UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2021


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

For the transition period from to

Commission file number: 001-37526

TELA Bio, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		45-5320061 (I.R.S. Employer Identification Number)

1 Great Valley Parkway, Suite 24 Malvern, Pennsylvania (Address of principal executive offices)		19355 (Zip Code)

(484) 320-2930
(Registrant’s telephone number, including area code)

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


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, $0.001 par value per share	TELA	The Nasdaq Global Market

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 ◻ No

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 ◻ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ◻
			Smaller reporting company ☒
Non-accelerated filer ⌧			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. ◻

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

As of November 3, 2021, the registrant had 14,503,570 shares of Common Stock, $0.001 par value per share, outstanding.

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TABLE OF CONTENTS


PART I FINANCIAL INFORMATION

Item 1.	Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

	Signatures	31

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (“Quarterly Report”) that are not statements of historical or current facts, such as those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements discuss our business, operations and financial performance and conditions, as well as our plans, objectives and expectations for our business operations and financial performance and condition. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. In addition, statements that “we believe” or similar statements reflect our beliefs and opinions on the relevant subject. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business.

You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

●

the full extent of the impact on our business from the pandemic resulting from the novel coronavirus and the disease it causes and variants thereof, such as the delta variant (“COVID-19”), is highly uncertain and difficult to predict and it may continue to impact our business, results of operations and financial condition, including our revenue (resulting from deferrals of elective procedures using our products), expenses, manufacturing capability, supply chain integrity, research and development activities, and employee-related matters, including compensation;

●

any future developments around COVID-19 and the uncertainty of COVID-19, including new information that may emerge, changes in the rate of COVID-19 transmission and infection, the emergence of new variants of COVID-19, such as the delta variant, the availability of vaccinations for COVID-19, changes in the level of restrictions imposed by governmental authorities (and the resulting impact on the frequency of surgical procedures using our products), access to hospitals, and other actions taken to contain or treat COVID-19, as well as the economic impact on regional, national and international customers and markets;

●

estimates regarding future results of operations, financial position, research and development costs, capital requirements and our needs for additional financing;

●

the commercial success and the degree of market acceptance of our products;

●

our ability to expand, manage and maintain our direct sales and marketing organization and to market and sell our products in the United States;

●

the performance of Aroa Biosurgery Ltd. (“Aroa”), in connection with the development and production of our products;

●

our ability to compete successfully with larger competitors in our highly competitive industry;

●

our ability to achieve and maintain adequate levels of coverage or reimbursement for our current products and any future products we may seek to commercialize;

●

our ability to enhance our products, expand our indications and develop and commercialize additional products;

●

the development, regulatory approval, efficacy and commercialization of competing products;

●

our business model and strategic plans for our products, technologies and business, including our implementation thereof;

●

the size of the markets for our current and future products;

●

our ability to attract and retain senior management and other highly qualified personnel;

●

our ability to obtain additional capital to finance our planned operations;

●

our ability to commercialize or obtain regulatory approvals for our products, or the effect of delays in commercializing or obtaining regulatory approvals;

●

regulatory developments in the U.S. and internationally;

●

our ability to develop and maintain our corporate infrastructure, including our internal controls;

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●

our ability to establish and maintain intellectual property protection for our products, as well as our ability to operate our business without infringing the intellectual property rights of others;

●

our expectations regarding the use of proceeds from our public offerings of common stock;

●

the occurrence of adverse safety events, restrictions on use with our products or product liability claims; and

●

other risks and uncertainties, including those listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 (our “Annual Report”), our Quarterly Reports on Form 10-Q and the other documents we file with the Securities and Exchange Commission (the “SEC”).

These forward-looking statements are based on management's current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management's beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements may not be achieved or occur at all. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of any unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends on indications of future performance, unless expressed as such, and should only be viewed as historical data.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TELA Bio, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)


	September 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	53,636	$	74,394
Accounts receivable, net		3,573		2,683
Inventory		6,269		3,907
Prepaid expenses and other assets		2,061		2,241
Total current assets		65,539		83,225
Property and equipment, net		891		626
Intangible assets, net		2,379		2,607
Total assets	$	68,809	$	86,458

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,334	$	652
Accrued expenses and other current liabilities		7,043		5,953
Total current liabilities		9,377		6,605
Long‑term debt with related party		31,315		30,827
Other long‑term liabilities		388		—
Total liabilities		41,080		37,432

Stockholders’ equity:
Preferred stock; $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding		—		—
Common stock; $0.001 par value: 200,000,000 shares authorized; 14,503,582 and 14,437,289 shares issued and 14,503,518 and 14,437,107 shares outstanding at September 30, 2021 and December 31, 2020, respectively		15		14
Additional paid-in capital		249,067		245,736
Accumulated other comprehensive loss		(43)		(71)
Accumulated deficit		(221,310)		(196,653)
Total stockholders’ equity		27,729		49,026
Total liabilities and stockholders’ equity	$	68,809	$	86,458

See accompanying notes to unaudited interim consolidated financial statements.

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TELA Bio, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)


	Three months ended				Nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue	$	7,654	$	5,313	$	21,089	$	12,546
Cost of revenue (excluding amortization of intangible assets)		2,976		1,950		7,707		4,746
Amortization of intangible assets		76		76		228		228
Gross profit		4,602		3,287		13,154		7,572
Operating expenses:

SEC Form 10-Q filed by TELA Bio, Inc.