vcel-20230331

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: March 31, 2023

☐ 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 April 30, 2023, 47,564,919 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	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Exhibit Index		33
Signatures		34

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

VERICEL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands)


	March 31,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	61,834	$	51,067
Short-term investments	57,442		68,471
Accounts receivable (net of allowance for doubtful accounts of $47 and $47, respectively)	38,359		46,539
Inventory	15,370		15,986
Other current assets	4,540		4,803
Total current assets	177,545		186,866
Property and equipment, net	18,197		15,837
Intangible assets, net	7,344		7,500

Right-of-use assets	40,851		41,535
Long-term investments	19,910		19,962
Other long-term assets	1,249		1,303
Total assets	$	265,096	$	273,003
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,125	$	16,930
Accrued expenses	13,111		16,190
Current portion of operating lease liabilities	4,497		4,302
Other current liabilities	20		41
Total current liabilities	28,753		37,463
Operating lease liabilities	42,365		43,268

Total liabilities	71,118		80,731
COMMITMENTS AND CONTINGENCIES (Note 12)
Shareholders’ equity:
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding 47,507 and 47,253, respectively	602,104		593,245
Accumulated other comprehensive loss	(636)		(978)
Accumulated deficit	(407,490)		(399,995)
Total shareholders’ equity	193,978		192,272
Total liabilities and shareholders’ equity	$	265,096	$	273,003

The accompanying notes to 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 March 31,
	2023		2022
Product sales, net	$	41,017	$	35,852
Other revenue	—		222
Total revenue	41,017		36,074
Cost of product sales	14,497		12,622
Gross profit	26,520		23,452
Research and development	5,212		4,860
Selling, general and administrative	29,485		25,865
Total operating expenses	34,697		30,725
Loss from operations	(8,177)		(7,273)
Other income (expense):
Interest income	839		88
Interest expense	(145)		(18)
Other (expense) income	(12)		112
Total other income	682		182


Net loss	$	(7,495)	$	(7,091)
Net loss per common share:
Basic and diluted	$	(0.16)	$	(0.15)

Weighted-average common shares outstanding:
Basic and diluted	47,387		46,985

The accompanying notes to 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 March 31,
	2023		2022
Net loss	$	(7,495)	$	(7,091)
Other comprehensive loss:
Unrealized gain (loss) on investments	342		(459)
Comprehensive loss	$	(7,153)	$	(7,550)

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

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VERICEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited, amounts in thousands)


	Common Stock			Accumulated Other Comprehensive Gain (Loss)		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount
BALANCE, DECEMBER 31, 2022	47,253	$	593,245	$	(978)	$	(399,995)	$	192,272
Net loss	—	—		—		(7,495)		(7,495)
Stock-based compensation expense	—	8,731		—		—		8,731
Stock option exercises	132	2,009		—		—		2,009
Shares issued under the Employee Stock Purchase Plan	11	216		—		—		216
Issuance of stock for restricted stock unit vesting	183	—		—		—		—
Restricted stock withheld for employee tax remittance	(72)	(2,097)		—		—		(2,097)
Unrealized gain on investments	—	—		342		—		342
BALANCE, MARCH 31, 2023	47,507	$	602,104	$	(636)	$	(407,490)	$	193,978


	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

The accompanying notes to 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)


	Three months ended March 31,
	2023		2022
Operating activities:
Net loss	$	(7,495)	$	(7,091)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization expense	1,158		873
Stock-based compensation expense	8,731		9,531
Amortization of premiums and discounts on marketable securities	(290)		194
Amortization of debt issuance costs	54		—
Non-cash lease costs	1,112		1,076
Other	12		4
Changes in operating assets and liabilities:
Inventory	616		(1,004)
Accounts receivable	8,180		5,582
Other current assets	263		(847)
Accounts payable	(274)		(219)
Accrued expenses	(3,079)		(3,734)
Operating lease liabilities	(1,128)		(897)

Net cash provided by operating activities	7,860		3,468
Investing activities:
Purchases of investments	(9,787)		(12,629)
Sales and maturities of investments	21,500		5,041
Expenditures for property and equipment	(1,413)		(3,081)
Purchases of intangible assets	(7,500)		—
Net cash provided by (used in) investing activities	2,800		(10,669)
Financing activities:
Net proceeds from common stock issuance	2,225		1,465

Payments on employee’s behalf for taxes related to vesting of restricted stock unit awards	(2,097)		(943)
Other	(21)		(19)
Net cash provided by financing activities	107		503
Net increase (decrease) in cash, cash equivalents, and restricted cash	10,767		(6,698)
Cash, cash equivalents, and restricted cash at beginning of period	51,067		68,541
Cash, cash equivalents, and restricted cash at end of period	$	61,834	$	61,843

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VERICEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited, amounts in thousands)


	Three months ended March 31,
	2023		2022
Supplemental disclosure of cash flow information:
Non-cash information:
Right-of-use asset and lease liability recognized	$	419	$	—

SEC Form 10-Q filed by Vericel Corporation