TELA Bio, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures ​ The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Operating Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023. Management’s Report on Internal Control Over Financial Reporting ​ Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Operating Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. ​ Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are achieved. Further, the design of a control system must be balanced against resource constraints, and therefore the benefits of controls must be considered relative to their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. 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 93 Table of Contents 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. ​ Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. 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. ​ Changes in Internal Control over Financial Reporting ​ During the fourth quarter ended December 31, 2023, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. 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. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ​ ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information concerning directors and compliance with Section 16(a) of the Exchange Act and our Code of Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller called for by Item 10 of Form 10-K will be set forth in our definitive proxy statement for the 2024 annual meeting of stockholders, to be filed within 120 days after the end of the fiscal year covered by this annual report on Form 10-K, and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2024 annual meeting of stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2024 annual meeting of stockholders. 94 Table of Contents ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Item 13 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2024 annual meeting of stockholders. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Our independent registered public accounting firm is KPMG LLP , Philadelphia, PA , Auditor Firm ID: 185 . The information required by Item 14 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2024 annual meeting of stockholders. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. Financial Statements See Index to the Consolidated Financial Statements on page F-1 of this Annual Report. 2. Financial Statement Schedules None, as all information required in these schedules is included in the Notes to the Consolidated Financial Statements. 3. Exhibits Reference is made to the Exhibit Index on page 96 of this Annual Report for a list of exhibits required by Item 601 of Regulation S-K to be filed as part of this Annual Report. ITEM 16 . FORM 10-K SUMMARY Not applicable. ​ ​ 95 Table of Contents TELA Bio, Inc. Index to Consolidated Financial Statements ​ ​ ​ Page ​ ​ Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 ​ ​ ​ F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors TELA Bio, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of TELA Bio, Inc. and subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Change in Accounting Principle As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2022 due to the adoption of Accounting Standards Update 2016-02, Leases . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2013. Philadelphia, Pennsylvania March 22, 2024 ​ F-2 Table of Contents TELA Bio, Inc. Consolidated Balance Sheets (In thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Assets ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 46,729 ​ $ 42,019 Accounts receivable, net of allowances of $ 416 and $ 143 ​ 9,737 ​ 6,621 Inventory ​ 13,162 ​ 11,792 Prepaid expenses and other assets ​ 2,098 ​ 2,015 Total current assets ​ 71,726 ​ 62,447 Property and equipment, net ​ 1,984 ​ 1,682 Intangible assets, net ​ 2,119 ​ 2,499 Right-of-use assets ​ 1,954 ​ 1,227 Restricted cash ​ ​ 265 ​ ​ — Total assets ​ $ 78,048 ​ $ 67,855 ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders’ equity ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 1,667 ​ $ 1,534 Accrued expenses and other current liabilities ​ 15,300 ​ 10,869 Total current liabilities ​ 16,967 ​ 12,403 Long‑term debt ​ ​ 40,515 ​ ​ 39,916 Other long‑term liabilities ​ 1,685 ​ 1,231 Total liabilities ​ 59,167 ​ 53,550 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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; 24,494,675 and 19,165,027 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively ​ 24 ​ 19 Additional paid-in capital ​ ​ 339,655 ​ ​ 288,361 Accumulated other comprehensive income ​ 91 ​ 150 Accumulated deficit ​ ( 320,889 ) ​ ( 274,225 ) Total stockholders’ equity ​ 18,881 ​ 14,305 Total liabilities and stockholders’ equity ​ $ 78,048 ​ $ 67,855 ​ See accompanying notes to consolidated financial statements. ​ ​ ​ ​ ​ F-3 Table of Contents TELA Bio, Inc. Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 ​ 2022 2021 Revenue ​ $ 58,453 ​ $ 41,418 ​ $ 29,463 Cost of revenue (excluding amortization of intangible assets) ​ 17,961 ​ 13,570 ​ 10,346 Amortization of intangible assets ​ 380 ​ 804 ​ 304 Gross profit ​ 40,112 ​ 27,044 ​ 18,813 Operating expenses: ​ ​ ​ Sales and marketing ​ 59,681 ​ 43,252 ​ 29,062 General and administrative ​ 14,887 ​ 13,862 ​ 12,459 Research and development ​ 9,619 ​ 8,937 ​ 6,743 Total operating expenses ​ 84,187 ​ 66,051 ​ 48,264 Loss from operations ​ ( 44,075 ) ​ ( 39,007 ) ​ ( 29,451 ) Other expense: ​ ​ ​ Interest expense ​ ( 5,223 ) ​ ( 4,051 ) ​ ( 3,597 ) Loss on extinguishment of debt ​ ​ — ​ ​ ( 1,228 ) ​ ​ — Other income (expense) ​ 2,634 ​ ( 10 ) ​ ( 228 ) Total other expense ​ ( 2,589 ) ​ ( 5,289 ) ​ ( 3,825 ) Net loss ​ $ ( 46,664 ) ​ $ ( 44,296 ) ​ $ ( 33,276 ) Net loss per common share, basic and diluted ​ $ ( 2.04 ) ​ $ ( 2.72 ) ​ $ ( 2.30 ) Weighted average common shares outstanding, basic and diluted ​ 22,868,663 ​ 16,267,678 ​ 14,473,213 Comprehensive loss: ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 46,664 ) ​ $ ( 44,296 ) ​ $ ( 33,276 ) Foreign currency translation adjustment ​ ( 59 ) ​ ​ 202 ​ 19 Comprehensive loss ​ $ ( 46,723 ) ​ $ ( 44,094 ) ​ $ ( 33,257 ) ​ See accompanying notes to consolidated financial statements. ​ ​ F-4 Table of Contents TELA Bio, Inc. Consolidated Statements of Stockholders’ Equity (In thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ other ​ ​ ​ ​ ​ ​ ​ ​ Common stock ​ paid ‑ in ​ comprehensive ​ Accumulated ​ ​ ​ ​ Shares Amount capital income (loss) deficit Total Balance at January 1, 2021 ​ 14,437,107 ​ $ 14 ​ $ 245,736 ​ $ ( 71 ) ​ $ ( 196,653 ) ​ $ 49,026 Vesting of common stock previously subject to repurchase ​ 153 ​ — ​ 1 ​ — ​ — ​ ​ 1 Vesting of share-based awards and exercise of stock options ​ 89,154 ​ 1 ​ 546 ​ — ​ — ​ ​ 547 Issuance of common stock under the employee stock purchase plan ​ 3,163 ​ ​ — ​ ​ 38 ​ ​ — ​ ​ — ​ ​ 38 Foreign currency translation adjustment ​ — ​ ​ — ​ ​ — ​ ​ 19 ​ ​ — ​ ​ 19 Stock‑based compensation expense ​ — ​ — ​ 3,661 ​ — ​ — ​ 3,661 Reclassification of liability-classified stock-based compensation awards ​ — ​ ​ — ​ ​ 82 ​ ​ — ​ ​ — ​ 82 Net loss ​ — ​ — ​ — ​ — ​ ( 33,276 ) ​ ( 33,276 ) Balance at December 31, 2021 14,529,577 ​ ​ 15 ​ ​ 250,064 ​ ​ ( 52 ) ​ ​ ( 229,929 ) ​ ​ 20,098 Vesting of common stock previously subject to repurchase 29 ​ — ​ — ​ — ​ — ​ — Vesting of share-based awards and exercise of stock options 44,346 ​ — ​ 19 ​ — ​ — ​ 19 Issuance of common stock under the employee stock purchase plan ​ 4,523 ​ — ​ 50 ​ — ​ — ​ 50 Shares withheld for employee taxes ​ ( 13,448 ) ​ ​ — ​ ​ ( 157 ) ​ ​ — ​ ​ — ​ ​ ( 157 ) Foreign currency translation adjustment — ​ ​ — ​ ​ — ​ ​ 202 ​ ​ — ​ 202 Stock‑based compensation expense — ​ — ​ 3,989 ​ — ​ — ​ 3,989 Sale of common stock, net of underwriting discounts, commissions and offering costs ​ 4,600,000 ​ ​ 4 ​ ​ 34,396 ​ ​ — ​ ​ — ​ ​ 34,400 Net loss — ​ — ​ — ​ — ​ ( 44,296 ) ​ ( 44,296 ) Balance at December 31, 2022 19,165,027 ​ ​ 19 ​ ​ 288,361 ​ ​ 150 ​ ​ ( 274,225 ) ​ ​ 14,305 Vesting of share-based awards and exercise of stock options 126,987 ​ — ​ 127 ​ — ​ — ​ 127 Issuance of common stock under the employee stock purchase plan ​ 10,602 ​ ​ — ​ ​ 88 ​ ​ — ​ ​ — ​ ​ 88 Shares withheld for employee taxes ​ ( 27,131 ) ​ ​ — ​ ​ ( 289 ) ​ ​ — ​ ​ — ​ ​ ( 289 ) Foreign currency translation adjustment — ​ — ​ — ​ ( 59 ) ​ — ​ ( 59 ) Stock‑based compensation expense ​ — ​ ​ — ​ ​ 5,032 ​ ​ — ​ ​ — ​ ​ 5,032 Sale of common stock, net of underwriting discounts, commissions and offering costs ​ 5,219,190 ​ ​ 5 ​ ​ 46,336 ​ ​ — ​ ​ — ​ ​ 46,341 Net loss — ​ — ​ — ​ — ​ ( 46,664 ) ​ ( 46,664 ) Balance at December 31, 2023 24,494,675 ​ $ 24 ​ $ 339,655 ​ $ 91 ​ $ ( 320,889 ) ​ $ 18,881 ​ See accompanying notes to consolidated financial statements. ​ F-5 Table of Contents TELA Bio, Inc. Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 ​ 2022 2021 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 46,664 ) ​ $ ( 44,296 ) ​ $ ( 33,276 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation expense ​ 428 ​ 383 ​ 231 Noncash interest expense ​ 599 ​ 657 ​ 664 Noncash loss on extinguishment of debt ​ ​ — ​ ​ 1,228 ​ ​ — Amortization of intangible assets ​ 380 ​ 804 ​ 304 Net changes in operating lease ROU assets and liabilities ​ ​ ( 49 ) ​ ​ ( 36 ) ​ ​ — Inventory excess and obsolescence charge ​ 1,414 ​ 1,866 ​ 1,439 Stock ‑ based compensation expense ​ 5,032 ​ 3,989 ​ 3,661 (Gain) loss on disposal of fixed assets ​ ​ ( 12 ) ​ ​ — ​ ​ 2 Change in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ ( 3,058 ) ​ ( 2,421 ) ​ ( 1,553 ) Inventory ​ ( 2,718 ) ​ ( 6,073 ) ​ ( 5,194 ) Prepaid expenses and other current assets ​ ( 81 ) ​ 1,216 ​ ( 992 ) Accounts payable ​ 11 ​ ( 884 ) ​ 1,597 Accrued expenses and other current and long-term liabilities ​ 4,177 ​ 2,399 ​ 2,673 Foreign currency translation (gain) loss ​ ​ ( 316 ) ​ ​ 420 ​ ​ 12 Net cash used in operating activities ​ ( 40,857 ) ​ ( 40,748 ) ​ ( 30,432 ) Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment for intangible asset ​ ​ — ​ ​ ( 1,000 ) ​ ​ — Purchase of property and equipment ​ ( 611 ) ​ ( 872 ) ​ ( 627 ) Proceeds from the sale property and equipment ​ ​ 12 ​ ​ — ​ ​ — Net cash used in investing activities ​ ( 599 ) ​ ( 1,872 ) ​ ( 627 ) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from sale of common stock, net of underwriting discounts, commissions and offering costs ​ ​ 46,341 ​ ​ 34,400 ​ ​ — Proceeds from issuance of long ‑ term debt ​ ​ — ​ ​ 40,000 ​ ​ — Repayment of long ‑ term debt ​ — ​ ( 30,000 ) ​ — Payment of debt financing costs ​ ​ — ​ ​ ( 3,460 ) ​ ​ — Proceeds from exercise of stock options ​ 127 ​ 19 ​ 547 Payment of withholding taxes related to stock-based compensation to employees ​ ​ ( 289 ) ​ ​ ( 157 ) ​ ​ — Proceeds from issuance of common stock under the employee stock purchase plan ​ ​ 88 ​ ​ 50 ​ ​ 38 Net cash provided by financing activities ​ 46,267 ​ 40,852 ​ 585 Effect of exchange rate on cash and cash equivalents ​ 164 ​ ( 144 ) ​ 11 Net increase (decrease) in cash and cash equivalents and restricted cash ​ 4,975 ​ ( 1,912 ) ​ ( 30,463 ) Cash and cash equivalents and restricted cash, beginning of year ​ 42,019 ​ 43,931 ​ 74,394 Cash and cash equivalents and restricted cash, end of year ​ $ 46,994 ​ $ 42,019 ​ $ 43,931 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid during the period for interest ​ $ 4,624 ​ $ 3,394 ​ $ 2,933 Supplemental disclosures of noncash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Property and equipment in accounts payable and accrued expenses and other current liabilities ​ $ 119 ​ $ 7 ​ $ 166 Issuance of common stock for early exercised stock options ​ $ — ​ $ — ​ $ 1 Reclassification of liability-classified stock-based compensation awards to equity-classified ​ $ — ​ $ — ​ $ 82 Operating lease ROU asset exchanged for operating lease liabilities ​ $ 895 ​ $ 1,376 ​ $ — Tenant improvement and deferred rent reclassified to operating lease liabilities ​ $ — ​ $ 380 ​ $ — Operating lease liabilities assumed for operating lease ROU assets ​ $ — ​ $ 1,756 ​ $ — ​ See accompanying notes to consolidated financial statements. ​ ​ F-6 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (1) Background TELA Bio, Inc. (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 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. OviTex PRS Reinforced Tissue Matrix (“OviTex PRS”), the Company’s second portfolio of products, addresses unmet needs in plastic and reconstructive surgery. The Company’s principal corporate office and research facility is located in Malvern, Pennsylvania. The Company has been directly impacted by the COVID-19 pandemic since the onset of the pandemic in 2020. 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 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 The Company’s operations to date have focused on commercializing products, developing and acquiring technology and assets, business planning, raising capital and organization and staffing. The Company has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $ 320.9 million as of December 31, 2023. The Company anticipates incurring additional losses until such time, if ever, it can generate sufficient revenue from its products to cover its expenses. 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. F-7 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) (3) Summary of Significant Accounting Policies 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”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”). The consolidated financial statements include the accounts of TELA Bio, Inc. and its wholly owned subsidiary TELA Bio Limited. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant judgments are employed in estimates used to determine the recoverability of the carrying value of the Company’s inventory. As future events and their effects cannot be determined with precision, actual results may differ significantly from these estimates. Segments 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 Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash with high-credit-quality financial institutions and primarily invests in money market funds. The Company has established guidelines relative to credit ratings and maturities that seek to maintain safety and liquidity. 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. (“Aroa”). As part of this agreement, Aroa is also the exclusive contract manufacturer of the Company’s OviTex portfolio of products. The inability of Aroa to fulfill supply requirements of the Company could materially impact future operating results. A change in the relationship with Aroa, or an adverse change in their business, could materially impact future operating results. Cash and Cash Equivalents The Company considers cash equivalents to be highly-liquid investments with maturities of three months or less from the date of purchase. Cash equivalents consist of investments in a money market fund. The Company’s cash and cash equivalents are carried at fair value. F-8 Table of Contents 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 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Finished goods ​ $ 13,102 ​ $ 11,792 Raw materials ​ 60 ​ — Total inventory ​ $ 13,162 ​ $ 11,792 ​ 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. As of December 31, 2023 and 2022, the Company had $ 3.0 million and $ 2.3 million, respectively, in finished goods consigned to others. Property and Equipment Property and equipment are stated at the aggregate cost incurred to acquire and place the asset in service. Expenditures for routine maintenance and repairs are charged to expense as incurred and costs of improvements and renewals are capitalized. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. Intangible Assets Upfront payments and milestone payments due related to licenses or commercialization rights prior to future economic benefit being established are recorded as research and development expenses. Milestone payments due related to licenses or commercialization rights after future economic benefit is established are recorded as intangible assets. In 2023, 2022 and 2021, the Company recorded $ 0.4 million, $ 0.8 million and $ 0.3 million of amortization expense, respectively, related to intangible assets. At December 31, 2023, the remaining life of intangible assets was 5.6 years. The Company anticipates recognizing amortization expense of $ 0.4 million in each of the next five years and $ 0.1 million thereafter. Leases 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 F-9 Table of Contents 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. Fair value is determined using various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. No impairment losses were recognized during the years ended December 31, 2023, 2022 or 2021. 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 amount of the related debt. Revenue Recognition Under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), an entity recognizes revenue when its customer obtains control of the promised good, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods. The Company performs the following five steps to recognize revenue under ASC 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that will be transferred to the customer. A significant portion of the Company’s revenue is generated from product shipped to a customer or from consigned inventory maintained at hospitals. Revenue from the sale of consigned products is recognized when control is transferred to the customer, which occurs at the time the product is used in a surgical procedure. For product that is not held on consignment, the Company recognizes revenue when control transfers to the customer which occurs at the time the product is shipped or delivered. For all of the Company’s customer contracts, the only identified performance obligation is providing the product to the customer. Revenue is recognized at the estimated net sales price which includes estimates of variable consideration. The Company enters into contracts with certain third-party payors for the payment of rebates with respect to the utilization of its products. These rebates are based on contractual percentages. The Company estimates and records rebates in the same period the related revenue is recognized, resulting in a reduction of product revenue. Payment terms with customers do not exceed one year and, therefore, the Company does not account for a financing component in its arrangements. There are no incremental costs of obtaining a contract that would rise to or enhance an asset other than product costs, which are a component of inventory. The Company expenses incremental costs of obtaining a contract with a customer (e.g., sales commissions) when incurred as the period of benefit is less than one year. Fees charged to customers for shipping are recognized as revenue. The following table presents revenue disaggregated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2023 ​ 2022 ​ 2021 OviTex ​ $ 39,416 ​ $ 28,879 ​ $ 22,990 OviTex PRS ​ ​ 18,736 ​ ​ 12,431 ​ ​ 6,473 Other ​ ​ 301 ​ ​ 108 ​ ​ — Total revenue ​ $ 58,453 ​ $ 41,418 ​ $ 29,463 ​ F-10 Table of Contents 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 Research and development costs are charged to expense as incurred and consist primarily of salaries, benefits, and other related costs, including stock-based compensation for personnel serving in the research and development functions as well as costs incurred with Aroa under development agreements related to technology transfer, laboratory materials and supplies. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs. Costs incurred in obtaining patent and other intellectual property licenses or milestone payments from license agreements for which there are no alternative future uses are charged to expense as incurred. Stock-Based Compensation The Company accounts for stock-based awards in accordance with provisions of ASC Topic 718, Compensation—Stock Compensation , under which the Company recognizes the grant-date fair value of stock-based awards issued to employees and nonemployee board members as compensation expense on a straight-line basis over the vesting period of the award while awards containing a performance condition are recognized as expense when the achievement of the performance criteria is considered probable. The Company uses the Black-Scholes option pricing model to determine the grant-date fair value of stock options. The Company estimates forfeitures that it expects will occur and adjusts expense for actual forfeitures in the periods they occur. Income Taxes Income taxes are accounted for under the asset-and-liability method as required by ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period corresponding to the enactment date. Under ASC 740, a valuation allowance is required when it is more likely than not all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income. ASC Subtopic 740-10, Accounting for Uncertainty of Income Taxes (“ASC 740-10”), defines the criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in consolidated financial statements prepared in conformity with GAAP. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the respective tax position. The tax benefits recognized in the consolidated financial statements from such a tax position should be measured based on the largest benefit having a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. 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. F-11 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) Fair value of financial instruments Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction among market participants. 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 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. 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. The guidance requires fair value measurements be 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 liabilities. ● 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). The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value measurement at reporting date using ​ ​ Quoted prices in ​ ​ ​ ​ ​ ​ ​ ​ active markets ​ Significant other ​ Significant ​ ​ for identical ​ observable ​ unobservable ​ ​ assets ​ inputs ​ inputs ​ (Level 1) (Level 2) (Level 3) December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents – money market fund ​ $ 41,561 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents – money market fund ​ $ 39,010 ​ $ — ​ $ — ​ 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 $ ( 46 ) ​ ( 12 ) ​ 6 ​ $ ( 52 ) Year ended December 31, 2022 $ ( 52 ) ​ ( 116 ) ​ 25 ​ $ ( 143 ) Year ended December 31, 2023 $ ( 143 ) ​ ( 306 ) ​ 33 ​ $ ( 416 ) ​ F-12 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) Net loss per share Basic and diluted net loss per common share is determined by dividing net loss by the weighted-average shares of common stock outstanding during the reporting period. In periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share since dilutive shares are not assumed to have been issued if their effect is antidilutive. Therefore, the weighted-average shares used to calculate both basic and diluted loss per share are the same. The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding, as they would be antidilutive. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 ​ 2021 Stock options (including shares subject to repurchase) ​ 2,162,453 2,071,848 ​ 1,706,438 Unvested restricted stock units ​ 907,203 ​ 311,991 ​ 163,043 Common stock warrants ​ 88,556 ​ 88,556 ​ 88,556 Total 3,158,212 2,472,395 ​ 1,958,037 ​ Recently Issued Accounting Pronouncements The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. 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 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 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 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. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. The new guidance also modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. 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 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 F-13 Table of Contents 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 Property and equipment consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Asset description Estimated useful lives 2023 2022 Lab equipment 5 Years ​ $ 2,883 ​ $ 2,635 Furniture and fixtures 5 Years ​ 284 ​ 274 Computer equipment and software 3 Years ​ 645 ​ 604 Leasehold improvements Lesser of useful life or lease term ​ 2,507 ​ 2,309 Total ​ 6,319 ​ 5,822 Less accumulated depreciation and amortization ​ ( 4,335 ) ​ ( 4,140 ) Property and equipment, net ​ $ 1,984 ​ $ 1,682 ​ The cost of property and equipment at both December 31, 2023 and 2022 includes $ 0.2 million of equipment located at Aroa. Depreciation expense was $ 0.4 million, $ 0.4 million and $ 0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. (5) Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Compensation and related benefits ​ $ 9,216 ​ $ 6,420 Third-party and professional fees ​ 2,828 ​ 2,563 Amounts due to contract manufacturer ​ ​ 2,024 ​ ​ 1,263 Current portion of operating lease liabilities ​ ​ 565 ​ ​ 340 Research and development expenses ​ ​ 140 ​ ​ 137 Other ​ 527 ​ 146 Total accrued expenses and other current liabilities ​ $ 15,300 ​ $ 10,869 ​ ​ F-14 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) (6) Debt Long-term debt consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 MidCap Term Loan ​ $ 40,000 ​ $ 40,000 End of term charge ​ 2,000 ​ 2,000 Unamortized end of term charge and issuance costs ​ ( 1,485 ) ​ ( 2,084 ) Long-term debt ​ $ 40,515 ​ $ 39,916 ​ MidCap Term Loan On May 26, 2022, the Company entered into the Credit and Security Agreement (the “MidCap Credit Agreement”) with MidCap Financial Trust, as agent (the “Agent”), and certain lender parties thereto. The MidCap Credit Agreement provides for up to $ 50.0 million in term loans (the “MidCap Term Loans”), consisting of a $ 40.0 million Tranche 1 (“Tranche 1”) and a $ 10.0 million Tranche 2 (“Tranche 2”). 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. 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. The MidCap Credit Agreement contains certain covenants that limit the Company’s ability to engage in certain transactions that may be in the Company’s long-term best interests, including the incurrence of additional indebtedness, effecting certain corporate changes, making certain investments, acquisitions or dispositions and paying dividends. ​ The MidCap Credit Agreement also contains customary indemnification obligations and customary events of default, including, among other things, (i) non-payment, (ii) breach of warranty, (iii) non-performance of covenants and obligations, (iv) default on other indebtedness, (v) judgments, (vi) change of control, (vii) bankruptcy and insolvency, (viii) impairment of security, (ix) key permit events, (x) termination of a pension plan, (xi) regulatory matters, (xii) material adverse effect and (xiii) breach of material contracts. ​ In addition, the Company must maintain minimum net revenue levels tested quarterly. In the event of default under the MidCap Credit Agreement, the Company would be required to pay interest on principal and all other due and unpaid obligations at the current rate in effect plus 2 %. ​ The MidCap Term Loans mature on May 1, 2027 and bear interest at a rate equal to 6.25 % plus the greater of one-month Term SOFR (as defined in the MidCap Credit Agreement) or 1.0 %. The Company is required to make 36 monthly interest payments beginning on June 1, 2022 (the “Interest-Only Period”). If the Company is in covenant compliance at the end of the Interest-Only Period, the Company will have the option to extend the Interest-Only Period by 12 months to 48 monthly interest payments, followed by 12 months of straight-line amortization, with the entire principal payment due at maturity. 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 F-15 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) 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. 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”). The OrbiMed Term Loans consisted of two tranches, a $ 30.0 million Tranche 1 (“First Tranche”) and a $ 5.0 million Tranche 2 (“Second Tranche”). In November 2018, the Company borrowed $ 30.0 million of the First Tranche. The Company elected not to borrow the Second Tranche prior to its expiration on December 31, 2019. 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. The OrbiMed Term Loan bore interest at a rate equal to 7.75 % plus the greater of one-month LIBOR or 2.0 % until the aggregate principal, interest and End of Term Charge of $ 3.0 million were paid with part of the proceeds received from the MidCap Credit Agreement. As a result of these payments, a $ 1.2 million loss on extinguishment was recorded during the year ended December 31, 2022. Interest expense associated with the OrbiMed Credit Facility recorded for the year ended December 31, 2022 was $ 1.5 million, of which $ 0.3 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, 2021 was $ 3.6 million, of which $ 0.7 million was related to the amortization of debt issuance costs. ​ (7) Stockholders’ Equity Public Stock Offerings 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. The Company received net proceeds of $ 34.4 million after deducting underwriting discounts, commissions and other offering expenses. ​ ​ F-16 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) Warrants ​ The Company had the following warrants outstanding at December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercise ​ Expiration ​ Outstanding ​ price dates Common stock warrants 8,379 ​ $ 28.65 2028 Common stock warrants 80,177 ​ 28.65 2027 ​ 88,556 ​ ​ ​ ​ ​ ​ ​ (8) Stock-Based Compensation The Company has two equity incentive plans: the 2012 Stock Incentive Plan and the Amended and Restated 2019 Equity Incentive Plan. New awards can only be granted under the Amended and Restated 2019 Equity Incentive Plan (the “Plan”). At December 31, 2023, 1,138,279 shares of common stock were available for future issuances under the Plan. The Plan is subject to an annual increase, subject to prior approval by the Company’s board of directors, equal to the lesser of (i) 432,442 shares, (ii) 4 % of the shares outstanding on the last day of the immediately preceding fiscal year and (iii) such smaller number of shares as determined by the board of directors. The Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, directors, and other persons, as determined by the Company’s board of directors. The Company’s stock options vest based on the terms in each award agreements and generally vest over four years and have a term of 10 years . The Company estimates forfeitures that it expects will occur and adjusts expense for actual forfeitures in the periods they occur. The Company measures employee and nonemployee stock-based awards at grant-date fair value and records compensation expense ratably over the vesting period of the award. The Company recorded stock-based compensation expense in the following expense categories of its accompanying consolidated statements of operations and comprehensive loss (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 ​ 2022 ​ 2021 Sales and marketing ​ $ 1,824 ​ $ 1,373 ​ $ 961 General and administrative ​ 2,478 ​ 2,029 ​ 1,542 Research and development ​ 730 ​ 587 ​ 1,158 Total stock‑based compensation ​ $ 5,032 ​ $ 3,989 ​ $ 3,661 ​ F-17 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) The following table summarizes stock option activity for the Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ average ​ ​ ​ ​ Weighted ​ remaining ​ ​ Number of ​ average exercise ​ contractual term ​ shares price per share (years) Outstanding at January 1, 2021 1,498,208 ​ $ 10.87 Granted 468,000 ​ 14.80 Exercised ( 77,154 ) ​ 7.08 Canceled/forfeited ( 182,645 ) ​ 13.08 Outstanding at December 31, 2021 1,706,409 ​ $ 11.88 ​ Granted 450,410 ​ 10.24 Exercised ( 3,563 ) ​ 5.51 Canceled/forfeited ( 81,408 ) ​ 13.13 Outstanding at December 31, 2022 ​ 2,071,848 ​ $ 11.49 ​ ​ Granted ​ 212,960 ​ ​ 10.50 ​ ​ Exercised ​ ( 25,428 ) ​ ​ 5.00 ​ ​ Canceled/forfeited ​ ( 96,927 ) ​ ​ 11.25 ​ ​ Outstanding at December 31, 2023 ​ 2,162,453 ​ $ 11.48 ​ 6.26 Vested and expected to vest at December 31, 2023 2,131,840 ​ $ 11.48 6.23 Exercisable at December 31, 2023 1,606,779 ​ $ 11.50 5.50 ​ Included in outstanding options at December 31, 2023, were 355,766 stock options 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). 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. The Company had the right, but not the obligation, to repurchase early exercised options without transferring any appreciation to the employee if the employee terminates employment before the end of the original vesting period. The repurchase price is the lesser of the original exercise price or the then fair value of the common stock. At December 31, 2022, all early exercised options had vested. The following table summarizes activity relating to early exercise of stock options: ​ ​ ​ ​ ​ ​ Number of ​ shares Unvested balance at January 1, 2021 182 Vested ( 153 ) Unvested balance at December 31, 2021 ​ 29 Vested ​ ( 29 ) 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, 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. F-18 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) Estimating Fair Value of Stock Options The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Certain of these inputs are subjective and generally require judgment to determine. Expected term – The expected term of stock options represents the weighted average period the stock options are expected to be outstanding. The Company uses the simplified method for estimating the expected term as provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average time to vesting and the contractual life of the options. Expected volatility – Due to the Company’s limited operating history and lack of sufficient company-specific historical or implied volatility, the expected volatility assumption was determined by examining the historical volatilities of a group of industry peers, including the Company, whose share prices are publicly available. Risk-free interest rate – The risk-free rate assumption is based on the U.S. Treasury instruments, the terms of which were consistent with the expected term of the Company’s stock options. Expected dividend – The Company has not paid and does not intend to pay dividends. The fair value of each option was estimated on the date of grant using the weighted average assumptions in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2023 ​ 2022 2021 ​ Expected dividend yield — ​ — ​ — ​ Expected volatility 74.3 % 69.6 % 63.9 % Risk‑free interest rate 3.99 % 2.55 % 0.99 % Expected term (in years) 6.15 ​ 6.20 ​ 6.15 ​ ​ Restricted Stock Units 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. ​ F-19 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) The following table summarizes restricted stock units for the Plan: ​ ​ ​ ​ ​ ​ Number of ​ shares Outstanding at January 1, 2021 ​ — Granted ​ 194,232 Vested ​ ( 12,000 ) Canceled/forfeited ​ ( 19,189 ) Outstanding at December 31, 2021 ​ 163,043 Granted ​ 197,950 Vested ​ ( 40,783 ) Canceled/forfeited ​ ( 8,219 ) Outstanding at December 31, 2022 ​ 311,991 Granted ​ 729,734 Vested ​ ( 101,559 ) Canceled/forfeited ​ ( 32,963 ) Outstanding at December 31, 2023 ​ 907,203 ​ 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 $ 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. The total unrecognized compensation expense at December 31, 2023 related to RSUs was $ 4.8 million, which is expected to be recognized in expense over a weighted-average period of approximately 2.9 years. ​ (9) Employee Benefit Plans 401(k) Defined Contribution Plan The Company sponsors a 401(k) defined-contribution plan covering all employees. Participants are permitted to contribute up to 100 % of their eligible annual pretax compensation up to an established federal limit on aggregate participant contributions. Discretionary contributions made by the Company, if any, are determined annually by the board of directors. Effective January 1, 2020, the Company matched 50 % of employees’ contributions up to 6 %, subject to a maximum annual amount. 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. 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. 2019 Employee Stock Purchase Plan In November 2019, the Company adopted the 2019 Employee Stock Purchase Plan (the “ESPP”). At December 31, 2023, 518,350 shares were available for future issuance under the ESPP. The ESPP is subject to an annual increase, subject to prior approval by the Company’s board of directors, equal to the least of (i) 107,887 shares of common stock, (ii) 1 % of the shares outstanding on the final day of the immediately preceding calendar year, and (iii) such smaller number of shares as determined by the board of directors. The ESPP provides the opportunity to purchase the Company’s common stock at a 15 % discount to the market price through payroll deductions. As of December 31, 2023, 2022 and 2021, 10,602 , 4,523 and 3,163 shares, respectively, have been issued under the ESPP. F-20 Table of Contents TELA Bio, Inc. Notes to Consolidated Financial Statements (continued) (10) Income Taxes The Company has incurred losses since inception. 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. Significant components of the Company’s deferred tax assets for federal income taxes consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Deferred tax assets ​ ​ ​ ​ ​ Net operating loss carryforwards ​ $ 61,427 ​ $ 55,091 Interest expense carryforward ​ ​ 523 ​ ​ — Research and development credits ​ 830 ​ 623 Lease liability ​ ​ 557 ​ ​ 387 Capitalized research and development expenses ​ ​ 4,845 ​ ​ 1,743 Accrued expenses and other ​ 3,535 ​ 2,682 Inventory reserve ​ 289 ​ 372 Gross deferred tax asset ​ 72,006 ​ 60,898 Deferred tax liabilities ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ( 436 ) ​ ( 435 ) Right of use asset ​ ​ ( 484 ) ​ ​ ( 302 ) Gross deferred tax liability ​ ( 920 ) ​ ​ ( 737 ) Net deferred tax asset before valuation allowance ​ ​ 71,086 ​ ​ 60,161 Valuation allowance ​ ( 71,086 ) ​ ( 60,161 ) Net deferred tax asset ​ $ — ​ $ — ​ The Company does no t have unrecognized tax benefits as of December 31, 2023 and 2022. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company’s net operating loss (“NOL”) carryforwards for federal and state income tax purposes consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 NOL carryforwards ​ ​ ​ ​ ​ ​ Federal ​ $ 239,417 ​ $ 212,314 State ​ 196,132 ​ 173,472 ​ The NOL carryforwards begin expiring in 2032 for federal purposes and in 2027 for state income tax purposes yet $ 160.0 million of the federal NOL carryforwards have no expiration. The Company recorded a valuation allowance on the deferred tax assets as of December 31, 2023 and 2022 because of the uncertainty of their realization. The valuation allowance increased by $ 10.9 million and $ 10.4 million for the years ended December 31, 2023 and 2022, respectively, mainly due to losses incurred. Utilization of the net operating losses and general business tax credits carryforwards may be subject to a substantial limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if changes in ownership of the company have occurred previously or occur in the future. 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 F-21 Table of Contents 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. 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. A reconciliation of income tax benefit at the statutory federal income tax rate and as reflected in the consolidated financial statements is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 2022 2021 ​ Rate reconciliation ​ ​ ​ ​ ​ Federal tax benefit at statutory rate ( 21.0 ) % ( 21.0 ) % ( 21.0 ) % State rate, net of federal benefit ( 3.1 ) ( 3.1 ) ​ ( 3.5 ) ​ Permanent differences 0.7 0.6 ​ 0.2 ​ Research and development ( 0.4 ) — ​ 0.4 ​ Change in valuation allowance 23.4 23.4 ​ 24.2 ​ Other 0.4 0.1 ​ ( 0.3 ) ​ Total tax provision — % — % — % ​ The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and the United Kingdom. Tax years 2020 and forward remain open for examination for federal and the Company’s more significant state tax jurisdictions. Carryforward attributes from prior years may be adjusted upon examination by taxing authorities if used in an open period. (11) Commitments and Contingencies Legal Proceedings 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 In August 2012, the Company entered into a License, Product Development, and Supply Umbrella Agreement (“Aroa Agreement”) with Aroa. The Aroa Agreement provides the Company a license to patent rights and other intellectual property related to Aroa’s products and technologies for use in certain indications and expires on the expiration of the last patent covering the products (currently March 9, 2031). The Company has the right to extend the term of the agreement by an additional 10 years following the expiration of the last patent covering the products on commercially reasonable terms to be negotiated by the parties. This agreement initially limited the Company’s license rights to the U.S. but was subsequently amended in March 2013 to include certain countries in Europe including the United Kingdom and members of the European Union and certain former Union of Soviet Socialist Republic satellite nations. The Aroa Agreement required payments aggregating up to $ 4.0 million upon the achievement of U.S. and European cumulative product sales targets. 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. F-22 Table of Contents 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, 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. Under the amended agreement, the criteria for a supply failure was modified to mean a failure by Aroa to timely supply, during any consecutive 60-day period, at least 75 % of the products ordered by the Company under binding purchase orders. During the period that the Company steps in and assumes manufacturing responsibility, it shall not be required to purchase product from or pay transfer prices to Aroa, the annual minimums shall be proportionately reduced to reflect the lack of supply responsibility by Aroa and the Company shall pay a royalty of 6 % of net sales in lieu of 27 % of net sales of the licensed products. 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, 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. Leases 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 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. ​ F-23 Table of Contents 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 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 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. ​ The following table reconciles the undiscounted future minimum lease payments (displayed in aggregate by year) under non-cancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the consolidated balance sheets as of December 31, 2023 (in thousands): ​ ​ ​ ​ 2024 $ 601 2025 580 2026 ​ 557 2027 ​ 570 2028 ​ 583 Thereafter ​ 845 Total undiscounted future minimum lease payments $ 3,736 Less imputed interest ​ ( 1,486 ) Total operating lease liabilities $ 2,250 ​ 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) Subsequent Event ​ 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 . ​ ​ ​ F-24 Table of Contents Exhibits. ​ The following exhibits are being filed herewith: ​ EXHIBIT INDEX ​ Exhibit No. Exhibit ​ ​ ​ 3.1 ​ 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). 3.2 ​ 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). 4.1 ​ 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. 333-234217), dated November 7, 2019). 4.2 ​ Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to exhibit 4.2 to the Company’s Report on Form 10-K, filed on March 30, 2020) . 10.1 ​ Form of Indemnification Agreement by and between the Company and its individual directors and officers (incorporated by reference to exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019). 10.2 ​ TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.3 ​ Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.4 ​ Second Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.5 ​ Third Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.6 ​ Fourth Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.6 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.7 ​ Fifth Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.8 ​ Form of Incentive Stock Option Agreement pursuant to the 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.8 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.9 ​ Form of Nonstatutory Stock Option Agreement pursuant to 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) 10.10 ​ TELA Bio, Inc. Amended and Restated 2019 Equity Incentive Plan (incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 8, 2020) . 10.11 ​ Form of TELA Bio, Inc. Amended and Restated 2019 Equity Incentive Plan Stock Option Grant Notice and Stock Option Agreement (incorporated by reference to exhibit 10.1 to the Company’s Report on Form 10-Q, filed on May 11, 2022). 10.12 ​ Form of TELA Bio, Inc. Amended and Restated 2019 Equity Incentive Plan Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (time-based vesting) (incorporated by reference to exhibit 10.2 to the Company’s Report on Form 10-Q, filed on May 11, 2022). 10.13 ​ 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) (incorporated by reference to exhibit 10.13 to the Company’s Report on Form 10-K, filed on March 23, 2023). 10.14 ​ TELA Bio, Inc. 2019 Employee Stock Purchase Plan (incorporated by reference to exhibit 10.12 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019). 10.15 ​ Amendment No. 1 to TELA Bio, Inc. 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) . 10.16 ​ Form of TELA Bio, Inc. 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 ). 10.17 ​ Form of TELA Bio, Inc. 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 ). 96 Table of Contents 10.18 ​ TELA Bio, Inc. Amended and Restated Non-Employee Director Compensation Policy (filed herewith). 10.19 ​ Amended and Restated Employment Agreement, dated October 25, 2019, by and between the Company and Antony Koblish (incorporated by reference to exhibit 10.16 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019). 10.20 ​ Employment Agreement, dated January 17, 2020, by and between the Company and Peter Murphy (incorporated by reference to exhibit 10.26 to the Company’s Report on Form 10-K, filed on March 30, 2020). 10.21 ​ Employment Agreement, dated August 27, 2021, by and between the Company and Roberto Cuca (incorporated by reference to exhibit 10.1 to the Company’s Report on Form 8-K, filed on September 27, 2021) . 10.22 ​ 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). 10.23 ​ 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). 10.24 ​ 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 ). 10.25 ​ 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). 10.26* ​ Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated July 16, 2015, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.23 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) . 10.27* ​ Amendment to Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated November 26, 2015, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.24 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) . 10.28* ​ Amendment to Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated January 3, 2019, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.25 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) . 10.29* ​ Addendum to the Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated August 27, 2019, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.22 on the Company’s Report on Form 10-K filed on March 30, 2020). 10.30* ​ Addendum to the Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated February 15, 2020, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.2 on the Company’s Report on Form 10-Q filed on May 15, 2020). 10.31* ​ 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 ). 10.32 ​ 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. 333-234217), dated November 7, 2019) . 10.33 ​ First Amendment to Lease between the Company and Liberty Property Partnership, dated June 19, 2014 (incorporated by reference to exhibit 10.27 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019) . 10.34 ​ Second Amendment to Lease between the Company and WPT Land 2 LP (as successor in interest to Liberty Property Limited Partnership), dated January 17, 2018 (incorporated by reference to exhibit 10.28 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019). 10.35 ​ 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 ) . 10.36 ​ 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). 10.37 ​ 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) . 21.1 ​ Subsidiaries of the Registrant (filed herewith). 97 Table of Contents 23.1 ​ Consent of KPMG LLP (filed herewith) . 31.1 ​ ​ Certification of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.2 ​ ​ Certification of Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1 ​ ​ Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.2 ​ ​ Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 97.1 ​ TELA Bio, Inc. Compensation Recovery Policy (filed herewith). 101 INS ​ Inline XBRL Instance Document (filed herewith). 101 SCH ​ Inline XBRL Taxonomy Extension Schema Document (filed herewith). 101 CAL ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith). 101 DEF ​ Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith). 101 LAB ​ Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith). 101 PRE ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith). 104 ​ Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). ​ ​ ​ * ​ Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit. ​ ​ ​ 98 Table of Contents ​ SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. ​ ​ ​ ​ TELA BIO, INC. ​ ​ ​ ​ By: /s/ ANTONY KOBLISH ​ ​ Name: Antony Koblish ​ ​ Title: President, Chief Executive Officer and Director Date: March 22, 2024 ​ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date ​ ​ ​ ​ ​ /s/ ANTONY KOBLISH ​ President, Chief Executive Officer and Director (Principal Executive Officer) ​ March 22, 2024 Antony Koblish ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ ROBERTO CUCA ​ Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) ​ March 22, 2024 Roberto Cuca ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ MEGAN SMEYKAL ​ Chief Accounting Officer and Controller (Principal Accounting Officer) ​ March 22, 2024 Megan Smeykal ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ DOUG EVANS ​ Chairman, Board of Directors ​ March 22, 2024 Doug Evans ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ KURT AZARBARZIN ​ Director ​ March 22, 2024 Kurt Azarbarzin ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ VINCE BURGESS ​ Director ​ March 22, 2024 Vince Burgess ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ LISA COLLERAN ​ Director ​ March 22, 2024 Lisa Colleran ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ FEDERICA O’BRIEN ​ Director ​ March 22, 2024 Federica O’Brien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 99