		158,462
Property and equipment, net	Property and equipment, net	10,590		7,633		Property and equipment, net	15,919		13,308
Restricted cash	Restricted cash	211		211		Restricted cash	6,184		211
Right-of-use assets	Right-of-use assets	47,798		50,105		Right-of-use assets	43,583		45,720
Long-term investments	Long-term investments	24,826		24,099		Long-term investments	23,718		25,687
Other long-term assets						Other long-term assets	317		317
Total assets	Total assets	$	221,945	$	205,608	Total assets	$	244,815	$	243,705
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	8,134	$	6,755	Accounts payable	$	9,684	$	9,016
Accrued expenses	Accrued expenses	11,077		11,293		Accrued expenses	12,133		14,045
Current portion of operating lease liabilities	Current portion of operating lease liabilities	4,611		4,394		Current portion of operating lease liabilities	3,156		2,950
Other liabilities		41		41
Other current liabilities						Other current liabilities	41		41
Total current liabilities	Total current liabilities	23,863		22,483		Total current liabilities	25,014		26,052
Operating lease liabilities	Operating lease liabilities	46,928		48,789		Operating lease liabilities	44,964		47,147
Other long-term liabilities	Other long-term liabilities	62		76		Other long-term liabilities	21		44
Total liabilities	Total liabilities	$	70,853	$	71,348	Total liabilities	69,999		73,243
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES	0		0		COMMITMENTS AND CONTINGENCIES	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding 46,579 and 45,804, respectively		534,005		510,061
Accumulated other comprehensive income (loss)		(23)		14
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding 47,141 and 46,880, respectively						Common stock, no par value; shares authorized — 75,000; shares issued and outstanding 47,141 and 46,880, respectively	575,011		553,902
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(855)		(154)
Accumulated deficit	Accumulated deficit	(382,890)		(375,815)		Accumulated deficit	(399,340)		(383,286)
Total shareholders’ equity	Total shareholders’ equity	151,092		134,260		Total shareholders’ equity	174,816		170,462
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	221,945	$	205,608	Total liabilities and shareholders’ equity	$	244,815	$	243,705

The accompanying ~~Notes~~notes to ~~the Condensed Consolidated Financial Statements~~condensed consolidated financial statements are an integral part of these statements.

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VERICEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except per share amounts)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020				2022			2021		2022		2021
Product sales, net	Product sales, net	$	38,680	$	20,014	$	72,307	$	46,692		Product sales, net	$	36,826		$	38,680	$	72,678	$	72,307
Other revenue	Other revenue	839		0		1,780		0			Other revenue	220			839		442		1,780
Total revenue	Total revenue	39,519		20,014		74,087		46,692			Total revenue	37,046			39,519		73,120		74,087
Cost of product sales	Cost of product sales	12,609		8,660		24,192		18,582			Cost of product sales	14,192			12,609		26,814		24,192
Gross profit	Gross profit	26,910		11,354		49,895		28,110			Gross profit	22,854			26,910		46,306		49,895
Research and development	Research and development	4,449		3,226		8,079		6,989			Research and development	4,792			4,449		9,652		8,079
Selling, general and administrative	Selling, general and administrative	26,190		16,486		48,850		34,555			Selling, general and administrative	27,144			26,190		53,009		48,850
Total operating expenses	Total operating expenses	30,639		19,712		56,929		41,544			Total operating expenses	31,936			30,639		62,661		56,929
Loss from operations	Loss from operations	(3,729)		(8,358)		(7,034)		(13,434)			Loss from operations	(9,082)			(3,729)		(16,355)		(7,034)
Other income (expense):	Other income (expense):										Other income (expense):
Interest income	Interest income	43		147		119		453			Interest income	148			43		236		119
Interest expense	Interest expense	(1)		(1)		(2)		(3)			Interest expense	(20)			(1)		(38)		(2)
Other income (expense)	Other income (expense)	(27)		(57)		57		10			Other income (expense)	(9)			(27)		103		57
Total other income	Total other income	15		89		174		460			Total other income	119			15		301		174
Net loss before tax provision		(3,714)		(8,269)		(6,860)		(12,974)
Tax provision		(72)		0		(215)		0
Loss before income taxes											Loss before income taxes	(8,963)			(3,714)		(16,054)		(6,860)
Income tax expense											Income tax expense	—			72		—		215
Net loss	Net loss	$	(3,786)	$	(8,269)	$	(7,075)	$	(12,974)		Net loss	$	(8,963)		$	(3,786)	$	(16,054)	$	(7,075)
Net loss per share attributable to common shareholders (Basic and diluted)		$	(0.08)	$	(0.18)	$	(0.15)	$	(0.29)
Weighted average number of common shares outstanding (Basic and diluted)		46,403		45,137		46,195		45,031

Net loss per common share:											Net loss per common share:
Basic											Basic	$	(0.19)		$	(0.08)	$	(0.34)	$	(0.15)
Diluted											Diluted	$	(0.19)		$	(0.08)	$	(0.34)	$	(0.15)
Weighted-average common shares outstanding:											Weighted-average common shares outstanding:
Basic											Basic	47,117			46,403		47,052		46,195
Diluted											Diluted	47,117			46,403		47,052		46,195

The accompanying ~~Notes~~notes to ~~the Condensed Consolidated Financial Statements~~condensed consolidated financial statements are an integral part of these statements.

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VERICEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, amounts in thousands)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020				2022		2021		2022		2021
Net loss	Net loss	$	(3,786)	$	(8,269)	$	(7,075)	$	(12,974)		Net loss	$	(8,963)	$	(3,786)	$	(16,054)	$	(7,075)
Other comprehensive income (loss):
Unrealized gain (loss) on investments		24		84		(37)		125
Other comprehensive loss:											Other comprehensive loss:
Unrealized (loss) gain on investments											Unrealized (loss) gain on investments	(242)		24		(701)		(37)
Comprehensive loss	Comprehensive loss	$	(3,762)	$	(8,185)	$	(7,112)	$	(12,849)		Comprehensive loss	$	(9,205)	$	(3,762)	$	(16,755)	$	(7,112)

The accompanying ~~Notes~~notes to ~~the Condensed Consolidated Financial Statements~~condensed consolidated financial statements are an integral part of these statements.

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VERICEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~SHAREHOLDERS'~~SHAREHOLDERS’ EQUITY

(Unaudited, amounts in thousands)

Common Stock Accumulated Other Comprehensive Income (loss) Accumulated Deficit Total Shareholders' Equity
Shares Amount
BALANCE, DECEMBER 31, 2020 45,804 $ 510,061 $ 14 $ (375,815) $ 134,260
Net loss — — — (3,289) (3,289)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures — 7,019 — — 7,019
Stock option exercises 359 3,532 — — 3,532
Shares issued under the Employee Stock Purchase Plan 14 249 — — 249
Issuance of stock upon restricted stock unit vesting 76 — — — 0
Restricted stock withheld for employee tax remittance (28) (1,501) — — (1,501)
Unrealized loss on investments — — (61) — (61)
BALANCE, MARCH 31, 2021 46,225 $ 519,360 $ (47) $ (379,104) $ 140,209
Net loss — — — (3,786) (3,786)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures — 10,866 — — 10,866
Stock option exercises 330 3,531 — — 3,531
Shares issued under the Employee Stock Purchase Plan 13 309 — — 309
Issuance of stock upon restricted stock unit vesting 12 — — — 0
Restricted stock withheld for employee tax remittance (1) (61) — — (61)
Unrealized gain on investments — — 24 — 24
BALANCE, JUNE 30, 2021 46,579 $ 534,005 $ (23) $ (382,890) $ 151,092


	Common Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount
BALANCE, DECEMBER 31, 2021	46,880	$	553,902	$	(154)	$	(383,286)	$	170,462
Net loss	—	—		—		(7,091)		(7,091)
Stock-based compensation expense	—	9,531		—		—		9,531
Stock option exercises	125	1,155		—		—		1,155
Shares issued under the Employee Stock Purchase Plan	9	310		—		—		310
Issuance of stock for restricted stock unit vesting	108	—		—		—		—
Restricted stock withheld for employee tax remittance	(41)	(1,423)		—		—		(1,423)
Unrealized loss on investments	—	—		(459)		—		(459)
BALANCE, MARCH 31, 2022	47,081	$	563,475	$	(613)	$	(390,377)	$	172,485
Net loss	—	—		—		(8,963)		(8,963)
Stock-based compensation expense	—	10,808		—		—		10,808
Stock option exercises	32	428		—		—		428
Shares issued under the Employee Stock Purchase Plan	10	318		—		—		318
Issuance of stock for restricted stock unit vesting	19	—		—		—		—
Restricted stock withheld for employee tax remittance	(1)	(18)		—		—		(18)
Unrealized loss on investments	—	—		(242)		—		(242)
BALANCE, JUNE 30, 2022	47,141	$	575,011	$	(855)	$	(399,340)	$	174,816


		Common Stock			Accumulated Other Comprehensive Income		Accumulated Deficit					Total Shareholders' Equity			Common Stock				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Shareholders’ Equity
		Shares	Amount								Shares					Amount
BALANCE, DECEMBER 31, 2019		44,864	$	489,749	$	21			$	(378,679)					$	111,091
BALANCE, DECEMBER 31, 2020														BALANCE, DECEMBER 31, 2020	45,804		$	510,061		$	14		$	(375,815)		$	134,260
Net loss	Net loss	—	—		—		(4,705)					(4,705)		Net loss	—		—		—			(3,289)			(3,289)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures		—	3,768		—		—					3,768

Stock-based compensation expense														Stock-based compensation expense	—		7,019		—			—			7,019
Stock option exercises	Stock option exercises	57	196		—		—					196		Stock option exercises	359		3532		—			—			3,532
Shares issued under the Employee Stock Purchase Plan	Shares issued under the Employee Stock Purchase Plan	20	224		—		—					224		Shares issued under the Employee Stock Purchase Plan	14		249		—			—			249
Issuance of stock upon restricted stock unit vesting		36	—		—		—					0
Issuance of stock for restricted stock unit vesting														Issuance of stock for restricted stock unit vesting	76		—		—			—			—
Restricted stock withheld for employee tax remittance														Restricted stock withheld for employee tax remittance	(28)		(1,501)		—			—			(1,501)
Unrealized loss on investments														Unrealized loss on investments	—		—		(61)			—			(61)
BALANCE, MARCH 31, 2021														BALANCE, MARCH 31, 2021	46,225		$	519,360	$	(47)		$	(379,104)		$	140,209
Net loss														Net loss	—		—		—			(3,786)			(3,786)
Stock-based compensation expense														Stock-based compensation expense	—		10,866		—			—			10,866
Stock option exercises														Stock option exercises	330		3,531		—			—			3,531
Shares issued under the Employee Stock Purchase Plan														Shares issued under the Employee Stock Purchase Plan	13		309		—			—			309
Issuance of stock for restricted stock unit vesting														Issuance of stock for restricted stock unit vesting	12		—		—			—			—
Restricted stock withheld for employee tax remittance	Restricted stock withheld for employee tax remittance	(14)	(163)		—		—					(163)		Restricted stock withheld for employee tax remittance	(1)		(61)		—			—			(61)
Unrealized gain on investments	Unrealized gain on investments	—	—		41		—					41		Unrealized gain on investments	—		—		24			—			24
BALANCE, MARCH 31, 2020		44,963	$	493,774	$	62	$	(383,384)				$	110,452
Net loss		—	—		—		(8,269)					(8,269)
Compensation expense related to stock options and restricted stock units granted, net of forfeitures		—	4,376		—		—					4,376
Stock option exercises		188	696		—		—					696
Shares issued under the Employee Stock Purchase Plan		32	257		—		—					257
Issuance of stock upon restricted stock unit vesting		11	—		—		—					0
Unrealized gain on investments		—	—		84		—					84
BALANCE, JUNE 30, 2020		45,194	$	499,103	$	146	$	(391,653)				$	107,596
BALANCE, JUNE 30, 2021														BALANCE, JUNE 30, 2021	46,579		$	534,005	$	(23)		$	(382,890)		$	151,092

The accompanying ~~Notes~~notes to ~~the Condensed Consolidated Financial Statements~~condensed consolidated financial statements are an integral part of these statements.

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VERICEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Operating activities:	Operating activities:					Operating activities:
Net loss	Net loss	$	(7,075)	$	(12,974)	Net loss	$	(16,054)	$	(7,075)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash flows from operating activities:						Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	1,506		1,079		Depreciation and amortization expense	1,928		1,506

Stock compensation expense		17,885		8,144

Foreign currency translation loss		27		45
Loss (gain) on sale of fixed assets		(22)		30

Stock-based compensation expense						Stock-based compensation expense	20,339		17,885
Amortization of premiums and discounts on marketable securities	Amortization of premiums and discounts on marketable securities	505		(25)		Amortization of premiums and discounts on marketable securities	302		505
Non-cash lease cost	Non-cash lease cost	2,325		1,603		Non-cash lease cost	2,155		2,325
Other						Other	16		5
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Inventory	Inventory	(3,603)		(1,601)		Inventory	(2,548)		(3,603)
Accounts receivable	Accounts receivable	2,772		8,513		Accounts receivable	3,773		2,772
Other current assets	Other current assets	1,039		53		Other current assets	(563)		1,039
Accounts payable	Accounts payable	1,356		(1,692)		Accounts payable	1,152		1,356
Accrued expenses	Accrued expenses	(216)		27		Accrued expenses	(1,912)		(216)
Operating lease liabilities	Operating lease liabilities	(1,644)		(1,537)		Operating lease liabilities	(1,977)		(1,644)

Net cash provided by operating activities	Net cash provided by operating activities	14,855		1,665		Net cash provided by operating activities	6,611		14,855
Investing activities:	Investing activities:					Investing activities:
Purchases of investments	Purchases of investments	(30,951)		(5,657)		Purchases of investments	(34,948)		(30,951)
Sales and maturities of investments	Sales and maturities of investments	32,655		32,797		Sales and maturities of investments	26,344		32,655

Expenditures for property, plant and equipment		(4,461)		(1,186)

Net cash provided by (used for) investing activities		(2,757)		25,954
Expenditures for property and equipment						Expenditures for property and equipment	(5,062)		(4,461)
Net cash used in investing activities						Net cash used in investing activities	(13,666)		(2,757)
Financing activities:	Financing activities:					Financing activities:

Net proceeds from common stock issuance due to stock option exercises		7,621		1,373
Payments on employee's behalf for taxes related to vesting of restricted stock units		(1,562)		(163)

Net proceeds from common stock issuance						Net proceeds from common stock issuance	2,211		7,621
Payments on employee’s behalf for taxes related to vesting of restricted stock unit awards						Payments on employee’s behalf for taxes related to vesting of restricted stock unit awards	(1,441)		(1,562)
Other	Other	(16)		(14)		Other	(18)		(16)
Net cash provided by financing activities	Net cash provided by financing activities	6,043		1,196		Net cash provided by financing activities	752		6,043

Net increase in cash, cash equivalents, and restricted cash		18,141		28,815
Net (decrease) increase in cash, cash equivalents, and restricted cash						Net (decrease) increase in cash, cash equivalents, and restricted cash	(6,303)		18,141
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	33,831		26,978		Cash, cash equivalents, and restricted cash at beginning of period	68,541		33,831
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	51,972	$	55,793	Cash, cash equivalents, and restricted cash at end of period	$	62,238	$	51,972

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VERICEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited, amounts in thousands)


	Six Months Ended June 30,
	2022	2021
Supplemental disclosure of cash flow information:
Non-cash information:

Additions to property and equipment included in accounts payable	869	630
Restricted stock held for employee tax remittance included in accounts payable	—	61


	Six Months Ended June 30,
	2022		2021
Reconciliation of amounts within the condensed consolidated balance sheets:
Cash and cash equivalents	$	56,054	$	51,761
Restricted cash	6,184		211
Total cash, cash equivalents, and restricted cash at end of period	$	62,238	$	51,972

The accompanying ~~Notes~~notes to ~~the Condensed Consolidated Financial Statements~~condensed consolidated financial statements are an integral part of these statements.

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VERICEL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.Organization

Vericel Corporation, a Michigan corporation (together with its consolidated subsidiaries referred to herein as the Company, or Vericel), was incorporated in March 1989 and began employee-based operations in 1991. The Company is a fully-integrated, commercial-stage biopharmaceutical company and is a leader in advanced therapies for the sports medicine and severe burn care markets. Vericel currently markets 2 cell therapy products in the ~~United States,~~U.S., MACI® (autologous cultured chondrocytes on porcine collagen membrane) and Epicel® (cultured epidermal autografts).

MACI is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel is a permanent skin replacement for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area ~~(TBSA)~~(“TBSA”). The Company also holds an exclusive license from MediWound Ltd. ~~(MediWound)~~(“MediWound”) for North American rights to NexoBrid®~~(concentrate of proteolytic enzymes enriched in bromelain)~~, a registration-stage biological orphan product designed for the debridement of severe thermal burns. The Company operates its business primarily in the U.S. in 1 reportable segment — the research, product development, manufacture and distribution of cellular therapies for use in the treatment of specific diseases.

COVID-19

The ongoing pandemic caused by the spread of a novel strain of coronavirus ~~(COVID-19) began directly affecting the United States in March of 2020 and has continued since that point.The pandemic~~(“COVID-19”) has created significant disruptions to the U.S. and global economy and has contributed ~~at times,~~ to significant volatility in financial markets. The global impact of the outbreak has fluctuated since early 2020.At times, many state, local and national governments – including those in Massachusetts and Michigan, where the Company’s operations are located – have responded by issuing, extending and supplementing orders requiring quarantines, restrictions on travel, and the mandatory closure of certain non-essential businesses, among other actions. In the U.S., the status and application of these orders have varied on a state-by-state basis since the early days of the pandemic. Many of the restrictions have been periodically updated as infection rates in the U.S. have risen and fallen, as new virus variants have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, the Company has been exempted from government orders requiring the closure of workplaces and the cessation of business operations. The vast majority of these restrictions have since been rescinded throughout most of the U.S.

Notwithstanding being an essential business, the Company’s business and operations ~~were,~~ at times have been adversely impacted by the ongoing effects of the COVID-19 ~~during 2020. As~~pandemic. For example, as a result of periodic restrictions placed on the performance of elective surgical procedures, ~~the Company~~Vericel experienced a significant increase in cancellations of scheduled MACI procedures as well as a slowdown in new MACI orders during March and April of 2020. The widespread suspension of surgical procedures impacted the Company’s business and operations during the first and second quarters of 2020. The level and degree of restriction on elective surgeries, on the ability of patients to seek treatment and on U.S. business operations generally fluctuated throughout 2020 as COVID-19 infection rates rose and fell during the summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on the Company’s MACI business had largely dissipated. During the summer of 2021, however, the pandemic’s direct and ancillary effects again began to cause some disruption to the Company’s MACI business. Following the cessation of COVID-19-related travel restrictions in many parts of the U.S. and the availability of vaccinations in May and June 2021, some MACI patients postponed or delayed treatment. Further, surges of new COVID-19 cases during the second half of 2021 caused by the spread of the “Delta” and “Omicron” variants again caused disruptions to health care networks including restrictions on the performance of elective procedures, the availability of physicians and/or their treatment prioritizations, the level of healthcare facility staffing and, in some instances, the willingness or ability of patients to seek treatment. Consequently, and notwithstanding the widespread distribution of vaccines, these factors contributed to a slowdown of MACI procedures during the third and fourth quarters of 2021 and during the first and second quarters of 2022. Although hospitals are now better prepared for a subsequent ~~surge~~surges in COVID-19 patients, ~~and COVID-19 vaccines have been approved and are being widely distributed in the United States,~~ the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the ~~United States~~U.S. were to rise, ~~again,~~ or if new or existing COVID-19 variants render current vaccine treatments ineffective.

Because Epicel is used almost exclusively in ~~the~~an emergent setting by burn centers and surgeons throughout the country, Epicel revenue and procedure volumes have been less affected by the pandemic. Nevertheless, the number of large burns and burn admissions can be affected by restrictions on human activity resulting from more severe government lockdown orders.

At the outset of the pandemic, the Company put in place a comprehensive workplace protection plan, which instituted protective measures in response to COVID-19.~~The Company’s~~ Vericel’s workplace protection plan has closely followed guidance issued by the Centers for Disease Control and Prevention ~~(CDC)~~(“CDC”) and has complied with applicable federal and state law.~~Because vaccines designed~~ To date, Vericel has been successful in sustaining its operations and providing MACI and Epicel to ~~protect against COVID-19 have become readily available and the rates of COVID-19 infections, hospitalizations and deaths~~patients in the majority of the U.S. have declined since the beginning of 2021, the CDC and the Occupational Safety and Health Administration (OSHA) have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced –need. The Company continues to ~~include the lifting of all capacity~~

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~~limitations on businesses in both states.~~Accordingly, Vericel is planning for a return to more normal workplace operations, but will continue to modify its workplace protection plan, and will reinstitute protective measures for its workforce as necessary.

~~The Company is reviewing~~review its policies and procedures regularly, including its workplace protection plan, as the pandemic evolves and the Company may take additional actions to the extent required.

The Company continues to manufacture MACI and Epicel and is maintaining a significant safety stock of all key raw materials. Vericel does not expect that current supply chain interruptions will impact its ongoing manufacturing operations. With respect to customer delivery, MACI final product has an established shelf life of six (6) days and an established shipping shelf life of three (3) days. Currently, MACI is picked up by courier and shipped by commercial air or ground transportation to customer surgical sites. Epicel final product has an established shelf life of 48 hours and is hand carried to customer hospitals by courier. Transportation is primarily by commercial or charter airline. Although the Company has not experienced material shipping delays, significant disruption of air travel could result in the inability to deliver MACI or Epicel final products to customer sites within appropriate timeframes, which could further adversely impact the Company’s business. At this time, the Company is not aware of COVID-19 related impacts on its distributors, operations or third-party service providers’ ability to manage patient cases. The Company believes it is possible that it could experience variable business impacts, should a new resurgence of COVID-19 infections occur in the future.

~~Going Concern~~The Conflict in Ukraine

The current conflict between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are creating substantial uncertainty in the global economy and resulting in heightened inflation and supply chain disruptions. While the Company does not have operations in Russia or Ukraine and does not have exposure to distributors, or third-party service providers in Russia or Ukraine, it is unable to predict the impact that these actions will have on the global economy or on its financial condition, results of operations, and cash flows as of the date of these unaudited condensed consolidated financial statements.

Liquidity

The accompanying ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of June 30, ~~2021,~~2022, the Company had an accumulated deficit of $~~382.9~~399.3 million and had a net loss of ~~$3.8~~$16.1 million ~~and $7.1 million, respectively,~~ during the ~~three and~~ six months ended June 30, ~~2021.~~2022. The Company had cash and cash equivalents of ~~$51.8~~$56.1 million and investments of ~~$64.0~~$68.4 million as of June 30, ~~2021.~~2022. The Company expects that cash from the sales of its products and existing cash, cash equivalents and investments will be sufficient to support the Company’s current operations through at least 12 months from the issuance of these ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements. The effects of the COVID-19 pandemic continue to evolve, however. To the extent the ~~United States~~U.S. experiences a ~~resurgence~~worsening in COVID-19 infections or the emergence of additional virus variants that result in more serious disease or limit the effectiveness of existing vaccines, subsequent healthcare measures – to include the postponement or cessation of elective and ~~elective surgery restrictions are reinstated on~~other surgical procedures – may cause the Company to experience a ~~widespread basis~~reduction in business and resulting revenue. This, consequently, may result in irrecoverable losses of customers and significantly impact the Company’s ~~business,~~long-term liquidity, potentially requiring the Company to engage in layoffs, furloughs and/or reductions in salaries. The Company also may need to access additional capital; however, the Company may not be able to obtain financing on acceptable terms or at all, particularly in light of the impact of COVID-19 on the global economy and financial markets. The terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders.

2. Basis of Presentation

The accompanying c~~Condensed Consolidated Financial Statements~~ondensed consolidated financial statements as of ~~June 30, 2021 and for the~~ ~~three and six months ended~~ ~~June 30, 2021~~Vericel are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ~~(SEC)~~(“SEC”). The preparation of ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ~~(GAAP)~~(“GAAP”) requires management to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenue and expenses. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations.

The financial statements reflect, in the opinion of management, all adjustments (consisting only of normal, recurring adjustments) necessary to state fairly the financial position and results of operations as of and for the periods indicated. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expenses. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact ~~its~~the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future

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developments that are highly uncertain, including as a result of new information that may emerge concerning the COVID-19 pandemic and the actions taken to continue to contain or treat COVID-19, as well as the economic impact on its customers. The Company has made estimates of the impact of the COVID-19 pandemic within these financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates. As of June 30, ~~2021,~~2022, the Company has not recorded impairments to investments, inventory, other current assets or long-lived assets as a result of the COVID-19 pandemic.

The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date, but does not include all the information and notes required by U.S. GAAP for complete financial statements. These c~~Condensed Consolidated Financial Statements~~ondensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February 24, ~~2021 (Annual Report)~~2022 (“Annual Report”).

Recent Accounting Pronouncements

~~Consolidated Statement of Cash Flows~~

~~The following table presents certain supplementary cash flows information for~~No new accounting standards were adopted during the ~~six months~~quarter ended June 30, ~~2021 and 2020:~~

Six Months Ended June 30,
(In thousands) 2021 2020
Supplementary Cash Flows information:
Non-cash information:
Right-of-use asset and lease liability recognized $ 0 $ 429
Additions to property and equipment included in accounts payable 630 55
Restricted shares held for employee tax remittance included in accounts payable 61 66
Cash information:
Interest paid $ 2 $ 3

Six Months Ended June 30,
(In thousands) 2021 2020
Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position:
Cash and cash equivalents $ 51,761 $ 55,704
Restricted cash, included in other long-term assets 211 89
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 51,972 $ 55,793
2022.

3. ~~Recent Accounting Pronouncements~~Revenue

~~Simplifying the Accounting for Income Taxes~~

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Simplifying the Accounting for Income Taxes (ASC 740).~~ The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intra-period tax allocation exception to the incremental approach, ownership changes in investments, changes from a subsidiary to an equity method investment, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. This guidance became effective for the Company on January 1, 2021 and had no material impact on its ~~Condensed Consolidated Financial Statements~~.

~~4. Revenue~~

Revenue Recognition and Net Product Sales

The Company recognizes product revenue from sales of MACI biopsy kits, MACI implants, Epicel grafts and other sources following the five-step model in Accounting Standards Codification 606, Revenue ~~Recognition~~Recognition.

MACI Biopsy Kits

MACI biopsy kits are sold directly to hospitals and ambulatory surgical centers based on contracted rates in an approved contract or sales order. The Company recognizes MACI kit revenue upon delivery of the biopsy kit, at which time the customer (the facility) is in control of the kit. The kit is used by the doctor to provide a sample of cartilage tissue to the Company, which can later be used to manufacture a MACI implant. The ordering of the kit does not obligate the Company to manufacture an implant nor does the receipt of the cartilage ~~tissue.~~tissue by the Company from the customer following biopsy. The customer’s order of an implant is separate from the process of ordering the biopsy kit. Therefore, the sale of the biopsy kit and any subsequent sale of an implant are distinct contracts and are accounted for separately.

10MACI Implants

~~MACI Implants~~

The Company contracts with 2 specialty pharmacies, Orsini Pharmaceutical Services, Inc. ~~(Orsini)~~(“Orsini”) and AllCare Plus Pharmacy, Inc. ~~(AllCare)~~(“AllCare”) to distribute MACI in a manner in which the Company retains the credit and collection risk from the end customer. The Company pays both specialty pharmacies a fee for each patient to whom MACI is dispensed. Both Orsini and AllCare perform collection activities to collect payment from customers. The Company engages a ~~third-party~~third party to provide services in connection with a patient support program to manage patient cases and to ensure complete and correct billing information is provided to the insurers and hospitals. In addition, the Company also sells MACI directly to DMS Pharmaceutical ~~(DMS)~~Group, Inc.(“DMS”) for patients treated at military treatment facilities. The sales directly to DMS are made at a contracted rate.

Prior authorization and confirmation of coverage level by the patient’s private insurance plan, hospital or government payer is a prerequisite to the shipment of product to a patient. The Company recognizes product revenue from sales of all MACI implants upon delivery at which time the customer obtains control of the implant and the claim is billable. The total consideration which the Company expects to collect in exchange for MACI implants (the ~~transaction price)~~“Transaction Price”) may be fixed or variable. Direct sales to hospitals or distributors are recorded at a contracted price, and there are typically no forms of variable consideration.

When the Company sells MACI, the patient is responsible for payment; however, the Company is typically reimbursed by a third-party insurer or government payer, subject to a patient co-pay amount. Reimbursements from third-party insurers and government payers vary by patient and payer and are based on either contracted rates, publicly available rates, fee schedules or past payer precedents. Net product revenue is recognized net of estimated contractual allowances, which considers historical collection experience from both the payer and patient, denial rates and the terms of the Company’s contractual arrangements. The Company estimates expected collections for these transactions using the portfolio approach. The Company records a reduction to revenue at the time of sale for its estimate of the amount of consideration that will not be collected. ~~The total allowance for uncollectible consideration as of June 30, 2021 and December 31, 2020 was $7.1 million and $5.3 million, respectively.~~ Changes to the estimate of the amount of consideration that will not be collected could have a material impact to the revenue recognized. A 0.5% change to the estimated uncollectible percentage could result in approximately a $0.3 million increase or decrease in the revenue recognized as of the six months ended June 30, 2021.

Changes in estimates of the transaction price are recorded through revenue in the period in which such change occurs. Changes in estimates related to prior period sales for the three and six months ended June 30, 2021 resulted in a decrease to revenue of $0.4 million and $0.1 million, respectively, and a decrease to revenue of $0.2 million and an increase to revenue of $1.1 million, respectively, for the same periods in 2020. The changes in estimates recorded during the three and six months ended June 30, 2021 and June 30, 2020, were primarily due to completion of the billing claims process for implants that occurred in 2020 or prior. Upon completion of the billing claims process, the Company concluded that it was probable that a significant reversal in the amount of revenue recognized would not occur.

~~Additionally,~~In addition, potential credit risk exposure has been evaluated for the Company’s accounts receivable in accordance with ASC 326, Financial Instruments -

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Credit ~~Losses.~~ Losses. The Company assesses risk and determines a loss percentage by pooling account receivables based on similar risk characteristics. The loss percentage is calculated ~~by pooling account receivables containing similar risk characteristics and applying collectability~~through the use of forecasts ~~which~~that are ~~derived from~~based on current and historical economic and financial information. ~~The~~This loss percentage ~~calculated~~ was applied to the accounts receivables as of June 30, ~~2021~~2022. The total allowance for uncollectible consideration as of June 30, 2022 and December 31, ~~2020. The allowance related~~2021 was $6.7 million and $7.0 million, respectively. Changes to the ~~potential impacts~~estimate of ~~COVID-19~~the amount of consideration that will not be collected could have a material impact on ~~accounts receivable from third-party insurers, government payers, hospitals and patients as of December 31, 2020 included~~the revenue recognized. A 50 basis points change to the estimated uncollectible percentage could result in an approximately ~~$0.1~~$0.3 million ~~and 0 additional allowance was recorded during~~decrease or increase in the revenue recognized for the six months ended June 30, ~~2021.~~2022.

Changes in estimates of the Transaction Price are recorded through revenue in the period in which such change occurs. Changes in estimates related to prior periods are shown in the Revenue by Product and Customer table below and relate primarily to changes in the initial expected reimbursement or collection expectation upon completion of the billing claims process for MACI implants that occurred in a prior year. During the three months ended June 30, 2022, the Company recorded changes in estimates for MACI implants that occurred in a prior year of approximately $1.4 million, related to claims billed through a third-party insurer as a result of finalization of the billing claims processes.

Epicel

The Company sells Epicel directly to hospitals and burn centers based on contracted rates stated in an approved contract or purchase order. Similar to MACI, there is no obligation to manufacture Epicel grafts upon receipt of a skin biopsy, and Vericel has no contractual right to receive payment until the product is delivered to the hospital. The Company recognizes product revenue from sales of Epicel upon delivery to the hospital, at which time the customer is in control of the Epicel grafts and the claim is billable to the hospital.

NexoBrid

The Company entered into exclusive license and supply agreements with MediWound in May 2019, under which MediWound will manufacture and supply NexoBrid on a unit price basis, which may be increased pursuant to the terms of the ~~agreement.~~agreements. The U.S. Biomedical Advanced Research and Development Authority ~~(BARDA)~~(“BARDA”) has committed to procure NexoBrid ~~directly~~ from MediWound ~~under an emergency use authorization. As~~and, as of June 30, 2022, the Company did not hold a ~~result, during 2020,~~direct contract or distribution agreement with BARDA, ~~accepted~~or take title to the ~~first shipments of~~

~~NexoBrid, per the agreement between BARDA and MediWound.~~product. The Company recognizes revenue based on a percentage of gross profits for sales of NexoBrid to BARDA upon delivery, at which time BARDA is in control of the product. ~~As of June 30, 2021, the Company did not take title to the product or hold a direct contract or distribution agreement with BARDA. During the three and six months ended~~

June 30, 2021, the Company recognized $0.8 million and $1.8 million of revenue, respectively. NaN revenue related to the procurement by BARDA was recognized for the three and six months ended June 30, 2020. See note 11 for further information.

Revenue by Product and Customer

The following table and ~~description~~descriptions below ~~shows~~show the products from which the Company generated its revenue:

Three Months Ended June 30, Six Months Ended June 30,
Revenue by product (in thousands) 2021 2020 2021 2020
MACI implants and kits
Implants based on contracted rates sold through a specialty pharmacy (a) $ 17,972 $ 9,790 $ 31,200 $ 21,218
Implants subject to third party reimbursement sold through a specialty pharmacy (b) 3,502 2,819 7,917 6,335
Implants sold direct based on contracted rates (c) 4,487 1,806 8,954 4,916
Implants sold direct subject to third party reimbursement (d) 405 589 1,255 1,016
Biopsy kits - direct bill 551 348 1,070 811
Change in estimates related to prior periods (e) (392) (248) (74) 1,095
Epicel
Direct bill (hospital) 12,155 4,910 21,985 11,301
Total product revenue $ 38,680 $ 20,014 $ 72,307 $ 46,692
NexoBrid revenue (f) 839 0 1,780 0
Total net revenue $ 39,519 $ 20,014 $ 74,087 $ 46,692
(a) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies have a direct contract with the underlying insurance provider. The amount of reimbursement is based on contracted rates at the time of sale supported by the pharmacy's direct contracts.
(b) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies do not have a direct contract with the underlying payer. The amount of reimbursement is established based on a payer or state fee schedule and/or payer history.
(c) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. Also represents direct sales under a contract to the specialty distributor DMS.
(d) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. The payment terms are subject to third-party reimbursement from an underlying insurance provider.
(e) Primarily represents changes in estimates related to implants sold through Orsini or AllCare in which such specialty pharmacy does not have a direct contract with the underlying payer. The initial estimate of the amount of reimbursement is established based on a payer or state fee schedule and/or payer history. The change in estimates is a result of additional information or actual cash collections received in the current period.
(f) Represents revenue based on a percentage of gross profits for sales of NexoBrid to BARDA, pursuant to the license agreement between the Company and MediWound.

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	Three Months Ended June 30,				Six Months Ended June 30,
Revenue by product (in thousands)	2022		2021		2022		2021
MACI implants and kits
Implants based on contracted rates sold through a specialty pharmacy (a)	$	15,714	$	17,972	$	31,009	$	31,200
Implants subject to third party reimbursement sold through a specialty pharmacy (b)	4,295		3,502		7,803		7,917
Implants sold direct based on contracted rates (c)	5,756		4,487		11,390		8,954
Implants sold direct subject to third-party reimbursement (d)	570		405		1,441		1,255
Biopsy kits - direct bill	545		551		1,066		1,070
Change in estimates related to prior periods (e)	1,733		(392)		1,898		(74)
Total MACI implants and kits	28,613		26,525		54,607		50,322
Epicel
Direct bill (hospital)	8,213		12,155		18,071		21,985

NexoBrid revenue (f)	220		839		442		1,780
Total revenue	$	37,046	$	39,519	$	73,120	$	74,087

(a) Represents implants sold through Orsini and AllCare whereby such specialty pharmacies have a direct contract with the underlying insurance provider. The amount of reimbursement is based on contracted rates at the time of sale supported by the pharmacy’s direct contracts.

(b) Represents implants sold through Orsini or AllCare whereby such specialty pharmacy does not have a direct contract with the underlying payer. The amount of reimbursement is established based on a payer or state fee schedule and/or payer history.

(c) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. Also represents direct sales under a contract to specialty distributor DMS.

(d) Represents implants sold directly from the Company to the facility based on a contract and known price agreed upon prior to the surgery date. The payment terms are subject to third-party reimbursement from an underlying insurance provider.

(e) Primarily represents changes in estimates related to implants sold through Orsini or AllCare, and relate primarily to changes to the initial expected reimbursement or collection expectation upon completion of the billing claims process. The change in estimates is a result of additional information, changes in collection expectations or actual cash collections received in the current period.

(f) Represents revenue based on a percentage of gross profits for sales of NexoBrid to BARDA, pursuant to the license agreement between the Company and MediWound (see note 10).

Concentration of Credit Risk

The ~~Company's~~Company’s total ~~Epicel~~ revenue concentration from aan Epicel customer for the three and six months ended June 30, ~~2021~~2022 was 6% and 7%, respectively, and 11% and 12%, respectively, ~~and 6% and 10%~~ for the same periods in ~~2020.~~2021. For the ~~Company's~~Company’s total ~~MACI revenue, and MACI and Epicel~~ accounts receivable balances, there were no customers ~~for the three and six months ended~~as of June 30, ~~2021~~2022 or ~~the comparable periods in 2020,~~December 31, 2021, with a concentration greater than 10%.

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5.4. Selected Balance Sheet Components

Inventory

Inventory as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(In thousands)	(In thousands)	June 30, 2021		December 31, 2020		(In thousands)	June 30, 2022		December 31, 2021
Raw materials	Raw materials	$	12,266	$	8,775	Raw materials	$	15,175	$	12,676
Work-in-process	Work-in-process	625		537		Work-in-process	683		644
Finished goods	Finished goods	68		44		Finished goods	71		61
Inventory		$	12,959	$	9,356
Total inventory						Total inventory	$	15,929	$	13,381

Property and Equipment

Property and Equipment, net as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(In thousands)	(In thousands)	June 30, 2021		December 31, 2020		(In thousands)	June 30, 2022		December 31, 2021
Machinery and equipment	Machinery and equipment	$	4,273	$	3,672	Machinery and equipment	$	4,615	$	4,522
Furniture, fixtures and office equipment	Furniture, fixtures and office equipment	844		809		Furniture, fixtures and office equipment	1,710		1,551
Computer equipment and software	Computer equipment and software	7,597		6,846		Computer equipment and software	8,112		7,769
Leasehold improvements	Leasehold improvements	5,634		5,560		Leasehold improvements	13,134		10,617
Construction in process	Construction in process	5,013		2,021		Construction in process	4,543		3,097
Financing right-of-use lease	Financing right-of-use lease	92		111		Financing right-of-use lease	55		74
Total property and equipment, gross	Total property and equipment, gross	23,453		19,019		Total property and equipment, gross	32,169		27,630
Less accumulated depreciation	Less accumulated depreciation	(12,863)		(11,386)		Less accumulated depreciation	(16,250)		(14,322)
Property and equipment, net		$	10,590	$	7,633
Total property and equipment, net						Total property and equipment, net	$	15,919	$	13,308

Depreciation expense for the three and six months ended June 30, ~~2021~~2022 was $1.1 million and $1.9 million, respectively, and $0.7 million and $1.5 ~~million, respectively, and $0.5 million and $1.1~~ million, respectively, for the same periods in ~~2020.~~2021.

Accrued Expenses

Accrued Expenses as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:


(In thousands)	(In thousands)	June 30, 2021		December 31, 2020		(In thousands)	June 30, 2022		December 31, 2021
Bonus related compensation	Bonus related compensation	$	3,815	$	5,721	Bonus related compensation	$	3,942	$	6,305
Employee related accruals	Employee related accruals	3,969		3,482		Employee related accruals	3,555		3,616
Insurance reimbursement-related liabilities						Insurance reimbursement-related liabilities	4,585		3,973
Other accrued expenses	Other accrued expenses	3,293		2,090		Other accrued expenses	51		151
Accrued expenses		$	11,077	$	11,293
Total accrued expenses						Total accrued expenses	$	12,133	$	14,045

6.5. Leases

The Company leases facilities in Ann Arbor, Michigan and Cambridge, Massachusetts. The Ann Arbor facility includes office space, and the Cambridge facilities include clean rooms, laboratories for MACI and Epicel manufacturing, and office space. The Company also leases offsite warehouse space, vehicles and computer equipment. Certain of the Company’s lease agreements include lease payments that are adjusted periodically for an index or rate. The leases are initially measured using the present value of the projected payments adjusted for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. All operating lease commitments with a lease term greater than 12 months are recognized as right-of-use assets and liabilities, on a discounted basis on the balance sheet. Effective October 21, 2020

On January 28, 2022, the Company entered into ana lease agreement ~~with one~~(the “Burlington Lease”) to lease approximately 126,000 square feet of ~~its Cambridge,~~to-be-constructed manufacturing, laboratory and office space in Burlington, Massachusetts ~~facility leases.~~ (the “Premises”). Once constructed, the Premises will serve as the Company’s new corporate headquarters and primary manufacturing facility.

The ~~agreement extended the terms~~term of the ~~lease~~Burlington Lease is currently expected to ~~expire~~begin in 2023, 12 months following the landlord’s commencement of construction of the core and shell of the building in which the Premises are located (the “Commencement Date”).

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The Company’s obligation to pay rent for the Premises will begin on ~~February 29, 2032,~~the earlier of: 13 months from the Commencement Date; or the date on which the Company first occupies the Premises to conduct operations (the “Rent Commencement Date”). The initial term of the Lease is 144 months following the Rent Commencement Date. The Company has a 1-time option to extend the term of the Lease for an additional 10 years, exercisable under certain conditions and at a market rate determined in accordance with ~~monthly~~the Burlington Lease.

The annual base rent of the Burlington Lease is initially $57 per square foot per year, subject to annual increases of 2.5%. Monthly contractual ~~lease~~ payments ~~ranging~~are expected to range from ~~$0.4~~$0.6 million to ~~$0.6~~$0.8 million. Additionally, the Company is responsible for reimbursing the landlord for the Company’s share of the Premises’ property taxes and certain other operating expenses. The ~~agreement~~Burlington Lease also provides for a tenant improvement allowance from the landlord in an amount equal to $200 per square foot of the Premises, or approximately $25.1 million in total, towards the design and construction of certain tenant improvements made to the Premises, subject to the terms set forth in the Burlington Lease.

The Company is not involved in the initial construction of the core and shell of the building and will record the lease liability and right-of-use asset on its condensed consolidated balance sheet, when the construction is substantially completed and it obtains control of the Premises, which is currently expected to be on or around the Commencement Date.

In January 2022, in connection with the execution of the Burlington Lease, the Company issued a letter of credit collateralized by cash deposits of approximately ~~$4.3~~$6.0 million. Such letter of credit shall be reduced to approximately $4.2 million ~~available through December 31, 2023.~~and $1.8 million at the conclusion of the third and sixth lease years, respectively, provided certain conditions set forth in the Burlington Lease are satisfied.

~~Leases with an initial term of 12 months or less are not recorded on the balance sheet.~~ For ~~both~~ the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, lease expense of less than $0.1 million was recorded ~~for each of~~related to short-term ~~leases and financing~~ leases. ~~During the six months ended June 30, 2021, the Company recorded~~ ~~$0.2 million~~ ~~of leasehold improvements funded by tenant improvement allowances available under the lease agreements. The~~ ~~contribution toward the cost of tenant improvements is recorded as a reduction of the operating lease assets.~~ For the three and six months ended June 30, ~~2021~~2022, the Company recognized ~~$1.8~~$1.7 million and ~~$3.7~~$3.5 million, respectively, of operating lease expense and ~~$1.4~~$1.8 million and ~~$2.9~~$3.7 million, respectively, for the same periods in ~~2020. The~~ ~~Company’s leases contain non-lease components~~2021. For the three and ~~activities that do not transfer a good or service to~~six months ended June 30, 2022 and 2021, the ~~Company. The~~ Company ~~elected not to combine~~recognized less than $0.1 million of financing lease ~~and non-lease components and therefore non-lease costs were not included in the net lease assets or lease liabilities.~~expense.

~~Total leased~~Operating and finance lease assets and liabilities ~~classified on the balance sheet, as of June 30, 2021 and December 31, 2020~~ are as follows:

(In thousands) Classification June 30, 2021 December 31, 2020
Assets
Operating Right-of-use assets $ 47,798 $ 50,105
Finance Property and equipment, net 92 111
$ 47,890 $ 50,216
Liabilities
Current
Operating Current portion of operating lease liabilities $ 4,611 $ 4,394
Finance Other liabilities 41 41
$ 4,652 $ 4,435
Non-current
Operating Operating lease liabilities $ 46,928 $ 48,789
Finance Other long-term liabilities 62 76
$ 46,990 $ 48,865

7.~~Stock-Based Compensation~~

~~Stock Option, Restricted Stock Units and Equity Incentive Plans~~

The Company has historically had various stock incentive plans and agreements that provide for the issuance of nonqualified and incentive stock options and restricted stock units as well as other equity awards. Such awards may be granted by the Company’s Board of Directors to certain of the Company’s employees, directors and consultants.


(In thousands)	Classification	June 30, 2022		December 31, 2021
Assets
Operating	Right-of-use assets	$	43,583	$	45,720
Finance	Property and equipment, net	55		73
Total leased assets		$	43,638	$	45,793
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	3,156	$	2,950
Finance	Other current liabilities	41		41

Non-current
Operating	Operating lease liabilities	44,964		47,147
Finance	Other long-term liabilities	21		44
Total leased liabilities		$	48,182	$	50,182

Options granted to employees and non-employees under these plans expire no later than ten years from the date of grant. Options and restricted stock units generally become exercisable or vest over a four-year period, under a graded-vesting methodology for stock options and annually on the anniversary grant date for restricted stock units, following the date of grant. The Company generally issues new shares upon the exercise of stock options or vesting of restricted stock units.

6. Stock-Based Compensation

The ~~Company's Amended and Restated 2019~~2022 Omnibus Incentive Plan ~~(2019 Plan)~~(“2022 Plan”) was approved on April ~~29, 2020~~27, 2022, and provides incentives through the grant of stock options, stock appreciation rights, restricted stock awards and restricted stock units. The exercise price of stock options granted under the ~~2019~~2022 Plan shall not be less than the fair market value of the Company’s common stock on the date of grant. The ~~2019~~2022 Plan replaced the 1992 Stock Option Plan, the 2001 Stock Option Plan, the Amended and Restated 2004 Equity Incentive Plan, the 2009 Second Amended and Restated Omnibus Incentive Plan, ~~and~~ the 2017 Omnibus Incentive Plan, ~~(Prior Plans)~~and the Amended and Restated 2019 Omnibus Incentive Plan (“Prior Plans”), and 0no new grants have been granted under the Prior Plans after approval of the ~~2019~~2022 Plan. However, the expiration or forfeiture of options previously granted under the Prior Plans will increase the number of shares available for issuance under the ~~2019~~2022 Plan.

Table of ~~June 30, 2021, there were 2,804,486 shares available for future grant under the 2019 Plan.~~Contents

~~Employee~~ Stock ~~Purchase Plan~~Compensation Expense

~~Employees are able to~~Non-cash stock-based compensation expense (service-based stock options, restricted stock units and employee stock purchase ~~stock under~~plan) is summarized in the Vericel Corporation Employee Stock Purchase Plan (ESPP). The ESPP allows for the issuance of an aggregate of 1,000,000 shares of common stock of which 729,273 shares have been issued since the inception of the plan in 2015. Participation in this plan is available to substantially all employees. The ESPP is a compensatory plan accounted for under the expense recognition provisions of the share-based payment accounting standards. Compensation expense is recorded based on the fair market value of the options at the grant date, which corresponds to the first day of each purchase period and is amortized over the purchase period. In July 2021, employees purchased 9,045 shares resulting in proceeds from the sale of common stock of $0.4 million under the ESPP for the second quarter of 2021.following table:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of product sales	$	1,035	$	1,287	$	2,153	$	2,199
Research and development	1,520		1,234		2,870		2,096
Selling, general and administrative	8,253		8,345		15,316		13,590
Total non-cash stock-based compensation expense	$	10,808	$	10,866	$	20,339	$	17,885

Service-Based Stock Options

During the three and six months ended June 30, ~~2021,~~2022, the Company granted service-based options to purchase common stock of 170,060 and 1,163,649, respectively, and 136,117 and 1,474,072, ~~respectively, and 110,750 and 1,296,890,~~ respectively, for the same periods in ~~2020.~~2021. The exercise price of the options is the fair market value per share of common stock on the grant date, and the options generally vest over four years (other than non-employee director options which may vest over ~~one~~ to three years from the grant date pursuant to the provisions of the Company's Amended and Restated Non-Employee Director Compensation Guidelines) and have a term of ten years. The Company issues new shares upon the exercise of stock options. The weighted averageweighted-average grant-date fair value of service-based options granted during the three and six months ended June 30, ~~2021~~2022 was $19.25 and $20.74 per option, respectively, and $39.31 and $32.69, ~~respectively, and $8.82 and $8.66,~~ respectively, for the same periods in ~~2020.~~2021.

Restricted Stock Units

During the three and six months ended June 30, ~~2021,~~2022, the Company granted ~~26,941~~39,746 and ~~241,054 service-based~~382,768 restricted stock units, respectively, and ~~10,700~~26,941 and ~~196,836,~~241,054, respectively, for the same periods in ~~2020.~~2021. The ~~restricted stock units vest annually over four years in equal installments commencing on the first anniversary of the grant date (other than non-employee director awards which may vest over~~ ~~one~~ to three years from the grant date pursuant to the provisions of the Company's Amended and Restated Non-Employee Director Compensation Guidelines). The Company issues new shares upon the vesting of restricted stock units. Restricted stock units are recorded at fair value at the date of grant, which is based on the closing share price on the grant date. Compensation expense is recorded for restricted stock units that are expected to vest based on their fair value at grant date and is amortized over the expected vesting period. The weighted averageweighted-average grant-date fair value of restricted stock units granted during the three and six months ended June 30, ~~2021~~2022 was $31.94 and $34.65 per unit, respectively, and $61.37 and $51.99, ~~respectively, and $14.49 and $11.41,~~ respectively, for the same periods in 2020. The aggregate fair value of restricted stock units granted in the three and six months ended June 30, 2021 was $1.7 million and $12.5 million, respectively, and $0.2 million and $2.2 million, respectively, for the same periods in 2020.

During the three and six months ended June 30, 2021, 11,576 and 59,433 shares, respectively, of common stock were issued upon the vesting of restricted stock units. These amounts are net of 1,174 and 29,414 shares, respectively, that were withheld for payment of taxes on the behalf of employees. During the three and six months ended June 30, 2020, 10,500 and 32,840 shares, respectively, of common stock were issued upon the vesting of restricted stock units. These amounts are net of 0 and 13,872 shares, respectively, withheld for payment of taxes, as no shares are withheld at vesting for shares awarded to the members of the Company's Board of Directors.

For the three and six months ended June 30, 2021, the total fair value of restricted stock awards vested was $0.9 million and $5.0 million, respectively, and $0.2 million and $0.5 million, respectively, for the same periods in 2020. The total fair value of restricted stock units withheld for payment of taxes during the three and six months ended June 30, 2021, was $0.1 million and $1.6 million, respectively. During the six months ended June 30, 2020, the total fair value of restricted stock units withheld for payment of taxes was $0.2 million. There were 0 restricted stock units withheld during the three months ended June 30, 2020.

~~Stock Compensation Expense~~

Non-cash stock-based compensation expense (employee stock purchase plan, service-based stock options and restricted stock units) included in cost of product sales, research and development expenses and selling, general and administrative expenses is summarized in the following table:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Cost of product sales $ 1,287 $ 568 $ 2,199 $ 997
Research and development 1,234 484 2,096 1,060
Selling, general and administrative 8,345 3,325 13,590 6,087
Total non-cash stock-based compensation expense $ 10,866 $ 4,377 $ 17,885 $ 8,144
2021.

~~8. Cash Equivalents and~~7. Investments

Marketable debt securities held by the Company are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities, and carried at fair value in the accompanying ~~Condensed Consolidated Balance Sheets~~condensed consolidated balance sheets on a settlement date basis. The following tables summarize the gross unrealized gains and losses of the Company’s marketable securities as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

June 30, 2021
Gross Unrealized Estimated Fair Value
(In thousands) Amortized Cost Gains Losses Credit Losses
Money market funds $ 6,022 $ 0 $ 0 $ 0 $ 6,022
Commercial paper 15,996 0 0 0 15,996
Corporate notes 43,692 0 (24) 0 43,668
U.S. government securities 1,500 0 0 0 1,500
U.S. government agency bonds 1,074 0 0 0 1,074
U.S. asset-backed securities 1,802 0 0 0 1,802
$ 70,086 $ 0 $ (24) $ 0 $ 70,062
Classified as:
Cash equivalents $ 6,022
Short-term investments 39,214
Long-term investments 24,826
$ 70,062

December 31, 2020
Gross Unrealized Estimated Fair Value
(In thousands) Amortized Cost Gains Losses Credit Losses
Money market funds $ 3,698 $ 0 $ 0 $ 0 $ 3,698
Commercial paper 8,993 1 0 0 8,994
Corporate notes 35,917 0 0 (6) 35,911
U.S. government securities 12,828 14 0 0 12,842
U.S. government agency bonds 5,000 1 0 0 5,001
U.S. asset-backed securities 3,534 4 0 0 3,538
$ 69,970 $ 20 $ 0 $ (6) $ 69,984
Classified as:
Cash equivalents $ 3,698
Short-term investments 42,187
Long-term investments 24,099
$ 69,984

Investments classified as short-term have maturities of less than one year. Investments classified as long-term are those which: (i) have a maturity of greater than one year, and (ii) the Company does not intend to liquidate within the next twelve months, although these funds are available for use and, therefore, are classified as available-for-sale. The Company’s


	June 30, 2022
			Gross Unrealized						Estimated Fair Value
(In thousands)	Amortized Cost		Gains		Losses		Credit Losses
Commercial paper	$	15,784	$	—	$	(76)	$	—	$	15,708
Corporate notes	53,428		—		(780)		—		52,648
	$	69,212	$	—	$	(856)	$	—	$	68,356
Classified as:
Short-term investments									$	44,638
Long-term investments									23,718
									$	68,356


	December 31, 2021
			Gross Unrealized						Estimated Fair Value
(In thousands)	Amortized Cost		Gains		Losses		Credit Losses
Commercial paper	$	10,243	$	—	$	(12)	$	—	$	10,231
Corporate notes	50,666		—		(142)		—		50,524
	$	60,909	$	—	$	(154)	$	—	$	60,755
Classified as:
Short-term investments									$	35,068
Long-term investments									25,687
									$	60,755

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~~investment strategy is to buy short-duration marketable securities with a high credit rating.~~ As of June 30, ~~2021~~2022 and December 31, ~~2020~~2021, all marketable securities held by the Company had remaining contractual maturities of three years or less.

Unrealized gains are included as a component of accumulated other comprehensive income in the Condensed Consolidated Balance Sheets and Statements of Shareholders’ Equity and a component of total comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Loss, until realized. Unrealized losses are evaluated for impairment under ~~ASC 326, Financial Instruments - Credit Losses~~, to determine if the impairment is credit-related or non-credit-related. Credit-related impairment is recognized as an allowance on the Condensed Consolidated Balance Sheet with a corresponding adjustment to earnings, and non-credit-related impairment is recognized in other comprehensive income (loss), net of taxes. ~~There were no material realized losses on marketable securities during the three and six months ended June 30, 2021.~~ There have been 0no impairments of the Company’s assets measured and carried at fair value during the three and six months ended June 30, ~~2021 or June 30, 2020, respectively.~~2022 and 2021.

8. Fair Value Measurements

The Company’s fair value measurements are classified and disclosed in one of the following three categories:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

~~There was no movement between Level 1 and Level 2 or between Level 2 and Level 3 from December 31, 2020 to June 30, 2021.~~ Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The commercial paper and corporate notes ~~U.S. government securities, U.S. government agency bonds and U.S. asset-backed securities~~ are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. There were no transfers into or out of Level 3 from December 31, 2021 to June 30, 2022.

The following table summarizes the valuation of the Company’s financial instruments that are measured at fair value on a recurring basis:


		June 30, 2021								December 31, 2020									June 30, 2022								December 31, 2021
				Fair value measurement category								Fair value measurement category									Fair Value Measurement Category								Fair Value Measurement Category
(In thousands)	(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:	Assets:																	Assets:
Money market funds	Money market funds	$	6,022	$	6,022	$	0	$	0	$	3,698	$	3,698	$	0	$	0	Money market funds	$	1,135	$	1,135	$	—	$	—	$	1,258	$	1,258	$	—	$	—
Commercial paper (a)																		Commercial paper (a)	15,708		—		15,708		—		18,229		—		18,229		—
Corporate notes																		Corporate notes	52,648		—		52,648		—		50,524		—		50,524		—
																			$	69,491	$	1,135	$	68,356	$	—	$	70,011	$	1,258	$	68,753	$	—
Commercial paper		15,996		0		15,996		0		8,994		0		8,994		0
Corporate notes		43,668		0		43,668		0		35,911		0		35,911		0
U.S. government securities		1,500		0		1,500		0		12,842		0		12,842		0
U.S. government agency bonds		1,074		0		1,074		0		5,001		0		5,001		0
U.S. asset-backed securities		1,802		0		1,802		0		3,538		0		3,538		0
		$	70,062	$	6,022	$	64,040	$	0	$	69,984	$	3,698	$	66,286	$	0

(a) Approximately $8.0 million of commercial paper had an original maturity of 90 days or less and was recorded as a cash equivalent as of December 31, 2021.

The fair values of the cash equivalents and marketable securities are based on observable market prices. The Company’s accounts receivables, accounts payable and accrued expenses are valued at cost which approximates fair value.

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~~10.~~9. Net Loss Per Common Share

~~The following reflects the~~A summary of net loss ~~attributable to~~per common ~~shareholders and~~ share ~~data used in the basic and diluted earnings per share computations using the two class method:~~is presented below:

Three Months Ended June 30, Six Months Ended June 30,
(Amounts in thousands, except per share amounts) 2021 2020 2021 2020
Numerator:
Net loss $ (3,786) $ (8,269) $ (7,075) $ (12,974)
Denominator:
Weighted-average common shares outstanding (basic and diluted) 46,403 45,137 46,195 45,031
Net loss per share attributable to common shareholders (basic and diluted) $ (0.08) $ (0.18) $ (0.15) $ (0.29)
Anti-dilutive shares excluded from the calculation of diluted earnings per share(a):
Stock options 5,960 6,018 5,960 6,018
Restricted stock units 413 301 413 301
(a) Common equivalent shares are not included in the diluted per share calculation where the effect of their inclusion would be anti-dilutive.


	Three Months Ended June 30,				Six months ended June 30,
(Amounts in thousands, except per share amounts)	2022		2021		2022		2021
Net loss	$	(8,963)	$	(3,786)	$	(16,054)	$	(7,075)

Basic weighted-average common shares outstanding	47,117		46,403		47,052		46,195
Effect of dilutive stock options and restricted stock units	—		—		—		—
Diluted weighted-average common shares outstanding	47,117		46,403		47,052		46,195

Basic loss per common share	$	(0.19)	$	(0.08)	$	(0.34)	$	(0.15)
Diluted loss per common share	$	(0.19)	$	(0.08)	$	(0.34)	$	(0.15)

Anti-dilutive shares excluded from diluted net loss per common share:
Stock options	6,586		5,960		6,586		5,960
Restricted stock units	636		413		636		413

~~11.~~

10. NexoBrid License and Supply Agreements

On May 6, 2019, the Company entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid and any improvements to NexoBrid in North America. NexoBrid is a topically-administered biological product that enzymatically removes nonviable burn tissue, or eschar, in patients with deep partial and full-thickness thermal burns. On September 16, 2020, the Company announced MediWound's submission of a biologics license application (BLA) to the U.S. Food and Drug Administration (FDA) seeking marketing approval for NexoBrid in the United States for the treatment of severe burns, and the FDA's assignment of a Prescription Drug User Fee Act (PDUFA) target date for the product of June 29, 2021. Subsequently, on June 29, 2021, the Company announced that MediWound had received a complete response letter ~~(CRL)~~(“CRL”) from the U.S. Food & Drug Administration (“FDA”) with respect to a biologics license application (“BLA”), which MediWound had previously submitted to the FDA ~~regarding~~seeking marketing approval for the ~~BLA, through which~~product in the U.S. As part of the CRL, the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it ~~cannot~~could not approve the BLA in its ~~present~~then form. The Company ~~announced further that it is committed~~has continued to ~~working~~work with MediWound, BARDA and the FDA ~~on the next steps~~ to address the issues identified in the ~~CRL~~CRL. On July 1, 2022, the Company and MediWound submitted a BLA resubmission to ~~seek~~ the ~~potential approval~~FDA to address the issues identified by the FDA in the CRL. Subsequently, the FDA informed the Company that it has accepted the resubmission for review and has established a Prescription Drug User Fee Act (“PDUFA”) date for completing that review of ~~NexoBrid.~~January 1, 2023.

Pursuant to the terms of the license agreement, if the BLA is approved, MediWound will transfer the BLA to ~~the Company~~Vericel and ~~the Company~~Vericel will market NexoBrid in the U.S. Both MediWound and ~~the Company,~~Vericel, under the supervision of a Central Steering Committee comprised of members of both companies will continue to guide the development of NexoBrid in North ~~America.~~America (the “Central Steering Committee”). NexoBrid is approved in the European Union (“EU”) and other international markets and has been designated as an orphan biologic in the ~~United States, European Union~~U.S., EU and other international markets.

In May 2019, the Company paid MediWound $17.5 million in consideration for the ~~license. The $17.5 million upfront payment~~license, which was recorded toas research and development expense during ~~2019, as the license was considered in process research and development.~~2019. The Company is also obligated to pay MediWound $7.5 million, which is contingent upon U.S. regulatory approval of the BLA for NexoBrid and up to ~~$125~~$125.0 million contingent upon meeting certain sales ~~milestones, subsequent to approval.~~milestones. The first sales milestone of $7.5 million would be triggered when annual net sales of NexoBrid or improvements to it in North America exceed ~~$75~~$75.0 million. As of June 30, ~~2021,~~2022, the milestone payments ~~were~~are not yet probable and therefore, not ~~considered~~recorded as a liability. The Company also will pay MediWound tiered royalties on net sales ranging from mid-high single-digit to mid-teen percentages, subject to customary ~~reductions, following approval.~~reductions. The Company also entered into a supply agreement with MediWound under which MediWound will manufacture NexoBrid for the Company on a unit price basis which may be increased based on a published index. MediWound is obligated to supply the Company with NexoBrid for sale in North

America on an exclusive basis for the first five years of the term of the supply agreement. After the exclusivity period or upon supply failure, the Company will be permitted to establish an alternate source of supply.

BARDA has committed to procure NexoBrid directly from MediWound under an emergency use authorization, and under such commitment the Company will receive a percentage of gross profit for sales directly to BARDA. If BARDA procures NexoBrid directly from ~~the Company,~~Vericel, the Company will pay a percentage of gross profits to MediWound on initial committed amounts and a royalty on any additional BARDA purchases of NexoBrid beyond the initial committed amount. As of June 30, ~~2021,~~2022, the Company ~~did~~does not hold a direct contract or distribution agreement with BARDA. ~~During 2020, BARDA accepted the first shipments~~

Table of NexoBrid for emergency use preparedness per the agreement between BARDA and MediWound. During the three and six months ended June 30, 2021, the Company recognized $0.8 million and $1.8 million, respectively, of revenue. NaN revenue related to the procurement by BARDA was recognized for the three and six months ended June 30, 2020.Contents

~~12.~~

11. Commitments and Contingencies

~~The Company's purchase commitments consist of minimum purchase amounts of materials used~~From time to time, the Company could be a party to various legal proceedings arising in the ~~Company's cell manufacturing process~~ordinary course of business. The costs and outcome of litigation, regulatory, investigatory or other proceedings cannot be predicted with certainty, and some lawsuits, claims, actions or proceedings may be disposed of unfavorably to ~~manufacture its marketed cell therapy products.~~the Company and could have a material adverse effect on the Company’s results of operations or financial condition. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, ~~also pays for usage~~could materially and adversely affect its financial condition or results of ~~an offsite warehouse space. In February 2021,~~operations. If a matter is both probable to result in material liability and the ~~terms~~amount of loss can be reasonably estimated, the ~~operating agreement were extended through March 31, 2027. The~~ Company ~~records rent expense related to this agreement on~~estimates and discloses the possible material loss or range of loss. If such loss is not probable or cannot be reasonably estimated, a ~~straight-line basis over the remaining term.~~liability is not recorded in its condensed consolidated financial statements.

~~Future minimum payments related to~~As of June 30, 2022, the ~~Company's contractual obligations are as follows:~~

Payments Due by Period
Contractual Obligations (in thousands) Total July 1, 2021 - December 31, 2021 2022 2023 2024 2025 More than 5 Years
Purchase commitments $ 19,390 $ 18,729 $ 661 $ 0 $ 0 $ 0 $ 0
Warehouse operating agreement 4,954 541 1,046 792 792 792 991
Total $ 24,344 $ 19,270 $ 1,707 $ 792 $ 792 $ 792 $ 991
Company had no material ongoing litigation in which the Company was a party or any material ongoing regulatory or other proceedings and had no knowledge of any investigations by government or regulatory authorities in which the Company is a target that could have a material adverse effect on its current business.

12. Subsequent Events

On July 29, 2022, the Company, as borrower, entered into a $150 million five-year senior secured revolving credit agreement by and among the Company, the other loan parties thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as the administrative agent (the “Revolving Credit Agreement”). The Revolving Credit Agreement includes a $15 million sub-facility for the issuance of letters of credit. Amounts available under the Revolving Credit Agreement are for the working capital needs and other general corporate purposes of the Company.

Outstanding borrowings under the Revolving Credit Agreement bear interest, with pricing based from time to time at the Company’s election at (i) SOFR plus 0.10% plus a spread ranging from 1.25% to 2.50% as determined by the Company’s total net leverage ratio (as defined in the Revolving Credit Agreement) or (ii) the alternative base rate (as defined in the Revolving Credit Agreement) plus a spread ranging from 0.25% to 1.50% as determined by the Company’s total net leverage ratio. The Revolving Credit Agreement also includes a commitment fee, which ranges from 0.20% to 0.25% as determined by the Company’s total net leverage ratio.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Vericel Corporation is a fully-integrated, commercial-stage biopharmaceutical company and a leader in advanced ~~cell~~ therapies and ~~specialty biologics~~ for ~~the~~ sports medicine and severe burn care markets. We currently market two U.S. Food and Drug Administration ~~(FDA)-approved~~(“FDA”) approved autologous cell therapy products in the ~~United States.~~U.S. MACI® is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults. Epicel® is a permanent skin replacement Humanitarian Use Device ~~(HUD)~~(“HUD”) for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30 percent of total body surface area ~~(TBSA)~~(“TBSA”). We also hold an exclusive license from MediWound for North American rights to NexoBrid®, a registration-stage biological orphan ~~product.~~product designed for the debridement of severe thermal burns. In 2020, MediWound submitted to the FDA a biologics license application ~~(BLA)~~(“BLA”) seeking the approval of NexoBrid for eschar removal (debridement) in adults with deep partial-thickness and/or full-thickness thermal burns. The FDA ~~subsequently~~ accepted the BLA for filing and assigned a Prescription Drug User Fee Act ~~(PDUFA)~~(“PDUFA”) target date of June 29, 2021.

~~Subsequently,~~ Thereafter, on June 29, 2021, ~~we announced that~~ MediWound received a complete response letter ~~(CRL)~~(“CRL”) from the FDA regarding the BLA ~~for NexoBrid. The~~through which the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it ~~cannot~~could not approve the BLA in its ~~present~~then form. ~~The FDA had identified issues related~~We have continued to the Chemistry, Manufacturing and Controls (CMC) section of the BLA and had requested that MediWound provide additional CMC information. The FDA stated that it had not reviewed several amendments submitted by MediWound in response to the CMC information requests related to the BLA. The FDA also stated that inspections of manufacturing facilities in Israel and Taiwan are required before the BLA can be approved, but that it was unable to conduct the required inspections during the original review cycle due to COVID-19-related travel restrictions. In addition, the CRL referenced observations that were made during good clinical practice (GCP) inspections related to the DETECT study and requested that MediWound address questions regarding the impact of the observations on the study’s efficacy findings. The FDA also requested that MediWound provide a safety update as part of its BLA resubmission. The Company announced further that it is committed to workingwork with MediWound, BARDA and the FDA ~~on the next steps~~ to address the issues identified in the ~~CRL~~CRL. On July 1, 2022, Vericel and MediWound submitted the BLA resubmission to ~~seek~~the FDA seeking the potential approval of NexoBrid. Subsequently, the FDA informed us that it has accepted the resubmission for review and has established a PDUFA date for completing that review of January 1, 2023.

See "Risk Factors - NexoBrid’s approval in the United States for the treatment of severe burns may be further delayed, and it may not be approved for use in the United States and other North American markets at all."

For patents related to MACI, we have one issued patent in the United States directed to a device related to MACI that is set to expire in November 2033, and one issued patent in the European Union set to expire in November 2034.

COVID-19

The ongoing pandemic caused by the spread of a novel strain of coronavirus ~~(COVID-19)~~(“COVID-19”) has created significant disruptions to the U.S. and global economy and has contributed to significant volatility in financial markets. The global impact of the outbreak has fluctuated since early 2020. At times, many state, local and national governments – including those in Massachusetts and Michigan, where ~~our~~the Company’s operations are located – have responded by issuing, extending and supplementing orders requiring quarantines, restrictions on travel, and the mandatory closure of certain non-essential businesses, among other actions. In the U.S., the status and application of these orders have varied on a state-by-state basis since the early days of the pandemic. Many of the restrictions have been periodically updated as infection rates in the U.S. have risen and fallen, as new virus “variants” have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, ~~the Company~~it has been exempted from government orders requiring the closure of workplaces and the cessation of business operations. The vast majority of these restrictions have since been rescinded throughout most of the U.S.

Notwithstanding being an essential business, ~~the Company’s~~our business and operations ~~were,~~ at times have been adversely impacted by the ongoing effects of the COVID-19 ~~during 2020. As~~pandemic. For example, as a result of periodic restrictions placed on the performance of elective surgical procedures, ~~the Company~~Vericel experienced a significant increase in cancellations of scheduled MACI procedures as well as a slowdown in new MACI orders during March and April of 2020. The widespread suspension of surgical procedures impacted ~~the Company’s~~our business and operations during the first and second quarters of 2020. The level and degree of restriction on elective surgeries, on the ability of patients to seek treatment and on U.S. business operations generally fluctuated throughout 2020 as COVID-19 infection rates rose and fell during the summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on ~~the Company’s~~our MACI business had largely dissipated. During the summer of 2021, however, the pandemic’s direct and ancillary effects again began to cause some disruption to our MACI business. Following the cessation of COVID-19-related travel restrictions in many parts of the U.S. and the availability of vaccinations in May and June 2021, some MACI patients postponed or delayed treatment. Further, surges of new COVID-19 cases during the second half of 2021 caused by the spread of the “Delta” and “Omicron” variants again caused disruptions to health care networks including restrictions on the performance of elective surgical procedures, the availability of physicians and/or their treatment prioritizations, the level of healthcare facility staffing and, in some instances, the willingness or ability of patients to seek treatment. Consequently, and notwithstanding the widespread distribution of vaccines, these factors contributed to a slowdown of MACI procedures during the third and fourth quarters of 2021 and during the first and second quarters of 2022. Although hospitals are now better prepared for a subsequent ~~surge~~surges in COVID-19 patients, ~~and COVID-19 vaccines have been approved and are being widely distributed in the~~

~~United States,~~ the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the ~~United States~~U.S. were to continue to rise, ~~again,~~ or if new or existing COVID-19 variants render current vaccine treatments ineffective.

Because Epicel is used almost exclusively in an emergent setting by burn centers and surgeons throughout the country, Epicel revenue and procedure volumes have been less affected by the pandemic. Nevertheless, the number of large burns and burn admissions can be affected by restrictions on human activity resulting from more severe government lockdown orders. Epicel procedure volumes did experience a slow-down during the second quarter of 2020, however, the reduction was less pronounced than that observed with MACI. Further reductions could be observed in the future, based on the degree of restrictions imposed.

At the outset of the pandemic, ~~the Company~~we put in place a comprehensive workplace protection plan, which instituted protective measures in response to COVID-19. ~~The Company's~~Our workplace protection plan has closely followed ~~the~~ guidance issued by the Centers for

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Disease Control and Prevention ~~(CDC)~~(“CDC”) and has complied with applicable federal and state law. ~~Because vaccines designed~~To date, Vericel has been successful in sustaining its operations and providing MACI and Epicel to ~~protect against COVID-19 have become readily available and the rates of COVID-19 infections, hospitalizations and deaths~~patients in the majority of the U.S. have declined since the beginning of 2021, the CDC and the Occupational Safety and Health Administration (OSHA) have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced - to include the lifting of all capacity limitations on businesses in both states. Accordingly, Vericel is planning for a return to more normal workplace operations, but willneed. We continue to ~~modify its workplace protection plan, and will reinstitute protective measures for its workforce as necessary. The Company is reviewing its~~review our policies and procedures regularly, including our workplace protection plan, as the pandemic evolves and we may take additional actions to the extent required.

We continue to manufacture MACI and Epicel and are maintaining a significant safety stock of all key raw materials. We do not expect current supply chain interruptions will impact our ongoing manufacturing operations. With respect to customer delivery, MACI final product has an established shelf life of six (6) days and an established shipping shelf life of three (3) days. Currently, MACI is picked up by courier and shipped by commercial air or ground transportation to customer surgical sites. Epicel final product has an established shelf life of 48 hours and is ~~hand carried~~hand-carried to customer hospitals by courier. Transportation is primarily by commercial or charter airline. Although we have not experienced material shipping delays, ~~or materially increased costs to date,~~ significant disruption of air travel could result in the inability to deliver MACI or Epicel final products to customer sites within appropriate timeframes, which could further adversely impact our business. At this time, ~~there is no expected impact~~we are not aware of ~~COVID-19~~COVID-19-related impacts on our distributors, operations or third-party service providers’ ability to manage patient cases.

We believe it is possible that we could continue to experience variable impacts on our business, should ~~there be~~ a new resurgence of COVID-19 infections occur in ~~various areas of~~ the ~~United States.~~future. Measures taken to limit the impact of COVID-19 at the international, national and local levels, including the availability and effectiveness of COVID-19 vaccines, shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns, may again create significant negative economic impacts on a global basis. Given that uncertainty, we cannot ~~reliably~~accurately estimate the extent to which the ongoing COVID-19 pandemic may continue to impact utilization and revenue of our products in ~~2021~~2022 and beyond.

~~For a discussion~~The Conflict in Ukraine

The current conflict between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are creating substantial uncertainty in the global economy and resulting in heightened inflation and supply chain disruptions. While we do not have operations in Russia or Ukraine and do not have exposure to distributors, or third-party service providers in Russia or Ukraine, we are unable to predict the impact that these actions will have on the global economy or on our financial condition, results of ~~additional risks associated with COVID-19, please see Item 1A. Risk Factors.~~operations, and cash flows as of the date of these unaudited condensed consolidated financial statements.

Manufacturing

We have a ~~cell-manufacturing~~cell manufacturing facility in Cambridge, Massachusetts which is used for U.S. manufacturing and distribution of MACI and Epicel.

Product Portfolio

Our marketed products include two FDA-approved autologous cell ~~therapies.~~therapies: MACI, a third-generation autologous ~~implant~~cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in ~~adult patients~~adults, and Epicel, a permanent skin replacement for the treatment of adult and pediatric patients with ~~deep dermal~~deep-dermal or ~~full thickness~~full-thickness burns comprising greater than or equal to ~~30%~~30 percent of TBSA. Both products are currently marketed in the U.S. In addition, we have entered into exclusive license and supply agreements with MediWound to commercialize NexoBrid in North America, ~~following regulatory approval. As previously mentioned, MediWound has submitted a BLA to~~if approved by the FDA seeking commercial approval of NexoBrid. On June 29, 2021, we announced that MediWound had received a CRL in response to the BLA and that the Company is committed to working with MediWound and the FDA to respond to the CRL to seek the potential approval of NexoBrid.FDA.

MACI

~~MACI~~

MACI is a third-generation autologous chondrocyte implantation ~~(ACI)~~(“ACI”) product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults.

Our target audience of U.S. physicians is approximately 5,000 orthopedic surgeons and is divided into two ~~segments -~~segments: a group of orthopedic surgeons who self-identify and/or have a formal specialty as sports medicine physicians, and a ~~sub-population~~subpopulation of general orthopedic surgeons who perform a high volume of cartilage repair procedures. As of the date of this report, we ~~currently~~ have 76 MACI sales representatives to enable the sales force to reach our target audience. Most private payers have a medical policy that covers treatment with MACI with the top 30 largest commercial payers having a formal medical policy for MACI or ACI in general. ~~Even for~~With respect to private commercial payers that have not yet approved a medical policy for MACI, ~~for medically appropriate cases,~~ we often obtain approval on a case-by-case basis. For the three and six months ended, June 30, 2021, net revenue for MACI was $26.5 million and $50.3 million, respectively, and $15.1 million and $35.4 million, respectively, for the same periods in 2020.

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Epicel

Epicel is a permanent skin replacement for ~~deep dermal~~deep-dermal or full-thickness burns greater than or equal to ~~30%~~30 percent of TBSA. Epicel is regulated by the Center for Biologics Evaluation and Research ~~or CBER~~(“CBER”) of the ~~U.S. Food and Drug Administration~~FDA under medical device authorities, and is the only FDA-approved cultured epidermal autograft product available for large total surface area burns. Epicel was designated as a HUD in 1998 and ~~a Humanitarian Device Exception (HDE)~~an HDE application for the product was submitted in 1999. HUDs are devices that are intended for diseases or conditions that affect fewer than 8,000 individuals annually in the U.S. Under an HDE approval, a HUD cannot be sold for an amount that exceeds the cost of research and development, fabrication and distribution unless certain conditions are met. A HUD is eligible to be sold for profit after receiving HDE approval if the device meets certain eligibility criteria, including where the device is intended for the treatment of a disease or condition that occurs in pediatric patients and such device is labeled for use in pediatric patients. If the FDA determines that a HUD meets the eligibility criteria, the HUD is permitted to be sold for profit so long as the number of devices distributed in any calendar year does not exceed the Annual Distribution Number ~~(ADN)~~(“ADN”). The ADN is defined as the number of devices reasonably needed to treat a population of 8,000 individuals per year in the U.S.

On February 18, 2016, the FDA approved our HDE supplement to revise the labeled indications of use for Epicel to specifically include pediatric patients. The revised product label also now specifies that the probable benefit of Epicel, mainly related to survival, was demonstrated in two Epicel clinical experience databases and a physician-sponsored study comparing outcomes in patients with massive burns treated with Epicel relative to standard care. Because of the change in the label to specifically include use in pediatric patients, Epicel is no longer subject to the HDE profit restrictions. In conjunction with adding the pediatric labeling and meeting the pediatric eligibility criteria, the FDA has determined the ADN number for Epicel isto be 360,400 which is approximately 4530 times larger than the volume of grafts sold in ~~2019.~~2021. We currently have a thirteen-person burn field force comprised of seven ~~(7)~~ account managers and six ~~(6)~~ burn clinical specialists, led by atwo regional directors and aone national sales director. For the three and six months ended June 30, 2021, net revenue for Epicel was $12.2 million and $22.0 million, respectively, and $4.9 million and $11.3 million, respectively, for the same periods in 2020.

NexoBrid

Our development portfolio ~~also~~ includes NexoBrid, a registration-stage, topically-administered biological product that enzymatically removes nonviable burn tissue, or eschar, in patients with deep partial and full-thickness thermal burns. ~~On June 30, 2020, we announced MediWound's submission of a BLA~~We have entered into exclusive license and supply agreement with MediWound to commercialize NexoBrid and any improvements to the ~~FDA seeking the approval of NexoBrid.~~product in North America, if approved. On June 29, 2021, the Company announced that MediWound had received a CRL from the FDA ~~regarding~~with respect to the BLA, ~~through~~ which MediWound had previously submitted to the FDA seeking marketing approval for the product in the U.S. As part of the CRL, the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it ~~cannot~~could not approve the BLA in its ~~present~~then form. ~~The Company announced further that it is committed~~We have continued to ~~working~~work with MediWound, BARDA and the FDA ~~on the next steps~~ to address the issues identified in the ~~CRL~~CRL. On July 1, 2022, Vericel and MediWound submitted a BLA resubmission to ~~seek~~ the ~~potential approval of NexoBrid. See "Risk Factors - NexoBrid’s approval~~FDA to address the issues identified by the FDA in the ~~United States~~CRL. Subsequently, the FDA informed us that is has accepted the resubmission for ~~the treatment~~review and has established a Prescription Drug User Fee Act (“PDUFA”) date for completing that review of ~~severe burns may be further delayed, and it may not be approved for use in the United States and other North American markets at all."~~January 1, 2023.

NexoBrid is approved in the European Union (“EU”) and other international markets and has been designated as an orphan biologic in the ~~United States, European Union~~U.S., EU and other international markets. Pursuant to the terms of our existing license agreement, if the BLA is approved, MediWound will transfer the BLA to ~~Vericel~~us and ~~Vericel~~we will market NexoBrid in the U.S. Both MediWound and Vericel, under the supervision of a Central Steering Committee comprised of members of both companies will continue to guide development of NexoBrid in North America. Under our license agreement with MediWound, NexoBrid is being manufactured for BARDA prior to approval by the FDA under an emergency use authorization. ~~For the three and six months ended June 30, 2021, $0.8 million and $1.8 million, respectively, of net revenue associated with delivery of NexoBrid~~

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~~to BARDA was recorded. NaN revenue related to the procurement by BARDA was recognized in the comparable periods of 2020.~~

Results of Operations

~~Net Loss~~The following is a summary of our condensed consolidated results of operations:


	Three Months Ended June 30,								Six Months Ended June 30,
(In thousands)	2022		2021		Change $		Change %		2022		2021		Change $		Change %
Total revenue	$	37,046	$	39,519	$	(2,473)	(6.3)	%	$	73,120	$	74,087	$	(967)	(1.3)	%
Cost of product sales	14,192		12,609		1,583		12.6	%	26,814		24,192		2,622		10.8	%
Gross profit	22,854		26,910		(4,056)		(15.1)	%	46,306		49,895		(3,589)		(7.2)	%
Research and development	4,792		4,449		343		7.7	%	9,652		8,079		1,573		19.5	%
Selling, general and administrative	27,144		26,190		954		3.6	%	53,009		48,850		4,159		8.5	%
Total operating expenses	31,936		30,639		1,297		4.2	%	62,661		56,929		5,732		10.1	%
Loss from operations	(9,082)		(3,729)		(5,353)		143.6	%	(16,355)		(7,034)		(9,321)		132.5	%
Total other income	119		15		104		693.3	%	301		174		127		73.0	%
Income tax expense	—		72		(72)		(100.0)	%	—		215		(215)		(100.0)	%
Net loss	$	(8,963)	$	(3,786)	$	(5,177)	136.7	%	$	(16,054)	$	(7,075)	$	(8,979)	126.9	%

~~Our net loss~~

Comparison of the Periods Ended June 30, 2022 and 2021

Total Revenue

Revenue by product for the three and six months ended June 30, 2022 and 2021 ~~totaled $3.8 million and $7.1 million, respectively, and $8.3 million and $13.0 million, respectively, for the same periods in 2020.~~

Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2021 2020 2021 2020
Net revenue $ 39,519 $ 20,014 $ 74,087 $ 46,692
Cost of product sales 12,609 8,660 24,192 18,582
Gross profit 26,910 11,354 49,895 28,110
Total operating expenses 30,639 19,712 56,929 41,544
Loss from operations (3,729) (8,358) (7,034) (13,434)
Other income 15 89 174 460
Tax provision (72) — (215) —
Net loss $ (3,786) $ (8,269) $ (7,075) $ (12,974)

~~Net Revenue~~are as follows:

~~Net~~


	Three Months Ended June 30,								Six Months Ended June 30,
Revenue by product (In thousands)	2022		2021		Change $		Change %		2022		2021		Change $		Change %
MACI	$	28,613	$	26,526	$	2,087	7.9	%	$	54,607	$	50,322	$	4,285	8.5	%
Epicel	8,213		12,154		(3,941)		(32.4)	%	18,071		21,985		(3,914)		(17.8)	%
NexoBrid	220		839		(619)		(73.8)	%	442		1,780		(1,338)		(75.2)	%
Total Revenue	$	37,046	$	39,519	$	(2,473)	(6.3)	%	$	73,120	$	74,087	$	(967)	(1.3)	%

Total revenue ~~increased~~decrease for the three and six months ended June 30, ~~2021~~2022 compared to the same periods in ~~2020,~~2021, was driven by ~~volume growth for both MACI~~a decrease in Epicel revenue and ~~Epicel. Additionally, for the three and six months ended June 30, 2021, we recorded $0.8 million and $1.8 million, respectively, of revenue~~lower revenues associated with the delivery of NexoBrid to BARDA for emergency response preparedness.

~~Net revenue by product for the three and six months ended June 30, 2021 and 2020 are shown below.~~

Three Months Ended June 30, Six Months Ended June 30,
Revenue by product (In thousands) 2021 2020 2021 2020
MACI $ 26,526 $ 15,104 $ 50,322 $ 35,391
Epicel 12,154 4,910 21,985 11,301
NexoBrid 839 — 1,780 —
Total Revenue $ 39,519 $ 20,014 $ 74,087 $ 46,692

Seasonality. The effects of the ongoing COVID-19 pandemic have disrupted the normal seasonality of our MACI business at times over the past ~~sixteen~~twenty-eight months. These effects have included, among others, periodic restrictions on the ~~temporary limitation~~performance of elective surgical procedures throughout the country, the unavailability of physicians and/or changes to their treatment prioritizations, reductions in the levels of healthcare facility staffing and, in certain instances, the willingness or ability of patients to seek treatment and the inability of our ~~Clinical Account Specialists~~clinical account specialists to call on surgeon ~~customers~~customers. Over the last five years, ACI (MACI and ~~we believe, a reduction in the number of patients seeking treatment for cartilage damage. In the four years preceding 2020, ACI~~Carticel prior to replacement) sales volumes from the first through the fourth quarter on average represented 19% (16%~~-24%~~-21% range), 22% (16%-25% range), 23% (21%~~-25% range), 22% (20%-23%~~-26% range) and 36% ~~(32%~~(33%-38% range) respectively, of total annual volumes. MACI orders are ~~consistently~~normally stronger in the fourth quarter due to several factors including the satisfaction by patients of insurance deductible limits and the time of year patients prefer to start rehabilitation. ~~Due to~~Because of the effects of the COVID-19 pandemic, the MACI business seasonality in 2021 and 2020 did not follow our historical patterns, and seasonality in ~~2021~~2022 could continue to be impacted by COVID-19 related ~~factors, as well.~~factors. Due to the low incidence and variable occurrence of severe burns, Epicel revenue has inherent variability from quarter-to-quarter and does not exhibit significant seasonality. ~~Over~~

Gross Profit

Gross profit decreased for the ~~past four years,~~three and six months ended June 30, 2022 compared to the same periods in 2021, driven by the reduction in revenue over those periods in addition to higher external storage costs and manufacturing facility costs, lower Epicel ~~revenue in a single quarter has ranged from as high as 38% to as low as 18% of annual revenue.~~labor utilization and raw material price increases.

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~~Gross Profit and Gross Profit Ratio~~

Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2021 2020 2021 2020
Gross profit $ 26,910 $ 11,354 $ 49,895 $ 28,110
Gross profit % 68 % 57 % 67 % 60 %

Gross profit increased for the three and six months ended June 30, 2021 compared to the same periods in 2020 primarily due to continued growth of both products, the impacts of the COVID-19 pandemic in the prior year, and other revenue related to NexoBrid.

Research and Development ~~Costs~~Expenses

Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2021 2020 2021 2020
Research and development costs $ 4,449 $ 3,226 $ 8,079 $ 6,989

The following table summarizes research and development expenses, which include license fees, materials, professional fees and ~~the approximate~~an allocation of employee-related salary and fringe benefit costs for our research and development projects:

Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2021 2020 2021 2020
ACI $ 2,533 $ 1,664 $ 4,421 $ 3,769
Epicel 1,231 686 2,165 1,713
NexoBrid 685 876 1,493 1,507
Total research and development costs $ 4,449 $ 3,226 $ 8,079 $ 6,989


	Three Months Ended June 30,								Six Months Ended June 30,
(In thousands)	2022		2021		Change $		Change %		2022		2021		Change $		Change %
MACI	$	2,972	$	2,533	$	439	17.3	%	$	5,961	$	4,421	$	1,540	34.8	%
Epicel	1,238		1,231		7		0.6	%	2,458		2,165		293		13.5	%
NexoBrid	582		685		(103)		(15.0)	%	1,233		1,493		(260)		(17.4)	%
Total research and development expenses	$	4,792	$	4,449	$	343	7.7	%	$	9,652	$	8,079	$	1,573	19.5	%

Research and development expenses for the three months ended June 30, ~~2021~~2022 were ~~$4.4~~$4.8 million, compared to ~~$3.2~~$4.4 million for the same period in ~~2020.~~2021. Research and development costs continue to be centered around process development, ~~and~~ regulatory and medical affairs for MACI and Epicel. The increase is primarily due to ~~an increase~~additional spend on instrument design for Arthroscopic MACI delivery, offset by reimbursement of ~~$0.7 million in stock-based compensation expense compared~~expenses related to the ~~same period a year ago.~~BLA resubmission.

Research and development expenses for the six months ended June 30, ~~2021~~2022 were ~~$8.1~~$9.7 million, compared to ~~$7.0~~$8.1 million for the same period in ~~2020.~~2021. Research and development costs continue to be centered around process development, regulatory and medical affairs for MACI and Epicel. The increase is primarily due to an increase of ~~$1.1~~$0.8 million in stock-based compensation expense ~~compared~~and additional spend on instrument design for Arthroscopic MACI delivery, offset by reimbursement of expenses related to the ~~same period a year ago.~~BLA resubmission.

Selling, General and Administrative ~~Costs~~Expenses

Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2021 2020 2021 2020
Selling, general and administrative costs $ 26,190 $ 16,486 $ 48,850 $ 34,555

Selling, general and administrative expenses for the three months ended June 30, ~~2021~~2022 were ~~$26.2~~$27.1 million compared to ~~$16.5~~$26.2 million for the same period in ~~2020.~~2021. The increase in selling, general and administrative expenses ~~during the three months ended June 30, 2021, compared to the same period in 2020, is~~was primarily due to ~~a $5.0 million~~an increase in ~~stock-based compensation expenses, a $0.8 million increase in sales force~~ travel and ~~conference spend, a $0.7 million increase~~in-person events including more physician engagement and educational programs in ~~patient reimbursement support services as a result of~~addition to higher ~~MACI volumes, and a recovery of marketing activities that were partially reduced during 2020, because of COVID-19.~~depreciation related to the new office space in Cambridge, Massachusetts.

Selling, general and administrative expenses for the six months ended June 30, ~~2021~~2022 were ~~$48.9~~$53.0 million compared to ~~$34.6~~$48.9 million for the same period in ~~2020.~~2021. The increase in selling, general and administrative expenses ~~during the six months ended June 30, 2021, compared to the same period in 2020, is~~was primarily due to ~~a $7.5~~an increase of $1.7 million ~~increase~~ in stock-based compensation expenses, ~~a $1.6 million~~an increase in ~~MACI expenses as a result of~~travel and in-person events including more physician engagement and educational programs in addition to higher depreciation related to the ~~sales force expansion~~new office space in 2020, a $0.9 million increase in patient reimbursement support services as a result of higher MACI volume, and a recovery of marketing activities that were partially reduced during 2020, because of COVID-19.

Cambridge, Massachusetts.

Total Other Income (Expense)

Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2021 2020 2021 2020
Net interest income $ 42 $ 146 $ 117 $ 450
Other income (expense) (27) (57) 57 10
Total other income $ 15 $ 89 $ 174 $ 460

The ~~decrease~~change in other income (expense) for the three and six months ended June 30, ~~2021,~~2022, compared to the same periods in ~~2020 is~~2021 was due primarily to fluctuations in the ~~decreasing~~ rates of return on our investments in various marketable debt ~~securities compared to the prior period.~~securities.

~~Stock Compensation~~

~~Non-cash stock-based compensation expense included in cost of product sales, research and development expenses and selling, general and administrative expenses is summarized in the following table:~~

Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2021 2020 2021 2020
Cost of product sales $ 1,287 $ 568 $ 2,199 $ 997
Research and development 1,234 484 2,096 1,060
Selling, general and administrative 8,345 3,325 13,590 6,087
Total non-cash stock-based compensation expense $ 10,866 $ 4,377 $ 17,885 $ 8,144
Income Tax Expense

~~The increase in stock-based compensation~~No income tax expense was recorded for the three and six months ended June 30, 2022, compared to $0.1 million and $0.2 million recorded for the three and six months ended June 30, 2021, respectively.

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Stock-Based Compensation Expense

Non-cash stock-based compensation expense is summarized in the following table:


	Three Months Ended June 30,								Six Months Ended June 30,
(In thousands)	2022		2021		Change $		Change %		2022		2021		Change $		Change %
Cost of product sales	$	1,035	$	1,287	$	(252)	(19.6)	%	$	2,153	$	2,199	$	(46)	(2.1)	%
Research and development	1,520		1,234		286		23.2	%	2,870		2,096		774		36.9	%
Selling, general and administrative	8,253		8,345		(92)		(1.1)	%	15,316		13,590		1,726		12.7	%
Total non-cash stock-based compensation expense	$	10,808	$	10,866	$	(58)	(0.5)	%	$	20,339	$	17,885	$	2,454	13.7	%

The increase in stock-based compensation expense for the six months ended June 30, 2022 compared to the same ~~periods~~period in ~~2020, is~~2021, was due primarily to ~~increases~~fluctuations in stock prices which impact the fair value of the options and restricted stock units awarded and the expense recognized in the period.

As of June 30, 2021, there was approximately $45.8 million of total unrecognized compensation cost related to non-vested service-based stock options granted under the 2019 Plan and the Prior Plans, compared to $13.1 million as of December 31, 2020. That cost is expected to be recognized over a weighted-average period of 3.3 years.

As of June 30, 2021, there was approximately $11.6 million of total unrecognized compensation cost related to non-vested restricted stock units granted under the 2019 Plan and Prior Plans, compared to $2.1 million as of December 31, 2020. That cost is expected to be recognized over a weighted-average period of 3.2 years. The estimated unrecognized compensation cost is not reduced by expected forfeitures.

Liquidity and Capital Resources

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:


	Six Months Ended June 30,
(In thousands)	2022		2021
Net cash provided by operating activities	$	6,611	$	14,855
Net cash used in investing activities	(13,666)		(2,757)
Net cash provided by financing activities	752		6,043
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(6,303)	$	18,141

Net Cash Provided by Operating Activities

Our cash, cash equivalents and restricted cash totaled $62.2 million, short-term investments totaled $44.6 million and long-term investments totaled $23.7 million as of June 30, 2022. The $6.6 million of cash provided by operations during the six months ended June 30, 2022 was primarily the result of non-cash charges of $20.3 million related to stock-based compensation expense, $2.2 million of operating lease amortization and $1.9 million in depreciation and amortization expense, offset by a net loss of $16.1 million and a net decrease of $2.1 million related to movements in our working capital accounts. The overall decrease in cash from our working capital accounts was primarily driven by a decrease in accrued expenses due to timing of payments, a decrease in operating lease liabilities, an increase in inventory due to increased production needs, offset by a decrease in accounts receivable due to cash collections.

Our cash, cash equivalents and restricted cash totaled $52.0 million, short-term investments totaled $39.2 million and long-term investments totaled $24.8 million as of June 30, 2021. The $14.9 million of cash provided by operations during the six months ended June 30, 2021 was primarily the result of non-cash charges of $17.9 million related to stock compensation expense, $2.3 million of operating lease amortization, and $1.5 million in depreciation and amortization expense, offset by a net loss of $7.1 million, and a net decrease of $0.3 million related to movements in our working capital accounts. The overall decrease in cash from our working capital accounts was primarily driven by a decrease in accounts receivable due to a decrease in sales volume compared to the previous sequential quarter, an increase in inventory due to increased production needs, and an increase in operating lease liabilities.

Net Cash Used In by Investing Activities

Net cash used in investing activities during the six months ended June 30, 2022 was the result of $34.9 million in investment purchases and $5.1 million of property and equipment purchases primarily for manufacturing upgrades and leasehold improvements, offset by $26.3 million of investment sales and maturities.

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Net cash used in investing activities during the six months ended June 30, 2021 was the result of $31.0 million in investments purchases and equipment purchases of $4.5 million, primarily for manufacturing upgrades and leasehold improvements, offset by $32.7 million of investment sales and maturities.

Net Cash Provided by Financing Activities

Net cash provided by financing activities during the six months ended June 30, 2022 was the result of net proceeds from the exercise of stock options and the employee stock purchase plan of $2.2 million partially offset by payments of employee withholding taxes related to the vesting of restricted stock units of $1.4 million.

Net cash provided by financing activities during the six months ended June 30, 2021 was primarily the result of net proceeds from the exercise of stock options of $7.6 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $1.6 million.

Liquidity

Since our acquisition of MACI and Epicel in 2014, our primary focus has been to invest in our existing commercial business with the goal of growing revenue. We have raised significant funds in order to complete our product development programs and to market and commercialize our products, ~~and product candidates.~~including NexoBrid. To date, we have financed our operations primarily through cash received through Epicel and MACI sales, debt and public and private sales of our equity securities. We generated ~~$14.9~~$6.6 million in operating cash flows during the six months ended June 30, ~~2021,~~2022, and we may ~~continue to~~ finance our operations through the sales of equity ~~securities.~~

Six Months Ended June 30,
(In thousands) 2021 2020
Cash provided by operating activities $ 14,855 $ 1,665
Cash provided by (used for) investing activities (2,757) 25,954
Cash provided by financing activities 6,043 1,196
Net increase in cash, cash equivalents and restricted cash $ 18,141 $ 28,815

Our cash and cash equivalents totaled $51.8 million, short-term investments totaled $39.2 million and long-term investments totaled $24.8 million as of June 30, 2021. The $14.9 million of cash provided by operations during the six months ended June 30, 2021 was the result of cash collections, a decrease in accounts receivable of $2.8 million, an increase in inventory of $3.6 million primarily to meet increased production needs and safety stock goals, and an increase in operating lease liabilities of $1.6 million. This includes non-cash charges of $17.9 million related to stock compensation expense, $2.3 million of operating lease amortization and $1.5 million in depreciation and amortization expense and a $7.1 million net loss.

Our cash and cash equivalents totaled $55.7 million and short-term investments totaled $25.1 million as of June 30, 2020. The $1.7 million of cash provided by operations during the six months ended June 30, 2020 was the result of cash collections and a decrease in accounts receivable of $8.5 million from a decrease in sales volume from the prior quarter and collections on prior period sales, including non-cash charges of $8.1 million in stock compensation expense and $1.1 million in depreciation and amortization expense offset by a $13.0 million net loss.

The change in cash provided by investing activities during the six months ended June 30, 2021 was the result of $32.7 million of investment sales and maturities offset by $31.0 million in investment purchases and property plant and equipment purchases of $4.5 million primarily for manufacturing upgrades through June 30, 2021. The cash provided by investing activities for the six months ended June 30, 2020 was the result of $32.8 million of investment sales and maturities offset by $5.7 million in short term investment purchases, and property plant and equipment purchases of $1.2 million primarily for manufacturing upgrades and leasehold improvements.

The change in cash provided by financing activities was the result of net proceeds from the exercise of stock options of $7.6 million, partially offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $1.6 million during the six months ended June 30, 2021. The change in cash provided from financing activities during the six months ended June 30, 2020 was the result of proceeds from the exercise of stock options of $1.4 million, slightly offset by the payment of employee withholding taxes related to the vesting of restricted stock units of $0.2 million.securities or debt financings.

We believe that our current cash on hand, cash equivalents investments, and ~~investments~~borrowing capacity will be sufficient to support our current operations through at least 12 months from the issuance of these ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements. However, the continuing effects of the ongoing COVID-19 pandemic continue to evolve and may ~~result in irrecoverable losses from customers.~~

~~If revenue declines for a sustained period, we may need to access additional capital; however, we may not be able to obtain financing on acceptable terms or at all. Market volatility could also~~ adversely impact our ~~ability to access financing when needed. The terms of any financing may adversely affect the holdings or the rights of our shareholders. Actual~~business and operations. Our actual cash requirements may differ from projections and will depend on many factors, including any future impacts of the COVID-19 pandemic, the level of future research and development, the scope and results of ongoing and potential clinical trials, the costs involved in filing, prosecuting and enforcing patents, the need for additional manufacturing capacity, competing technological and market developments, costs of possible acquisition or development of complementary business activities, and the cost to market our products.

~~Off-Balance Sheet Arrangements~~

AtAs of June 30, ~~2021,~~2022, we were not party to any off-balance sheet arrangements.

Sources of Capital

On August 27, 2021, we entered into a Sales Agreement with SVB Leerink LLC, as sales agent (“SVB Leerink”), pursuant to which we may offer and sell up to $200.0 million of shares of our common stock, no par value per share (“ATM Shares”). The ATM Shares to be offered and sold under the Sales Agreement will be issued and sold pursuant to an automatically effective shelf registration statement on Form S-3ASR (File No. 333-259119) filed by us on August 27, 2021, which expires three years from the filing date. We also filed a prospectus supplement relating to the offering and sale of the ATM Shares on August 27, 2021. We are not obligated to make any sales of ATM Shares, and SVB Leerink is not required to sell any specific number or dollar amount of the ATM Shares under the Sales Agreement. As of June 30, 2022, we have sold no shares pursuant to the Sales Agreement.

On July 29, 2022, we entered into a $150 million five-year senior secured revolving credit agreement by and among the Company, the other loan parties thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as the administrative agent (the “Revolving Credit Agreement”). We have no immediate plans to borrow under the Revolving Credit Agreement, but we will use the facility for working capital needs and other general corporate purposes, as desired. As of the filing of this Quarterly Report on Form 10-Q, there are no outstanding borrowings under the Revolving Credit Agreement, and we are in compliance with all covenant requirements of the Revolving Credit Agreement. See Note 12, “Subsequent Events” in the accompanying condensed consolidated financial statements.

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Contractual Obligations and Commitments

The disclosure of our contractual obligations and commitments is set forth in the heading “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes, outside of the ordinary course of business, to our contractual obligations and commitments since December 31, 2021, except as discussed in Note 5, “Leases” in the accompanying condensed consolidated financial statements.

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Critical Accounting Policies

~~Our~~ ~~Condensed Consolidated Financial Statements~~ ~~are prepared in accordance with accounting principles generally accepted in the United States.~~ The ~~preparation of these~~ ~~Condensed Consolidated Financial Statements~~ ~~requires the application of appropriate technical accounting rules~~discussion and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events. These estimates and judgments, in and of themselves, could materially impact the ~~Condensed Consolidated Financial Statements~~ and disclosures based on varying assumptions. The accounting policies discussed in our Annual Report are considered by management to be the most important to an understanding of the consolidated financial statements because of their significance to the portrayalanalysis of our financial condition and results of ~~operations.~~ operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, expenses, and related disclosures. Actual results may differ materially from these estimates under different assumptions and conditions.

There have been no material changes to ~~that information disclosed~~our critical accounting policies and estimates in ~~our Annual Report during~~ the six months ended June 30, 2022. For further information, refer to our summary of significant accounting policies and estimates in our Annual Report on Form 10-K filed for the year ended December 31, 2021.

Cautionary Note Regarding Forward-Looking Statements

This report, including the documents incorporated by reference herein, ~~contain~~contains certain statements that describe our management’s beliefs concerning future business conditions, plans and prospects, growth opportunities and the outlook for our business based upon information currently available. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ~~(Exchange Act)~~(“Exchange Act”). Wherever possible, we have identified these forward-looking statements by words such as “will,” “may,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “plans,” “projects,” “trends,” “opportunity,” “current,” “intention,” “position,” “assume,” “potential,” “outlook,” “remain,” “continue,” “maintain,” “sustain,” “seek,” “target,” “achieve,” “continuing,” “ongoing,” and similar words or phrases, or future or conditional verbs such as “would,” “should,” “could,” “may,” or similar expressions. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the risks and uncertainties listed in our Annual Report under “Part I, Item 1A Risk Factors.”

Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. Forward-looking statements speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in our Annual Report will be important in determining future results. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise. These forward-looking statements include statements regarding:

•manufacturing and facility capabilities;

•potential strategic collaborations with others;

•future capital needs and financing sources;

•adequacy of existing capital to support operations for a specified time;

•reimbursement for our products;

•the timing of ~~a response to the FDA’s CRL regarding the NexoBrid BLA;~~

•~~the timing of~~ the FDA’s review of ~~any resubmission of~~ the NexoBrid ~~BLA;~~BLA resubmission;

•expectations regarding approval by the FDA of the NexoBrid BLA;

•product development and marketing plans;

•features and successes of our therapies;

•clinical trial plans, including publication thereof;

•the effects of the ongoing COVID-19 pandemic on our business, including economic slowdowns or recessions, impact to our operations or to the healthcare industry generally, which could reduce demand for our products;

•anticipated inflationary pressures and our responses thereto as well as other unfavorable global and regional economic conditions, geopolitical events, and military conflicts, such as repercussions from the recent conflict in Ukraine;

•anticipation of future losses;

•replacement of manufacturing sources;

•commercialization plans; or

•revenue expectations and operating results.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~As of June 30, 2021, we held marketable debt securities, which are classified as available-for-sale~~For quantitative and ~~carried at fair value in the accompanying Condensed Consolidated Balance Sheet included in this Form 10-Q. The fair value~~qualitative disclosures about market risk, see Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” of our cash equivalents and marketable securities is subject to changes in market interest rates. Our earnings and cash flows are subject to fluctuations due to changes in interest rates, principally in connection with our investments in marketable debt securities. We do not believe we are materially exposed to changes in interest rates related to our investments, and we do not currently use interest rate derivative instruments or hedging transactions to manage exposure to interest rate changes of our investments. We estimate that a 100 basis point, or 1%, unfavorable change in interest rates would have resulted in approximately a $0.4 million and $0.5 million decrease inAnnual Report on Form 10-K for the ~~fair value of our investment portfolio as of June 30, 2021 and~~year ended December 31, ~~2020, respectively.~~

We2021. Our exposures to market risk have ~~evaluated the potential credit risk exposure for our accounts receivable and available-for sale investment securities in accordance with~~ ~~ASC 326, Financial Instruments - Credit Losses.~~ ~~See note 4 and note 8, for further discussion.~~

We operate in the United States only. We are primarily exposed to foreign exchange risk with respect to recognized assets and liabilities due to vendors in countries outside the United States, which are typically paid in Euro. We do not ~~enter into hedging transactions and do not purchase derivative instruments.~~changed materially since December 31, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer (its Certifying Officers), evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation as of June 30, ~~2021,~~2022, the Company’s Certifying Officers concluded that the Company’s disclosure controls and procedures were effective.

The Company has established disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management of the Company, with the participation of its Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended June 30, ~~2021,~~2022, there were no material changes made in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not party to any material legal proceedings, although from time to time we may become involved in disputes in connection with the operation of our business.

Item 1A. Risk Factors

~~Certain~~Factors that could cause the Company’s actual results to differ materially from those in this Quarterly Report are any of the risks described ~~below update the risk factors discussed~~ in ~~Part I, Item 1A, “Risk Factors,” of~~ our Annual Report on ~~Form~~the 10-K for the fiscal year ended December 31, ~~2020, as well as~~2021 filed with the ~~Risk Factors discussed~~SEC on February 24, 2022. Any of these factors could result in ~~Part II, Item 1A, “Risk Factors,”~~a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on the 10-K for the ~~quarter~~fiscal year ended ~~March~~December 31, 2021, ~~and expound upon and amend the specific risks resulting from the COVID-19 pandemic,~~except as well as the specific risks related to the U.S. Food & Drug Administration’s review of any resubmission of the NexoBrid BLA for the approval of NexoBrid in the United States. Each of these risks, as well as those discussed in our previous filings could materially affect our business, financial condition, results of operations, or cash flows. The risks described below and in our previous filings are not the only risks we face. Additional risks and uncertainties not currently known or currently deemed to be immaterial also may materially and adversely affect our business, financial condition, results of operations or cash flows.follows.

~~The current~~We are currently operating in a period of economic uncertainty and ongoing pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases, could seriously harm our research, development and commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

Broad-based business or economic disruptions could adversely affect our ongoing or planned research, development and commercialization activities. For example, the COVID-19 pandemic has created significant disruptions to the U.S. and global economy and has contributed, at times, to significant volatility in financial markets. The global impact of the outbreak has fluctuated since early 2020.At times, many state, local and national governments – including those in Massachusetts and Michigan, where the Company’s operations are located – have responded by issuing, extending and supplementing orders requiring quarantines, restrictions on travel, and the mandatory closure of certain non-essential businesses, among other actions. In the U.S., the status and application of these orders have varied on a state-by-state basis since the early days of the pandemic. Many of the restrictions have been periodically updated as infection rates in the U.S. have risen and fallen, as new virus variants have emerged, as vaccines have been distributed and administered, and as world health leaders learn more about the virus, its transmission pathway and who is most at risk. Because Vericel is deemed an essential business, the Companycapital markets disruption, which has been ~~exempted from government orders requiring the closure of workplaces~~significantly impacted by geopolitical instability, an ongoing military conflict between Russia and ~~the cessation of business operations as they have existed from time-to-time during the pandemic.~~

~~Even though widespread distribution of vaccines designed to protect against COVID-19 infection began in the United States~~Ukraine, and other countries throughout the world in early 2021, the pandemic remains unpredictable and the number of COVID-19 infections has fluctuated significantly in various geographies during 2020 and throughout 2021 and could continue to do so, particularly in light of emerging variant strains. As such, some state and local governments have re-instituted restrictions on businesses, travel, and personal activities from time-to-time and additional such measures may occur in the future as the pandemic evolves.

~~At the outset of the pandemic, the Company put in place a comprehensive workplace protection plan, which instituted protective measures in response to COVID-19.The Company’s workplace protection plan closely followed guidance issued by the CDC and complied with applicable federal and state law.~~Because vaccines designed to protect against COVID-19 have become readily available in the United States and the rates of COVID-19 infections, hospitalizations and deaths in the majority of the U.S. have declined since the beginning of 2021, the CDC and the OSHA have altered their guidance for Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded or greatly reduced – to include the lifting of all capacity limitations on businesses in both states.Accordingly, Vericel is planning for a return to more normal workplace operations, but will continue to modify its workplace protection plan and will reinstitute protective measures for its workforce as necessary. The Company is reviewing its policies and procedures regularly as the pandemic evolves and may take additional actions to the extent required.~~Both these and any future actions we take may result in disruption to our business.~~

The extent to which the COVID-19 pandemic, or the future outbreak of any other highly infectious or contagious disease, impacts our preclinical studies, clinical trial operations and current or future commercialization efforts will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects

of the pandemic and containment measures, among others. The rapid development and uncertainty of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic has and could continue to adversely affect ourrecord inflation. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and ~~it may have~~capital markets resulting from the ~~effect of heightening many of the risks described herein, including the below.~~conflict in Ukraine, geopolitical tensions, or record inflation.

•~~Hospitals, health systems~~U.S. and ~~surgeons minimized, postponed, or canceled electively scheduled surgeries during~~global markets are experiencing volatility and disruption following the ~~initial wave~~escalation of geopolitical tensions and the start of the ~~pandemic~~military conflict between Russia and Ukraine. In February 2022, a full-scale military invasion of Ukraine by Russian troops began. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in the spring of 2020. These actions were followed by numerous state-level executive orders either restricting or partially restricting elective surgeries. Because MACI is an elective surgical procedure, as a result of these restrictions the Company experienced aUkraine has led to market disruptions, including significant ~~increase~~volatility in ~~cancellations of scheduled MACI procedures~~commodity prices, credit and capital markets, as well as a slowdown in new MACI orders during March and April of 2020, which negatively impacted the Company’s business and results of operations during the first and second quarters of 2020. The level and degree of restriction on elective surgeries, on the ability of patients to seek treatment and on U.S. business operations generally fluctuated throughout 2020 as COVID-19 infection rates rose and fell during the summer months and into the autumn. By the first quarter of 2021, the pandemic’s effects on the Company’s MACI business had largely dissipated. Although hospitals are now better prepared for a subsequent surge in COVID-19 patients and COVID-19 vaccines have been made available and are being widely distributed in the United States, the risk remains that regional or local restrictions could again be placed on the performance of elective surgical procedures if the number of COVID-19 infections in the United States were to rise again, or if new or existing COVID-19 variants render current vaccine treatments ineffective. We believe our MACI business will be negatively impacted if elective surgical procedures are again restricted. Further, renewed and material disruption to the operations of our employees, distributors, suppliers or customers will impact our sales and operating results and could lead to potential impairments to inventory and accounts receivable. Although Epicel has been less directly impacted by the pandemic given the critical nature of severe burn injuries, it is difficult to ascertain the current or future impact of COVID-19 on the treatment of severe burns.

•We are currently conducting the PEAK (A Study of MACI in Patients Aged 10 to 17 Years with Symptomatic Chondral or Osteochondral Defects of the Knee) Study at ten (10) sites throughout the United States. Two (2) such sites have currently paused enrollment of new PEAK patients as a result of the effects of the pandemic, and the PEAK Study experienced a slow-down in its traditional rate of patient enrollment during 2020 and throughout 2021. Furthermore, the PEAK Study or another of our clinical trials may in the future experience difficulties associated with patient visits and study monitoring, which may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations, including closure of site access to outside medical monitors, quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical trial investigators and reduced availability of site staff supporting the conduct of our clinical trials, interruption or delays in the operations of the FDA, heightened exposure of patients, principal investigators and site staff to COVID-19 if an outbreak occurs in their geography, or other reasons related to the COVID-19 pandemic. Further, patients who are already recruited into our clinical trials may be unable or unwilling to attend follow-up visits within the timelines specified in our trial protocols, potentially impacting our ability to meet our clinical trial endpoints. A future outbreak may also affect employees of third-party contract research organizations located in affected geographies that we rely upon to carry out our clinical trials.

•~~We continue to manufacture MACI and Epicel and we maintain a significant safety back-up of all key raw materials. We do not currently expect that~~ supply chain interruptions, ~~will~~which has contributed to record inflation globally. We are continuing to monitor inflation, the situation in Ukraine and global capital markets and assessing its potential impact our ongoing manufacturing operations. However, we currently rely on both domestic and international third parties to, among other things, manufacture and supply raw materials, which are used to produce our products, and supply other goods and services to run our business. If any such third parties in our supply chain are adversely impacted by current or future restrictions or executive orders resulting from the COVID-19 pandemic for an extended period of time, including staffing shortages, production slowdowns, disruptions in delivery systems, or federal, state or foreign orders requiring the diversion of key supplies for use in the production or manufacturing of vaccines designed to inoculate individuals against COVID-19, our supply chain may be disrupted, limiting our ability to manufacture our products and product candidates and conduct our research and development operations, or commercially launch any of our product candidates, if approved. With respect to customer delivery, MACI final product has an established shelf life of six (6) days and established shipping shelf life of three (3) days. Currently, MACI is picked-up by courier and shipped by commercial air or ground transportation to our customers’ locations. Epicel final product has an established shelf life of 24 hours and is hand carried to customer hospital sites by courier. Transportation is primarily by commercial or charter airline. Although we have not experienced material shipping delays or increased costs to date, significant disruption of air travel in the future could result in the inability to deliver MACI or Epicel final products to customer sites within appropriate timeframes, which would have a material adverse effect on our ~~business and results of operations.~~business.

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•~~Throughout much~~Although, to date, our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine, geopolitical tensions, or record inflation, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such matters may impact our business. The extent and duration of the ~~pandemic, we generally restricted on-site staff~~conflict in ~~our facilities~~Ukraine, geopolitical tensions, record inflation and resulting market disruptions are impossible to ~~only those personnel and contractors who are required to perform essential activities related to~~predict but could be substantial. Any such disruptions may also magnify the ~~manufacture, production and delivery~~impact of ~~our products. We encouraged the majority of our remaining employees to work remotely. Since early 2021, vaccines designed to protect against COVID-19 infection have become readily available~~other risks described in the ~~United States and the rates of COVID-19 infections, hospitalizations and deaths~~10-K.

NexoBrid’s approval in the U.S. ~~have generally declined. The CDC and OSHA have altered their guidance~~ for ~~Americans, and emergency orders and mandatory workplace protocols in Michigan and Massachusetts have either been rescinded~~the treatment of severe burns may be further delayed, or ~~greatly reduced – to include~~it may not be approved by the ~~lifting of all capacity limitations on businesses in both states. Accordingly, Vericel is planning~~FDA for a return to more normal workplace operations but will continue to modify its workplace protection plan and will reinstitute protective measures for its workforce as necessary. We expect that some of our employees will continue to work remotely from time to time. A resurgence of COVID-19, COVID-19 variants, or similar infectious diseasesuse in the U.S., however, may lead to future government-imposed quarantines and restrictions, which may result in the closure of our administrative offices, with our employees working outside of our offices for an extended period of time. These actions may also result in the disruption of our manufacturing operations, which are currently accomplished within our administrative offices. Additionally, such quarantines and restrictions may adversely affect our ability to conduct certain product enhancement and business development activities. at all.

•Our reliance on certain personnel working from home may also increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, institutional review boards and ethics committees, third-party contractors and suppliers, clinical trial sites and other important agencies and contractors. Our business operations may be further disrupted if any of our employees, officers or directors contract an illness related to COVID-19 and are unable to perform their duties. For example, COVID-19 illness could impact members of management or our board of directors resulting in absenteeism from management meetings or meetings of the directors or committees of directors, and making it more difficult for management to effectively oversee our daily operations, or to convene the quorums of the full board of directors or its committees needed to conduct meetings for the management of our affairs. A resurgence of COVID-19 or COVID-19 variants may cause our employees, and employees of third-party contractors and licensees, including MediWound, responsible for conducting research and development activities to be unable to access laboratories and places of business for an extended period of time as a result of the temporary closure of such workspaces. As a result, this could delay timely completion of ongoing clinical trials or preclinical activities, and our ability to select future development candidates.

•~~NexoBrid is currently a pre-commercial product in North America.~~ On June 29, 2021, we announced that MediWound had received a CRL ~~regarding~~from the FDA with respect to a BLA ~~and~~ that MediWound had previously submitted to the FDA seeking marketing approval for NexoBrid in the U.S. As part of the CRL, the FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it ~~cannot~~could not approve the BLA in its ~~present~~then form.~~We announced further that we are working with MediWound and the FDA to address the issues identified in the CRL to seek potential approval of NexoBrid.~~ Health regulatory agencies, including the FDA, have experienced and may continue to experience disruptions in their operations as a result of the continued spread or resurgence of the COVID-19 pandemic. For instance, the COVID-19 pandemic may impact the FDA’s response times to regulatory submissions, like a BLA resubmission in response to the CRL, and its ability to monitor our clinical trials. Additionally, in many instances across the industry, the FDA has postponed, or has been unable to conduct certain inspections of domestic and international manufacturing facilities in connection with its regulatory review of product applications as a result of travel and other restrictions caused by the pandemic. As part of its review of the BLA, and any BLA resubmission, the FDA has communicated to MediWound that physical Current Good Manufacturing Practice (cGMP) inspections of manufacturing facilities in Israel and Taiwan are required before the BLA can be approved, as the FDA must assess the ability of those facilities to conduct certain manufacturing operations in compliance with cGMP. The FDA indicated that because of restrictions on travel caused by the COVID-19 pandemic, the agency was unable to conduct the required inspections of those facilities during the original BLA review cycle. Should continued restrictions prevent or delay the FDA in conducting necessary reviews or physical inspections of the manufacturing facilities involved in the production of NexoBrid, or should other events impact the FDA’s response times, the timeline for approval of NexoBrid could be materially and further delayed, which could materially affect the development, study and ultimate commercialization of the product.

•The trading prices of our common stock and that of other biopharmaceutical companies have been highly volatile during the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the continued spread or a resurgence of the COVID-19 pandemic could materially and adversely affect our business and the value of our common stock.

•The negative economic effects of the pandemic have, at times, caused increased unemployment in the U.S. resulting in many individuals losing their employer-based insurance coverage. Although the economy has begun to recover from the pandemic’s initial effects, the continued or future unemployment of our potential patients may adversely affect our ability to commercialize our products. In addition, market disruption or rising unemployment caused by a resurgence of the COVID-19 pandemic or a variant strain thereof may lead to delays in obtaining insurance coverage and reimbursement of newly approved products as well as an increase in the numbers of uninsured patients and patients who may no longer be able to afford their co-insurance or co-pay obligations. These factors may lead to decreased utilization of our products, which could reduce revenue. The continued outbreak or a worsening of COVID-19 may also negatively impact our commercialization strategy for our products and product candidates, if approved. At times during the pandemic, hospitals and other medical institutions have reduced and diverted staffing, diverted resources to patients suffering from COVID-19 and limited hospital access for non-patients, which has included our sales personnel. Hospitals may continue or increase these and similar measures in the future should the COVID-19 virus continue to spread or surge in certain areas. In addition, COVID-19 levels in the United States and/or specific regions of the United States may cause customers or patients to postpone or cancel previously scheduled surgeries or to decline to schedule surgeries utilizing our products, which would negatively impact our operations and financial results. Although many face-to-face interactions are again resuming, our sales personnel, at times, have conducted, and may continue to have to conduct, many of their interactions with physicians and patients through the use of webinars, telemedicine, direct-to-consumer advertising and social media. These circumstances may adversely affect the ability of our sales professionals to effectively market our products to physicians in the future, which may have a negative impact on our potential sales and our market penetration.

If any of these risks related to the impact of the COVID-19 pandemic were to occur, our preclinical activities, clinical development progress, data and timelines, commercialization efforts including any potential revenue from sales, supply chain continuity, and general business operations could be delayed and/or materially harmed and our business, prospects, financial condition, and results of operations would suffer as a result. The extent to which the current pandemic, or a future pandemic, impacts our business and operations will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and governmental actions to contain the outbreak or treat its impact, which are highly uncertain and cannot be predicted with confidence.

~~NexoBrid’s approval in the United States for the treatment of severe burns may be further delayed, or it may not be approved for use in the United States and other North American markets at all.~~

On September 16, 2020, we announced that the FDA had accepted for review MediWound’s BLA seeking marketing approval for NexoBrid in the United States for the treatment of severe burns, and had assigned a PDUFA target date for the product of June 29, 2021. The BLA submission is based in large part on data derived from a U.S. Phase 3 pivotal study. MediWound is conducting twelve and twenty-four month safety follow-ups for cosmesis, function, quality of life and other safety measurements. Data from MediWound’s twelve-month follow-up has been compiled and is being evaluated by the FDA, while data from the twenty-four month follow-up will be submitted to the agency as a safety update - either in connection with a BLA resubmission or as part of a post-approval commitment, if the BLA is approved. While this and previous studies evaluating NexoBrid have met their primary endpoints, we cannot predict the outcome of the planned safety follow-ups or whether the FDA will approve the BLA based on the available preclinical and clinical data and the submitted manufacturing processes, and the cGMP data.

~~Subsequently, on June 29, 2021, we announced that MediWound received a CRL from the FDA regarding the BLA for NexoBrid.The FDA communicated to MediWound that it had completed its review of the BLA, as amended, and had determined that it cannot approve the BLA in its present form.~~ The FDA identified issues related to the chemistry, manufacturing and controls, or CMC section of the BLA and had requested that MediWound provide additional CMC information. The FDA stated that it had not reviewed several amendments submitted by MediWound in response to the CMC information requests related to the BLA. The FDA also stated that inspections of manufacturing facilities in Israel and Taiwan are required before the BLA can be approved, but that it was unable to conduct the required inspections during the original review cycle due to COVID-19-related travel restrictions. In addition, the CRL referenced observations that were made during GCP inspections related to the Phase 3 pivotal DETECT study and requested that MediWound address questions regarding the impact of the observations on the study’s efficacy findings. The FDA also requested that MediWound provide a safety update as part of a BLA resubmission.

~~While we intend~~We have continued to work with MediWound, BARDA and the FDA to address the issues identified in the CRL, and on July 1, 2022, Vericel and MediWound submitted a BLA resubmission to ~~seek~~ the ~~potential approval~~FDA to address the issues identified by the FDA in the CRL. Subsequently, the FDA informed us that it has accepted the resubmission for review and has established a PDUFA date for completing that review of ~~NexoBrid, we~~January 1, 2023. We cannot predict ~~how long it~~the likelihood that the FDA will ~~take for MediWound and/or~~ultimately approve the ~~Company to respond to the CRL.~~NexoBrid BLA. We also cannot predict whether current geopolitical tensions between the ~~FDA~~U.S. and China will ~~accept any such resubmission for review, and, if such resubmission is accepted for review,~~affect or delay the ~~length~~FDA’s ability to conduct inspections of ~~time of any subsequent FDA review.We also cannot predict whether FDA will ultimately approve~~ the

NexoBrid ~~BLA.~~manufacturing facility located in Taiwan. In addition, if approval to market NexoBrid is sought in Mexico or Canada, we cannot predict how long regulatory authorities in those countries will take to provide NexoBrid with marketing authorization in their jurisdictions or whether such authorizations will be granted at all. A significant delay or a failure to receive regulatory approval for NexoBrid in the ~~United States~~U.S. may have a material adverse impact on our business prospects.

~~Item 1B.~~ ~~Unresolved Staff Comments~~

~~Not applicable.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

The Exhibits listed in the Exhibit Index are filed as a part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX


Exhibit No.						Description

3.1						Restated Articles of Incorporation of the Company, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 17, 2009, incorporated herein by reference.

3.2						Certificate of Amendment to Restated Articles of Incorporation of the Company, dated February 9, 2010, filed as Exhibit 3.2 to the Company’s Post-Effective Amendment No. 1 to Form S-1 filed on March 31, 2010, incorporated herein by reference.

3.3						Certificate of Amendment to Restated Articles of Incorporation of the Company, dated March 22, 2011, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 25, 2011, incorporated herein by reference.

3.4						Certificate of Amendment to the Restated Articles of Incorporation of the Company, dated November 21, 2014, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 24, 2014, incorporated herein by reference.

3.5						Bylaws, as amended, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 12, 2010, incorporated herein by reference.

10.1†						Lease Agreement, dated January 28, 2022, by and between the Company and NBD Property Owner 2, L.P., (incorporated herein by reference to Exhibit 10.1 on form 10-Q filed May 4, 2022).

10.2						Form of Current Employee Incentive Stock Option Agreement under the 2019 Omnibus Incentive Plan, amended February 15, 2022, (incorporated herein by reference to exhibit 10.1 on form 10-Q filed May 4, 2022)

10.3						Form of New Hire Incentive Stock Option Award Agreement under the 2019 Omnibus Incentive Plan amended February 15, 2022, (incorporated herein by reference to exhibit 10.1 on form 10-Q filed May 4, 2022).

10.4						Form of Non-Qualified Stock Option Award Agreement for Non-Employee Directors under the 2019 Omnibus Incentive Plan amended February 15, 2022, (incorporated herein by reference to exhibit 10.1 on form 10-Q filed May 4, 2022).

10.5*						Eighth Amendment to the Distribution Agreement between Orsini Pharmaceutical Services, Inc. and the Company, dated May 15, 2022.

10.6*						Third Amendment to the Dispensing Agreement between AllCare Plus Pharmacy, Inc. and the Company, dated May 16, 2022.

10.7*						Form of New Hire Incentive Stock Option Agreement under the 2022 Omnibus Incentive Plan (effective April 26 , 2022).

10.8*						Form of Current Employee Incentive Stock Option Agreement under the 2022 Omnibus Incentive Plan (effective April 26 , 2022).

10.9*						Form of Restricted Stock Unit Award Agreement for Employees under the 2022 Omnibus Incentive Plan (effecti ve April 26 , 2022).

10.10*						Form of Restricted Stock Unit Award Agreement for Non-employee Directors under the 2022 Omnibus Incentive Plan (effective April 26 , 2022).

10.11*						Form of Non-Qualified Stock Option Award Agreement for Non-Employee Directors under the 2022 Omnibus Incentive Plan (effective April 26 , 2022).

31.1**						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Exhibit No.						Description
31.2**						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**						Certification of Chief Executive Officer ~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

32.2**						~~Certification of~~and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.3**						~~Amended and Restated Non-Employee Director Compensation Guidelines (Revised April 28, 2021).~~

32.4**						~~Consulting Agreement, dated July 2, 2021, by and between the Company and Sandra Pennell.~~

101.INS**						Inline XBRL Instance Document

101.SCH**						Inline XBRL Taxonomy Extension Schema Document

101.CAL**						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE**						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF**						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

** Filed herewith.

† Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August ~~4, 2021~~3, 2022


			VERICEL CORPORATION


			/s/ DOMINICK C. COLANGELO
			Dominick C. Colangelo
			President and Chief Executive Officer
			(Principal Executive Officer)


			/s/ JOSEPH A. MARA
			Joseph A. Mara
			Chief Financial Officer
			(Principal Financial Officer)

3533


			Payments Due by Period
Contractual Obligations (in thousands)	Total		July 1, 2021 - December 31, 2021		2022		2023		2024		2025		More than 5 Years

Purchase commitments	$	19,390	$	18,729	$	661	$	0	$	0	$	0	$	0
Warehouse operating agreement	4,954		541		1,046		792		792		792		991
Total	$	24,344	$	19,270	$	1,707	$	792	$	792	$	792	$	991