PART I FINANCIAL INFORMATION This section presents the company's financial statements, management's discussion, market risk disclosures, and controls and procedures Financial Statements This section presents TELA Bio, Inc.'s unaudited interim consolidated financial statements for the quarter ended March 31, 2020, including balance sheets, statements of operations, and cash flows Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2020 and December 31, 2019 | Balance Sheet Highlights (in thousands) | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $41,411 | $45,302 | | Total current assets | $55,313 | $64,334 | | Total assets | $58,841 | $67,922 | | Total current liabilities | $4,232 | $6,713 | | Long-term debt with related party | $30,381 | $30,243 | | Total liabilities | $34,614 | $36,960 | | Total stockholders' equity | $24,227 | $30,962 | Consolidated Statements of Operations and Comprehensive Loss Details the company's revenues, expenses, and net loss for the three months ended March 31, 2020 and 2019 | Statement of Operations (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Revenue | $3,726 | $3,306 | | Gross profit | $2,200 | $1,798 | | Sales and marketing | $5,269 | $3,995 | | General and administrative | $2,518 | $1,324 | | Research and development | $912 | $1,659 | | Loss from operations | ($6,499) | ($5,180) | | Net loss | ($7,220) | ($5,966) | | Net loss per common share | ($0.63) | ($27.00) | Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2020 and 2019 | Cash Flows (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,307) | ($7,777) | | Net cash provided by (used in) investing activities | $3,932 | ($548) | | Net cash (used in) provided by financing activities | ($514) | $484 | | Net decrease in cash and cash equivalents | ($3,891) | ($7,846) | Notes to Unaudited Interim Consolidated Financial Statements Provides detailed explanations and additional information supporting the interim consolidated financial statements - The company has incurred recurring losses and negative cash flows since inception, with an accumulated deficit of $175.1 million as of March 31, 202023 - In November 2019, the company closed its IPO, receiving net proceeds of $50.6 million24 - The full extent of the COVID-19 pandemic's impact on the company's business is highly uncertain and may affect future estimates in financial statements30 | Revenue by Product (in thousands) | Three months ended March 31, 2020 | | :--- | :--- | | OviTex | $3,239 | | OviTex PRS | $487 | | Total revenue | $3,726 | - The company has a $30.0 million term loan with OrbiMed, a related party, which matures on November 16, 2023, and bears interest at 7.75% plus the greater of one-month LIBOR or 2.0%535456 - As a subsequent event, in April 2020, the company implemented temporary base salary reductions for all employees, including senior executives, in response to the COVID-19 pandemic73 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2020 financial performance, noting a 13% revenue increase and widened net loss, while addressing COVID-19 impacts and liquidity - The company is a commercial-stage medical technology firm focused on soft tissue reconstruction with its OviTex and OviTex PRS product lines, which are sold to over 265 hospital accounts7678 - In response to COVID-19, the company initiated cost-containment measures in April, including salary reductions for senior executives (30-35%) and other employees (5-20%), a hiring freeze, and suspension of 401(k) matching contributions98 - The COVID-19 pandemic led to the deferral of elective surgeries, which began to impact revenue in the second half of March 2020, with a significantly greater negative financial impact expected in the second quarter of 202099104105 | Financial Summary (in thousands) | Q1 2020 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,726 | $3,306 | $420 | 13% | | Gross profit | $2,200 | $1,798 | $402 | 22% | | Gross margin | 59% | 54% | - | - | | Total operating expenses | $8,699 | $6,978 | $1,721 | 25% | | Loss from operations | ($6,499) | ($5,180) | ($1,319) | 25% | | Net loss | ($7,220) | ($5,966) | ($1,254) | 21% | - As of March 31, 2020, the company had $46.7 million in cash, cash equivalents, and short-term investments and believes these resources are sufficient to fund operations for at least the next 12 months115118 Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, including credit risk, interest rate risk from its floating-rate debt, and inflation - The company's cash is held in amounts exceeding the $250,000 FDIC insurance limit, but at institutions believed to have little or no credit risk134 - The OrbiMed Credit Facility has a floating interest rate tied to LIBOR with a 2.0% floor; as of March 31, 2020, LIBOR was below this floor, so a 1.0% increase in interest rates would not increase annual interest payments136 - The company does not believe inflation has had a material impact on its financial condition or results of operations to date137 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report139 - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls140 PART II OTHER INFORMATION This section covers legal proceedings, updated risk factors, equity sales, and other required disclosures Legal Proceedings The company reports that it is not currently subject to any material legal proceedings - The company is not currently a party to any material legal proceedings142 Risk Factors This section updates the company's risk factors, primarily focusing on the significant and uncertain impacts of the COVID-19 pandemic on sales, supply chain, and capital access - The primary update to risk factors is the negative impact of the COVID-19 pandemic on the company's commercialization strategy and sales143144 - The deferral of elective surgeries and limited hospital access for sales professionals due to COVID-19 have negatively impacted sales efforts and market penetration for OviTex and OviTex PRS products145146 - The company relies on a single supplier, Aroa, in New Zealand, creating a supply chain risk if their operations are disrupted by COVID-19147 - The full extent of the COVID-19 pandemic's impact on the business is highly uncertain and cannot be predicted with reasonable accuracy, depending on future developments150 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered equity sales and confirms the use of $50.6 million net IPO proceeds for commercial expansion and product development as intended - The company's November 2019 IPO generated net proceeds of approximately $50.6 million after deducting underwriting discounts and offering costs153 - The planned use of IPO proceeds remains unchanged and is allocated to hiring sales and marketing personnel, funding product development, R&D activities, and potential strategic investments154 Defaults Upon Senior Securities The company reports that there were no defaults upon senior securities during the period - None157 Mine Safety Disclosures This item is not applicable to the company - Not applicable159 Other Information This item is not applicable - Not applicable160 Exhibits This section lists the exhibits filed with the Form 10-Q, including employment agreements, supply addendums, and CEO/CFO certifications - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act162
TELA Bio(TELA) - 2020 Q1 - Quarterly Report