What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-22 compared with 2023-03-23 · 147 added, 138 removed, 686 unchanged (29% of the section changed)

19 unchanged sentences

Accordingly, given the inherent limitations in a cost-effective system of internal control, financial statement misstatements due to error or fraud may occur and may not be detected.

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives.

disclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives.

We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies and procedures.

1 unchanged sentence

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Operating Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting.

Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal

control over financial reporting.

Based on its evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2023.

2 unchanged sentences

OTHER INFORMATION

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

During the three months ended December 31, 2023, none of our directors or officers adopted , terminated or modified a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K of the Exchange Act.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

59 unchanged sentences

Cash and cash equivalents

Accounts receivable, net

Accounts receivable, net of allowances of $ 416 and $ 143

Prepaid expenses and other assets

3 unchanged sentences

Right-of-use assets

Restricted cash

Liabilities and stockholders’ equity

4 unchanged sentences

Long‑term debt

Long‑term debt with related party

Other long‑term liabilities

9 unchanged sentences

200,000,000 shares authorized;

19,165,027 and 14,529,606 shares issued and 19,165,027 and 14,529,577 shares outstanding at December 31, 2022 and December 31, 2021, respectively

24,494,675 and 19,165,027 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

17 unchanged sentences

Loss on extinguishment of debt

Other (expense) income

Other income (expense)

Total other expense

12 unchanged sentences

Vesting of common stock previously subject to repurchase

Exercise of stock options

Vesting of share-based awards and exercise of stock options

Issuance of common stock under the employee stock purchase plan

1 unchanged sentence

Stock‑based compensation expense

Issuance of common stock upon follow-on offering, net of underwriting discounts, commissions and offering costs

Reclassification of liability-classified stock-based compensation awards

Balance at December 31, 2021

2 unchanged sentences

Issuance of common stock under the employee stock purchase plan

Shares withheld for employee taxes

Foreign currency translation adjustment

Stock‑based compensation expense

Reclassification of liability-classified stock-based compensation awards

Sale of common stock, net of underwriting discounts, commissions and offering costs

Balance at December 31, 2022

Vesting of common stock previously subject to repurchase

Vesting of share-based awards and exercise of stock options

19 unchanged sentences

Stock ‑ based compensation expense

Loss on disposal of fixed assets

(Gain) loss on disposal of fixed assets

Change in operating assets and liabilities:

3 unchanged sentences

Accrued expenses and other current and long-term liabilities

Foreign currency remeasurement loss

Foreign currency translation (gain) loss

Net cash used in operating activities

Cash flows from investing activities:

Proceeds from the sale and maturity of short-term investments

Payment for intangible asset

Purchase of property and equipment

Net cash (used in) provided by investing activities

Proceeds from the sale property and equipment

Net cash used in investing activities

Cash flows from financing activities:

3 unchanged sentences

Payment of debt financing costs

Payment of initial public offering costs

Proceeds from exercise of stock options

3 unchanged sentences

Effect of exchange rate on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of year

Cash and cash equivalents and restricted cash, end of year

Supplemental disclosure of cash flow information:

3 unchanged sentences

Issuance of common stock for early exercised stock options

Liability-classified stock-based compensation in accrued expenses and other current liabilities

Reclassification of liability-classified stock-based compensation awards to equity-classified

8 unchanged sentences

(the “Company”) was incorporated in the state of Delaware on April 17, 2012 and wholly owns TELA Bio Limited, a company incorporated in the United Kingdom.

The Company is commercial-stage medical technology company focused on providing innovative soft-tissue reconstruction solutions that optimize clinical outcomes by prioritizing the preservation and restoration of the patient’s own anatomy.

The Company is a commercial-stage medical technology company focused on providing innovative soft-tissue reconstruction solutions that optimize clinical outcomes by prioritizing the preservation and restoration of the patient’s own anatomy.

OviTex Reinforced Tissue Matrix (“OviTex”), the Company’s first portfolio of products, addresses unmet needs in hernia repair and abdominal wall reconstruction by combining the benefits of biologic matrices and polymer materials while minimizing their shortcomings, at a cost-effective price.

3 unchanged sentences

To date, among other impacts on the Company’s business related to the pandemic, physicians and their patients have been required by state mandates, or have chosen to, defer elective surgery procedures in which the Company’s products otherwise would be used.

There remains uncertainty and lack of visibility regarding the Company’s near-term revenue growth prospects and product development plans due to the volatility in the frequency of surgical procedures using the Company’s products, including through labor and hospital staffing shortages and the allocation of hospital resources due to financial strain experienced during the COVID-19 pandemic.

Although the Company continues to monitor developments related to hospital capacity and the volume of elective procedures, there is uncertainty regarding the pace to which surgical volumes will normalize to their pre-pandemic levels and the timing to address the backlog of deferred procedures.

The full extent of the impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition, including revenue, expenses, manufacturing capability, supply chain integrity, staffing availability, research and development costs and employee-related compensation, will depend on future developments that are highly uncertain.

There remains some uncertainty regarding the lingering effects of the COVID-19 pandemic on the Company’s near-term revenue growth prospects and product development plans due to the volatility in the frequency of surgical procedures using the Company’s products, including through labor and hospital staffing shortages and the allocation of hospital resources due to financial strain experienced during the COVID-19 pandemic.

While the Company believes that surgical procedures have started to normalize to pre-pandemic levels and that hospital systems have begun to address any remaining backlog of procedures previously delayed due to the COVID-19 pandemic, the full extent of the impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition, including revenue, expenses, manufacturing capability, supply chain integrity, staffing availability, research and development costs and employee-related compensation, will depend on future developments that remain uncertain.

(2) Risks and Liquidity

2 unchanged sentences

The Company anticipates incurring additional losses until such time, if ever, it can generate sufficient revenue from its products to cover its expenses.

In August 2022, the Company completed an underwritten public offering in which the Company issued and sold 4,600,000 shares of its common stock at a public offering price of $ 8.00 per share.

The Company received net proceeds of $ 34.4 million after deducting underwriting discounts, commissions and other offering expenses.

The operations of the Company are subject to certain risks and uncertainties including, among others, the uncertainty of product development, the impact of macroeconomic conditions, including the COVID-19 pandemic, general economic uncertainty, including as a result of inflationary pressures and the measures undertaken by various governments to address them, banking instability, geopolitical factors such as the war in Ukraine, technological uncertainty, commercial acceptance of any developed products, alternative competing technologies, dependence on collaborative partners, uncertainty regarding patents and proprietary rights, comprehensive government regulations, and dependence on key personnel.

In March 2024, the Company sold its distribution rights for NIVIS Fibrillar Collagen Pack to MiMedx Group, Inc.

in exchange for an initial $ 5.0 million payment and additional future payments aggregating between a minimum of $ 3.0 million and a maximum of $ 7.0 million based on net sales of NIVIS over the next two years .

On April 21, 2023, the Company completed an underwritten public offering in which the Company sold 5,219,190 shares of its common stock (including 469,190 shares sold pursuant to the underwriters’ overallotment option on May 5, 2023) at a public offering price of $ 9.50 per share, receiving net proceeds of approximately $ 46.3 million after deducting underwriting discounts, commissions and other offering expenses.

The operations of the Company are subject to certain risks and uncertainties including, among others, the uncertainty of product development, the impact of macroeconomic conditions, including the lingering effects of the COVID-19 pandemic or other public health crises, general economic uncertainty, including as a result of inflationary pressures and the measures undertaken by various governments to address them, banking instability, geopolitical factors such as the ongoing Russia-Ukraine conflict and the current conflict in Israel and Gaza (including any escalation or expansion), technological uncertainty, commercial acceptance of any developed products, alternative competing technologies, dependence on collaborative partners, uncertainty regarding patents and proprietary rights, comprehensive government regulations, and dependence on key personnel.

TELA Bio, Inc.

1 unchanged sentence

(3) Summary of Significant Accounting Policies

Basis of Presentation and Principals of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

7 unchanged sentences

As future events and their effects cannot be determined with precision, actual results may differ significantly from these estimates.

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company views its operations and manages its business in one segment.

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”), or decision- making group, in deciding how to allocate resources and in assessing performance.

The CODM, who is the Chief Executive Officer, views the Company’s operations and manages its business in one segment.

Concentration of Risk

2 unchanged sentences

The Company has established guidelines relative to credit ratings and maturities that seek to maintain safety and liquidity.

On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank (“SVB”) and appointed the FDIC as receiver.

On March 12, 2023, the U.S.

Department of the Treasury, the Federal Reserve and the FDIC released a joint statement confirming that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts.

In addition, on March 10, 2023, the Bank of England (the “BOE”) announced that it intended to seek the placement of Silicon Valley Bank UK Limited (“SVBUK”), an affiliate of SVB, into a Bank Insolvency Procedure, which ultimately results in the acquisition of SVBUK by HSBC UK Bank Plc (“HSBC") on March 13, 2023.

The BOE confirmed that all depositors’ money with SVBUK is safe and secure as a result of the transaction, and that operations at SVBUK would continue as normal.

During the course of these events, a portion of the Company’s cash was held in accounts at SVB and SVBUK, with the remainder held at another high-credit-quality financial institution.

We have recently established additional redundant accounts with another high-credit-quality financial institution to mitigate liquidity risk to our cash and cash equivalents from any further instability in the financial industry.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Following the events relating to Silicon Valley Bank in 2023, the Company has established additional redundant accounts with another high-credit-quality financial institution to mitigate liquidity risk to our cash and cash equivalents from any further instability in the financial industry.

As described in Note 11, the Company has licensed patents and other intellectual property from Aroa Biosurgery Ltd.

6 unchanged sentences

The Company’s cash and cash equivalents are carried at fair value.

Inventory consists of finished goods and is identified and tracked by lot and stated at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Restricted Cash

Restricted cash represents an amount held in an escrow deposit account, securing a letter of credit for the Company’s office lease.

Inventory consists of purchased materials, primarily finished goods and is identified and tracked by lot and stated at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis.

Inventories consisted of the following (in thousands):

Finished goods

Raw materials

Total inventory

The Company periodically analyzes its inventory levels and writes down inventory that has become obsolete or that has a cost basis in excess of its expected net realizable value based on expected customer demand.

10 unchanged sentences

The Company anticipates recognizing amortization expense of $ 0.4 million in each of the next five years and $ 0.1 million thereafter.

The Company adopted ASU 2016-02, Leases , (“ASU 2016-02”) on January 1, 2022 using the modified retrospective transition method and elected the transition practical expedients to not reassess lease identification, lease classification and initial indirect costs related to those leases entered into prior to the date of application.

ASU 2016-02 required a lessee to record a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.

Long-Lived Assets

Long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by such asset or asset group to its carrying value.

If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

expected to be generated by such asset or asset group to its carrying value.

If the carrying value of the long-lived asset or asset group exceeds the undiscounted cash flows, an impairment is recognized to the extent the carrying value exceeds its fair value.

1 unchanged sentence

No impairment losses were recognized during the years ended December 31, 2023, 2022 or 2021.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Debt Issuance Costs

Debt issuance costs incurred in connection with debt (Note 6) are amortized to interest expense over the term of the respective financing arrangement using the effective-interest method.

Debt issuance costs, net of related amortization are deducted from the carrying value of the related debt.

Debt issuance costs, net of related amortization are deducted from the carrying amount of the related debt.

Revenue Recognition

18 unchanged sentences

Total revenue

Sales outside of the U.S.

were $ 3.2 million or 8 % of total revenue for the year ended December 31, 2022 and immaterial for the years ended December 31, 2021 and 2020.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Sales outside of the U.S.

were $ 6.1 million or 10 % of total revenue for the year ended December 31, 2023, $ 3.2 million or 8 % of total revenue for the year ended December 31, 2022 and immaterial for the year ended December 31, 2021.

Research and Development

17 unchanged sentences

In accordance with the disclosure requirements of ASC 740-10, the Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of income tax expense.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Fair value of financial instruments

1 unchanged sentence

Fair value determination in accordance with applicable accounting guidance requires that a number of significant judgments are made.

Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

financial instruments.

Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments.

Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, other assets, and accounts payable are shown at cost, which approximates fair value due to the short-term nature of these instruments.

Due to the related-party relationship of the OrbiMed Credit Facility (Note 6), it was impractical to determine the fair value of the debt.

The carrying amount of the Company’s Credit and Security Agreement approximates fair value due to its variable interest rate.

The Company follows the provisions of ASC Topic 820, Fair Value Measurement , for financial assets and liabilities measured on a recurring basis.

13 unchanged sentences

Cash equivalents – money market fund

Allowance for credit losses

The following table presents a rollforward of the allowance of credit losses (in thousands):

Balance at Beginning of Period

Bad Debt Expense Recognized

Write-offs of Uncollectible Balances

Balance at End of Period

Year ended December 31, 2021

Year ended December 31, 2022

Year ended December 31, 2023

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Net loss per share

3 unchanged sentences

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding, as they would be antidilutive.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Year ended December 31,

Stock options (including shares subject to repurchase)

6 unchanged sentences

As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

In February 2016, the FASB issued ASU No.

2016-02, Leases , (“ASU 2016-02”) which requires a lessee to record a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.

A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application.

An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the consolidated financial statements as its date of initial application.

The Company adopted ASU 2016-02 on January 1, 2022 using the modified retrospective transition method and elected the transition practical expedients to not reassess lease identification, lease classification and initial indirect costs related to those leases entered into prior to the date of application.

In June 2016, the FASB issued ASU No.

2016-13, Measurement of Credit Losses on Financial Instruments , which provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model.

The standard is effective for the Company beginning January 1, 2023, and the adoption of this guidance is not expected to have a significant impact on the consolidated financial statements and related disclosures.

The standard was effective for the Company beginning January 1, 2023, and the adoption of this guidance did not have a significant impact on the consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity (“ ASU 2020-06”) .

2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity (“ ASU 2020-06”) .

ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.

2 unchanged sentences

ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those annual periods.

The adoption of this guidance is not expected to have a significant impact on the consolidated financial statements and related disclosures.

The adoption of this guidance did not have a significant impact on the consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures , which expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

This guidance is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024, with early adoption permitted, including adoption in any

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

interim period.

The Company is currently evaluating the expected impact that the standard could have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , requiring entities to provide additional information in the income tax rate reconciliation and additional disclosures about income taxes paid.

The new accounting guidance requires entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold.

This guidance is effective for annual periods beginning after December 15, 2024, and should be applied prospectively, but entities have the option to apply it retrospectively for each period presented.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company is currently evaluating the expected impact that the standard could have on its consolidated financial statements and related disclosures.

(4) Property and Equipment

23 unchanged sentences

MidCap Term Loan

OrbiMed Term Loan (related party)

End of term charge

5 unchanged sentences

Upon closing, the Company borrowed $ 40.0 million of Tranche 1 and used a portion of the proceeds to repay borrowings under the OrbiMed Credit Facility (described below) and intends to use the remaining proceeds to fund operations and other general corporate purposes.

The Company will be eligible to borrow Tranche 2 at the Company’s option upon meeting certain conditions, including, but not limited to, reaching $ 65.0 million of net product revenue over the preceding four quarters by fiscal year end 2023.

As of December 31, 2023, no additional borrowings were made and the Company’s ability to draw from Tranche 2 has since expired.

Pursuant to the MidCap Credit Agreement, the Company provided a first priority security interest in all existing and future acquired assets, including intellectual property, owned by the Company.

7 unchanged sentences

If the Company is not in covenant compliance at the end of the Interest-Only Period, the Company is required to make 24 months of straight-line amortization payments, with the entire principal amount due at maturity.

Subject to certain limitations, the MidCap Term Loans have a prepayment fee equal to 3.0 % of the prepaid principal amount for the first year following the closing date of the MidCap Term Loans, 2.0 % of the prepaid principal amount for the second year following the closing date and 1.0 % of the prepaid principal amount for the third year following the closing date and thereafter.

The Company is also required to pay an exit fee at the time of maturity or prepayment event equal to 5 % of all principal borrowings (the “End of Term Charge”) (or in the event of a prepayment event, the amount

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

the second year following the closing date and 1.0 % of the prepaid principal amount for the third year following the closing date and thereafter.

of principal being prepaid).

Interest expense associated with the MidCap Credit Facility recorded for the year ended December 31, 2023 was $ 5.2 million, of which $ 0.6 million was related to the amortization of debt issuance costs.

OrbiMed Term Loan (Related Party)

Interest expense associated with the MidCap Credit Facility recorded for the year ended December 31, 2022 was $ 2.6 million, of which $ 0.4 million was related to the amortization of debt issuance costs.

OrbiMed Term Loan

In November 2018, the Company entered into the OrbiMed Credit Facility with OrbiMed, a related party as the lender is affiliated with a stockholder of the Company, which consisted of up to $ 35.0 million in term loans (the “OrbiMed Term Loans”).

7 unchanged sentences

Interest expense associated with the OrbiMed Credit Facility recorded for the year ended December 31, 2021 was $ 3.6 million, of which $ 0.7 million was related to the amortization of debt issuance costs.

Interest expense associated with the OrbiMed Credit Facility recorded for the year ended December 31, 2020, was $ 3.6 million, of which $ 0.6 million was related to the amortization of debt issuance costs.

(7) Stockholders’ Equity

Public Stock Offerings

In June 2020, the Company sold 3,000,000 shares of its common stock at a public offering price of $ 16.00 per share.

The Company received net proceeds of $ 44.7 million after deducting underwriting discounts, commissions and other offering expenses.

In December 2020, the Company entered into an Equity Distribution Agreement (the “Equity Agreement”) with Piper Sandler & Co (“Piper”) in connection with the establishment of an at-the-market offering program under which it may sell up to an aggregate of $ 50.0 million of shares of the Company’s common stock, from time to time through Piper as sales agent.

No sales were made under the Equity Agreement during the years ended December 31, 2022, 2021 or 2020.

In November 2023, the Company entered into a new Equity Distribution Agreement (the “2023 Equity Agreement”) with Piper Sandler & Co, (“Piper”) in connection with the establishment of an at-the-market offering program under which the Company may sell shares of its common stock, from time to time through Piper as sales agent, in an initial amount of up to $ 50 million.

The 2023 Equity Agreement supersedes and replaces the Company’s previous Equity Distribution Agreement with Piper dated December 18, 2020 (the “2020 Equity Agreement”), which is no longer effective.

No sales were made under the 2023 Equity Agreement or the 2020 Equity Agreement during the years ended December 31, 2023, 2022 or 2021.

In April 2023, the Company completed an underwritten public offering in which the Company issued and sold 5,219,190 shares of its common stock (including 469,190 shares sold pursuant to the underwriters’ overallotment option in May 2023) at a public offering price of $ 9.50 per share.

The Company received net proceeds of approximately $ 46.3 million after deducting underwriting discounts, commissions and other offering expenses.

In August 2022, the Company completed an underwritten public offering in which the Company issued and sold 4,600,000 shares of its common stock at a public offering price of $ 8.00 per share.

38 unchanged sentences

These grants were made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq listing rule 5635(c)(4).

At December 31, 2022, the aggregate intrinsic value of outstanding options and exercisable options was $ 3.0 million and $ 2.3 million, respectively.

At December 31, 2023, the aggregate intrinsic value of both outstanding options and exercisable options was $ 0.3 million.

The 2012 Stock Incentive Plan provided the holders of stock options an election to early exercise prior to vesting.

6 unchanged sentences

Unvested balance at December 31, 2022

The weighted average grant-date fair value per share of options granted was $ 7.19 , $ 6.55 and $ 8.66 for the years ended December 31, 2023, 2022 and 2021, respectively.

The aggregate intrinsic value of options exercised was $ 0.1 million, $ 16,000 and $ 0.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31,

As of December 31, 2023, the total unrecognized compensation expense related to unvested employee and nonemployee stock option awards was $ 3.5 million, which is expected to be recognized in expense over a weighted-average period of approximately 2.2 years.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

2022, the total unrecognized compensation expense related to unvested employee and nonemployee stock option awards was $ 5.1 million, which is expected to be recognized in expense over a weighted-average period of approximately 2.5 years.

Estimating Fair Value of Stock Options

15 unchanged sentences

Restricted Stock Units

The Company’s restricted stock units (“RSUs”) vest based on the terms in each award agreement and generally vest over four years .

The Company has issued service-based and performance-based restricted stock units (“RSUs”).

During the year ended December 31, 2023, the Company granted 479,585 service-based awards at a weighted average grant-date fair value of $ 9.89 per RSU.

Vesting of the service-based RSUs is based on the terms in each award agreement and is generally over four years .

During the year ended December 31, 2023, the Company granted 250,149 performance-based RSUs at a weighted average grant-date fair value of $ 10.95 per RSU.

Vesting of these performance-based RSUs is subject to continued service through 2026 and the achievement of certain performance milestones for fiscal year 2026.

The amount of RSUs that will vest can range from 0 % to 110 % of the original number of RSUs granted.

Expense for the performance-based RSUs is not recognized until the performance conditions are deemed probable of achievement.

The Company did not record any expense related to the performance-based RSUs during the year ended December 31, 2023.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

The following table summarizes restricted stock units for the Plan:

4 unchanged sentences

Outstanding at December 31, 2022

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Canceled/forfeited

Outstanding at December 31, 2023

Included in outstanding RSUs at December 31, 2023, were 123,250 RSUs granted outside of the Plan.

These grants were made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq listing rule 5635(c)(4).

The weighted average grant-date fair value per RSU granted was $ 11.21 and $ 16.57 during the year ended December 31, 2022 and 2021, respectively.

The weighted average grant-date fair value per RSU granted was $ 10.25 , $ 11.21 and $ 16.57 during the years ended December 31, 2023, 2022 and 2021, respectively.

The aggregate intrinsic value of RSUs outstanding was $ 6.0 million and $ 3.6 million at December 31, 2023 and 2022, respectively.

7 unchanged sentences

The Company’s contributions were $ 0.5 million, $ 0.4 million and $ 0.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The match was suspended from April to August 2020 due to COVID-19.

Participants are immediately vested in their own contributions to the plan and are fully vested in discretionary profit sharing made by the Company after three years of service.

5 unchanged sentences

As of December 31, 2023, 2022 and 2021, 10,602 , 4,523 and 3,163 shares, respectively, have been issued under the ESPP.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

(10) Income Taxes

1 unchanged sentence

Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Significant components of the Company’s deferred tax assets for federal income taxes consisted of the following (in thousands):

1 unchanged sentence

Net operating loss carryforwards

Interest expense carryforward

Research and development credits

Lease liability

Capitalized research and development expenses

Accrued expenses and other

17 unchanged sentences

Ownership changes may limit the amount of net operating losses and general business tax credits carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of 5% shareholders in the stock of a corporation by more than 50 percentage points over a three-year period.

If the Company experiences a Section 382 ownership change, the tax benefits related to the NOL carryforwards may be further limited or lost.

The Company has not performed an analysis under Section 382 and cannot predict or otherwise determine whether there would be any limitation to the amount of net operating losses and general business tax credits carryforwards that can be utilized.

In general, an ownership change, as defined by Section 382, results from transactions increasing the

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

ownership of 5% shareholders in the stock of a corporation by more than 50 percentage points over a three-year period.

If the Company experiences a Section 382 ownership change, the tax benefits related to the NOL carryforwards may be further limited or lost.

A reconciliation of income tax benefit at the statutory federal income tax rate and as reflected in the consolidated financial statements is as follows:

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Carryforward attributes from prior years may be adjusted upon examination by taxing authorities if used in an open period.

Many governments have enacted or are currently contemplating economic stimulus and financial aid measures.

Many of these measures include deferring the due dates for tax payments, including both income tax and other taxes.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States to address the economic impacts of the COVID-19 pandemic.

The CARES Act includes corporate income tax, payroll tax, and other provisions.

While the Company may receive financial, tax, or other benefits under the bill, this legislation did not impact the Company during the year ended December 31, 2020.

During the year ended December 31, 2021, the Company claimed an employee retention payroll tax credit of $ 0.5 million for certain employment taxes.

(11) Commitments and Contingencies

Legal Proceedings

From time to time, the Company may be a party to various other lawsuits, claims, and other legal proceedings that arise in the ordinary course of its business.

While the outcomes of these matters are uncertain, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

From time to time, the Company may be a party to lawsuits, claims, and other legal proceedings that arise in the ordinary course of its business.

While the outcomes of these matters are uncertain, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

Agreements with Aroa

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and European cumulative product sales targets.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

The Company paid $ 1.0 million to Aroa in 2018 related to one of the cumulative product sales targets and the remaining $ 2.0 million in 2019.

The Company paid $ 1.0 million in 2022 related to the sales milestone payments in the European territory.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Other key terms of the amended Aroa agreement in addition to those disclosed above are as follows:

● The transfer price for product produced by Aroa is 200 % of Aroa’s cost of goods sold.

The transfer price and the quarterly true-up amount continued to equal 27 % of Company’s net sales of licensed products.

Upon a change in control of the Company (as defined in the amended agreement), the annual minimum amounts will be extended for a sixth year with a $ 5.0 million minimum amount for the North American territory and $ 1.0 million minimum amount for the European territory.

If a change in control of the Company occurs prior to the first product launch in the applicable territory, then the annual minimum requirements shall commence upon such change in control.

If the make whole payments, if any, are not made by the Company after a notice and cure period, then the license will convert to a nonexclusive basis in the territory for which the payment was required but not made.

● The transfer price for product produced by Aroa is 200 % of Aroa’s cost of goods sold, or 150 % of Aroa’s cost of goods sold for the Company’s recent products dedicated for use in inguinal hernia repair (“IHR”).

The transfer price and the quarterly true-up amount continued to equal 27 % of Company’s net sales of licensed products, with the exception of the IHR products, where the total amount payable to Aroa will at least equal the aggregate transfer pricing paid to Aroa for such products during the applicable calendar year.

● Provisions exist for the Company to step in and operate Aroa’s plant if a supply failure occurs and is not cured within a set timeframe.

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The Company expects to enter into similar milestone-based agreements with its strategic partner for both product territories and new products in order to expand and extend its product portfolio.

As of December 31, 2022, the Company had $ 1.0 million in purchase commitments with Aroa, $ 20.7 million in commitments with certain other suppliers to maintain exclusivity rights over time and $ 2.2 million milestone payments related to certain research and development arrangements which are currently deemed not probable as the timing and likelihood of such payments are not known with certainty.

Other Commitments

In November 2021, the Company entered into an exclusive distribution agreement with Next Science, a medical technology company, granting the Company exclusive rights to sell and market Next Science’s proprietary antimicrobial surgical wash in the U.S.

plastic reconstructive surgery market.

To maintain exclusivity, the Company had purchase commitments and annual license fees over a ten-year period.

In April 2022, the Company entered into an exclusive development and distribution partnership for Collagen Matrix, Inc.’s proprietary fibrillar collagen pack in the U.S.

To maintain exclusivity, the Company has purchase commitments of $ 20.7 million over the remaining nine-year period.

As of December 31, 2023, the Company had $ 7.1 million in commitments with one supplier to maintain exclusivity rights over time and $ 1.8 million in milestone payments related to certain research and development arrangements which are currently deemed not probable as the timing and likelihood of such payments are not known with certainty.

Employment Agreements

The Company entered into employment agreements with key personnel providing for compensation and severance in certain circumstances, as defined in the respective employment agreements.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

The Company leases office and laboratory space in Malvern, Pennsylvania under a noncancelable lease (the “Malvern Lease”).

The Malvern Lease, which was concluded to be an operating lease, was amended in December 2020 to extend the term of the lease from May 2021 to May 2028.

The Malvern Lease has annual scheduled payment increases and provides the Company a renewal option for an additional term of 60 months at the end of the lease term.

The Malvern Lease, which was concluded to be an operating lease, was amended in October 2023 to extend the term of the lease from May 2028 to May 2030 (the “Lease Amendment”).

Pursuant to the Lease Amendment, the Company leased an additional 15,881 square feet at the Company’s corporate headquarters which commenced on December 1, 2023 (the “Expansion Premises”) and will relinquish 4,652 square feet of non-contiguous space currently subject to the lease agreement on June 30, 2025 (the “Relinquished Space”).

The Expansion Premises increased the Company’s total leased square footage in the building from 24,725 square feet to 40,606 square feet, which will be subsequently reduced to 35,954 square feet as of June 30, 2025 following removal of the Relinquished Space.

The modification of the lease terms for the Company’s existing space was not treated as a separate contract;

however, the Company notes that the Expansion Premises is being treated as a new ROU asset.

The Lease Amendment required the Company to pay an additional security deposit of $ 0.3 million.

The Malvern Lease has annual scheduled payment increases and provides the Company with a renewal option for an additional term of 60 months at the end of the lease term.

The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities.

As the Company is not reasonably certain to exercise the renewal option, the additional 60-month term has been excluded.

On January 1, 2022 and upon adoption of ASU 2016-02, the Company recorded an operating lease liability of $ 1.8 million and an operating lease ROU asset of $ 1.4 million related to the Malvern Lease.

The Company also eliminated approximately $ 0.4 million of deferred rent and tenant allowance liabilities as of January 1, 2022 as these components are reflected as a reduction in the operating lease ROU asset.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

Operating lease leasehold improvements are depreciated over the lesser of the useful lives of the leasehold improvements or the lease term.

The tenant allowance was historically amortized over the initial, non-cancelable term of the Malvern Lease.

The Company's lease does not provide an implicit rate, and therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities.

The Company determined that the rate implicit in its lease is not readily determinable, and therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities.

The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease.

The Company used an incremental borrowing rate of 9.75 % to discount the Malvern Lease payments included in the operating lease liabilities recognized upon adoption of ASU 2016-02.

The Company recognized $ 0.3 million of lease cost during the year ended December 31, 2022.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 0.3 million for the year ended December 31, 2022, and this amount is included in operating activities in the consolidated statements of cash flows.

The Company used an incremental borrowing rate of 11.66 % to discount the Malvern Lease payments included in the operating lease liabilities recognized.

The Company recognized $ 0.3 million of lease cost during both the years ended December 31, 2023 and 2022.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 0.4 million and $ 0.3 million for the years ended December 31, 2023 and 2022, respectively, and these amounts are included in operating activities in the consolidated statements of cash flows.

As of December 31, 2023, the remaining lease term for the Malvern Lease is 6.4 years.

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Total operating lease liabilities

At December 31, 2021, the Company’s future minimum lease payments under non-cancelable operating leases for the five years ending December 31, 2022 through 2026 and thereafter were as follows:

$ 0.3 million, $ 0.4 million, $ 0.4 million, $ 0.4 million, $ 0.4 million and $ 0.5 million, respectively.

TELA Bio, Inc.

Notes to Consolidated Financial Statements (continued)

As of December 31, 2023, $ 0.6 million representing the current portion of operating lease liabilities is included in accrued expenses and other current liabilities in the consolidated balance sheets and $ 1.7 million representing the long-term portion of operating lease liabilities is included in other long-term liabilities in the consolidated balance sheets.

(12) Related-Party Transactions

On November 16, 2018, the Company entered into a senior secured term loan facility with OrbiMed, an entity affiliated with an owner of a material amount of the Company’s outstanding voting securities.

The terms of the debt and related components are described in more detail in Note 6.

On May 26, 2022, the Company entered into the MidCap Credit Agreement and upon closing used a portion of the proceeds to repay all borrowings under the OrbiMed Credit Facility, and terminated the OrbiMed Credit Facility.

(12) Subsequent Event

In March 2024, the Company sold its distribution rights for NIVIS Fibrillar Collagen Pack to MiMedx Group, Inc.

The following exhibits are being filed herewith:

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Fourth Amended and Restated Certificate of Incorporation (incorporated by reference to exhibit 3.1 of the Company’s Current Report on Form 8-K filed on November 19, 2019).

Second Amended and Restated Bylaws (incorporated by reference to exhibit 3.2 of the Company’s Current Report on Form 8-K filed on November 19, 2019).

Third Amended and Restated Bylaws (incorporated by reference to exhibit 3.1 of the Company’s Report on Form 10-Q filed on November 13, 2023).

Specimen Common Stock Certificate of the Company (incorporated by reference to exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No.

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Form of TELA Bio, Inc.

Amended and Restated 2019 Equity Incentive Plan Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (performance-based vesting) (filed herewith).

Amended and Restated 2019 Equity Incentive Plan Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (performance-based vesting) (incorporated by reference to exhibit 10.13 to the Company’s Report on Form 10-K, filed on March 23, 2023).

TELA Bio, Inc.

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1 to TELA Bio, Inc.

2019 Employee Stock Purchase Plan (fil ed herewith ) .

2019 Employee Stock Purchase Plan (incorporated by reference to exhibit 10.15 to the Company’s Report on Form 10-K, filed on March 23, 2023) .

Form of TELA Bio, Inc.

Inducement Award Agreement for Non-Qualified Stock Option (filed herewith).

Inducement Award Agreement for Non-Qualified Stock Option (incorporated by reference to exhibit 10.16 to the Company’s Report on Form 10-K, filed on March 23, 2023 ).

Form of TELA Bio, Inc.

Inducement Award Agreement for Restricted Stock Unit (filed herewith).

Inducement Award Agreement for Restricted Stock Unit (incorporated by reference to exhibit 10.17 to the Company’s Report on Form 10-K, filed on March 23, 2023 ).

TELA Bio, Inc.

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Employment Agreement, dated September 15, 2020, by and between the Company and Paul Talmo (incorporated by reference to exhibit 10.19 to the Company’s Report on Form 10-K, filed on March 23, 2022).

Employment Agreement, dated August 3, 2023, by and between the Company and Gregory Firestone (incorporated by reference to exhibit 10.1 to the Company’s Report on Form 10-Q, filed on August 10, 2023).

Credit and Security Agreement, dated as of May 26, 2022, by and among TELA Bio, Inc., MidCap Financial Trust and the lenders from time to time party thereto (incorporated by reference to exhibit 10.1 to the Company’s Report on Form 8-K, filed on May 31, 2022 ).

Amendment No.

1 to Credit and Security Agreement, dated as of October 18, 2023, by and among TELA Bio, Inc., MidCap Financial Trust and the lenders from time to time party thereto (filed herewith).

Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated July 16, 2015, by and between the Company and Aroa Biosurgery Ltd.

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(incorporated by reference to exhibit 10.2 on the Company’s Report on Form 10-Q filed on May 15, 2020).

Addendum to the Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated August 13, 2020, by and between the Company and Aroa Biosurgery Ltd.

(f iled herewith ).

Lease between the Company and Liberty Property Limited Partnership, dated January 31, 2013 (incorporated by reference to exhibit 10.26 to the Company’s Registration Statement on Form S-1 (File No.

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Third Amendment to Lease between the Company and WPT Land 2 LP (as successor in interest to Liberty Property Limited Partnership), dated December 22, 2020 (incorporated by reference to exhibit 10.29 to the Company’s Report on Form 10-K, filed on March 25 , 202 1 ) .

Equity Distribution Agreement, dated December 18, 2020 (incorporated by reference to Exhibit 1.2 of the Company’s Registration Statement on Form S-3 (File No.

333-251505) filed on December 18, 2020).

Fourth Amendment to Lease between the Company and WPT Land 2 LP (as successor in interest to Liberty Property Limited Partnership), dated October 18, 2023 (filed herewith).

Equity Distribution Agreement, dated November 13, 2023 (incorporated by reference to Exhibit 10.2 of the Company’s Report on Form 10-Q filed on November 13, 2023) .

Subsidiaries of the Registrant (filed herewith).

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

TELA Bio, Inc.

Compensation Recovery Policy (filed herewith).

Inline XBRL Instance Document (filed herewith).

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Lisa Colleran

/s/ JOHN NOSENZO

March 23, 2023

/s/ FEDERICA O’BRIEN

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures