TELA Bio(TELA) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section defines forward-looking statements, outlines factors influencing actual results, and directs readers to risk disclosures - Forward-looking statements discuss the future of the business, operations, financial performance, and growth strategies, rather than historical facts[8][9] - Key factors that could cause actual results to differ from forward-looking statements include estimates for future operations, market acceptance of products, new product introductions, ability to expand sales, performance of contract manufacturers, supply chain integrity, competition, reimbursement levels, product enhancements, regulatory approvals, pricing pressures, healthcare reform, and macroeconomic factors[10][13] - Readers are advised to consult the 'Risk Factors' section in the Annual Report and subsequent Quarterly Reports for a comprehensive discussion of these factors[12][13] PART I FINANCIAL INFORMATION This section encompasses the unaudited interim consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited interim consolidated financial statements, including the balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with their accompanying notes. It provides a snapshot of the company's financial position, performance, and cash movements for the periods ended June 30, 2025, and December 31, 2024 (balance sheet), and June 30, 2025, and 2024 (income statement, equity, cash flow) Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :-------------- | :---------------- | :----- | | Cash and cash equivalents | $34,977 | $52,670 | -$17,693 | | Total current assets | $60,745 | $78,071 | -$17,326 | | Total assets | $67,537 | $86,570 | -$19,033 | | Total current liabilities | $19,061 | $15,598 | +$3,463 | | Long-term debt | $38,051 | $41,124 | -$3,073 | | Total liabilities | $58,353 | $58,112 | +$241 | | Total stockholders' equity | $9,184 | $28,458 | -$19,274 | | Accumulated deficit | $(379,917) | $(358,730) | -$21,187 | Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | $20,197 | $16,091 | $38,717 | $32,694 | | Gross profit | $14,105 | $11,073 | $26,617 | $22,409 | | Loss from operations | $(9,081) | $(11,570) | $(19,553) | $(16,396) | | Net loss | $(9,923) | $(12,600) | $(21,187) | $(18,261) | | Net loss per common share, basic and diluted | $(0.22) | $(0.51) | $(0.47) | $(0.74) | | Weighted average common shares outstanding | 45,365,325 | 24,663,234 | 45,316,444 | 24,621,310 | Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(17,630) | $(25,081) | | Net cash provided by investing activities | $342 | $4,763 | | Net cash (used in) provided by financing activities | $(119) | $51 | | Net decrease in cash and cash equivalents and restricted cash | $(17,693) | $(20,233) | | Cash and cash equivalents and restricted cash, end of period | $35,242 | $26,761 | Consolidated Balance Sheets | Assets | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $34,977 | $52,670 | | Accounts receivable, net | $11,236 | $10,098 | | Inventory | $11,371 | $12,781 | | Prepaid expenses and other current assets | $3,161 | $2,522 | | Total current assets | $60,745 | $78,071 | | Property and equipment, net | $2,167 | $2,341 | | Intangible assets, net | $1,549 | $1,739 | | Right-of-use assets | $1,616 | $1,738 | | Other long-term assets | $1,131 | $2,276 | | Deferred tax asset, net | $64 | $140 | | Restricted cash | $265 | $265 | | Total assets | $67,537 | $86,570 | | Liabilities and stockholders' equity | | | | Accounts payable | $1,741 | $2,147 | | Accrued expenses and other current liabilities | $13,987 | $13,451 | | Current portion of long-term debt | $3,333 | — | | Total current liabilities | $19,061 | $15,598 | | Long-term debt | $38,051 | $41,124 | | Other long-term liabilities | $1,241 | $1,390 | | Total liabilities | $58,353 | $58,112 | | Common stock | $40 | $39 | | Additional paid-in capital | $388,968 | $387,059 | | Accumulated other comprehensive income | $93 | $90 | | Accumulated deficit | $(379,917) | $(358,730) | | Total stockholders' equity | $9,184 | $28,458 | | Total liabilities and stockholders' equity | $67,537 | $86,570 | Consolidated Statements of Operations and Comprehensive Loss | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | $20,197 | $16,091 | $38,717 | $32,694 | | Cost of revenue (excluding amortization) | $5,997 | $4,923 | $11,910 | $10,095 | | Amortization of intangible assets | $95 | $95 | $190 | $190 | | Gross profit | $14,105 | $11,073 | $26,617 | $22,409 | | Sales and marketing | $16,857 | $16,699 | $33,465 | $34,219 | | General and administrative | $4,126 | $3,621 | $7,962 | $7,450 | | Research and development | $2,203 | $2,323 | $4,743 | $4,716 | | Total operating expenses | $23,186 | $22,643 | $46,170 | $46,385 | | Gain on sale of product line | — | — | — | $7,580 | | Loss from operations | $(9,081) | $(11,570) | $(19,553) | $(16,396) | | Interest expense | $(1,188) | $(1,331) | $(2,407) | $(2,663) | | Other income | $379 | $301 | $858 | $798 | | Total other expense, net | $(809) | $(1,030) | $(1,549) | $(1,865) | | Loss before income tax expense | $(9,890) | $(12,600) | $(21,102) | $(18,261) | | Income tax expense | $(33) | — | $(85) | — | | Net loss | $(9,923) | $(12,600) | $(21,187) | $(18,261) | | Net loss per common share, basic and diluted | $(0.22) | $(0.51) | $(0.47) | $(0.74) | | Weighted average common shares outstanding | 45,365,325 | 24,663,234 | 45,316,444 | 24,621,310 | | Comprehensive loss | $(9,921) | $(12,599) | $(21,184) | $(18,254) | Consolidated Statements of Stockholders' Equity | Metric | Balance at Jan 1, 2025 | Net Loss | Stock-based Comp. Expense | Other Changes | Balance at Jun 30, 2025 | | :-------------------------------- | :--------------------- | :--------- | :------------------------ | :------------ | :---------------------- | | Common stock (Amount) | $39 | — | — | $1 | $40 | | Additional paid-in capital | $387,059 | — | $2,029 | $(180) | $388,968 | | Accumulated other comprehensive income | $90 | — | — | $3 | $93 | | Accumulated deficit | $(358,730) | $(21,187) | — | — | $(379,917) | | Total Stockholders' Equity | $28,458 | $(21,187) | $2,029 | $(176) | $9,184 | - Total stockholders' equity decreased from $28.5 million at January 1, 2025, to $9.2 million at June 30, 2025, primarily due to a net loss of $21.2 million[20] Consolidated Statements of Cash Flows | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(17,630) | $(25,081) | | Net cash provided by investing activities | $342 | $4,763 | | Net cash (used in) provided by financing activities | $(119) | $51 | | Effect of exchange rate on cash and cash equivalents | $(286) | $34 | | Net decrease in cash and cash equivalents and restricted cash | $(17,693) | $(20,233) | | Cash and cash equivalents and restricted cash, beginning of period | $52,935 | $46,994 | | Cash and cash equivalents and restricted cash, end of period | $35,242 | $26,761 | - Net cash used in operating activities decreased by $7.451 million, from $(25.1) million in H1 2024 to $(17.6) million in H1 2025, primarily due to a lower net loss when excluding the gain on sale of product line in 2024[26][164] - Cash provided by investing activities significantly decreased from $4.8 million in H1 2024 to $0.3 million in H1 2025, mainly due to lower proceeds from the sale of the NIVIS product line in 2025[26][165] Notes to Unaudited Interim Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the interim consolidated financial statements, covering accounting policies, risks, and specific financial line items - Interim financial statements are prepared in accordance with GAAP for interim information and SEC Rule 10-01 of Regulation S-X, allowing for reduced disclosures[33] - The Company operates as one reportable segment, focusing on innovative soft-tissue reconstruction solutions[37] Background (Note 1) This note provides an overview of TELA Bio, Inc. as a commercial-stage medical technology company specializing in soft-tissue reconstruction solutions - TELA Bio, Inc. is a commercial-stage medical technology company specializing in innovative soft-tissue reconstruction solutions, primarily with its OviTex and OviTex PRS product portfolios[29] Risks and Liquidity (Note 2) This note details the company's accumulated deficit, anticipated losses, and various operational risks including macroeconomic conditions and supply chain constraints - The Company has an accumulated deficit of $379.9 million as of June 30, 2025, and anticipates incurring additional losses[30] - Operations are subject to various risks, including product development uncertainty, macroeconomic conditions (e.g., inflation, geopolitical conflicts), cybersecurity events, supply chain constraints, and comprehensive government regulations[31] Summary of Significant Accounting Policies (Note 3) This note outlines the key accounting principles applied in preparing the interim financial statements, including revenue recognition and segment reporting Revenue Recognition This sub-section details the company's policy for recognizing revenue, primarily upon product shipment or surgical use, and provides a breakdown of revenue by product - Revenue is recognized when the customer obtains control of the promised good, which occurs either upon product shipment or when the product is used in a surgical procedure for consigned inventory[47] Product Revenue (in thousands) | Product | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | OviTex | $12,487 | $11,124 | $24,596 | $21,659 | | OviTex PRS | $7,333 | $4,796 | $13,377 | $10,741 | | Other | $377 | $171 | $744 | $294 | | Total revenue | $20,197 | $16,091 | $38,717 | $32,694 | - Sales outside of the U.S. were $3.0 million and $2.4 million for the three months ended June 30, 2025 and 2024, respectively, and $5.6 million and $4.7 million for the six months ended June 30, 2025 and 2024, respectively[50] Net Loss per Common Share This sub-section explains the calculation of basic and diluted net loss per common share, noting that potentially dilutive securities are antidilutive during periods of net loss - Basic and diluted net loss per common share are identical in periods of net loss, as potentially dilutive securities are considered antidilutive[56] Antidilutive Securities (in shares) | Security | 2025 | 2024 | | :-------------------------- | :--------- | :--------- | | Stock options | 2,817,979 | 2,239,140 | | Unvested restricted stock units | 1,359,116 | 991,391 | | Common stock warrants | 88,556 | 88,556 | | Total | 4,265,651 | 3,319,087 | - Pre-funded warrants to purchase 5,800,000 shares are included in the weighted-average shares outstanding as common stock equivalents due to their nominal exercise price[58][61] Recently Issued Accounting Pronouncements This sub-section summarizes new FASB Accounting Standards Updates that will impact future financial reporting, including expanded disclosures for segments, income tax, and income statement expenses - FASB issued ASU 2023-07, effective for annual periods beginning after December 15, 2023, which expands public entities' segment disclosures[62] - FASB issued ASU 2023-09, effective for annual periods beginning after December 15, 2024, requiring additional income tax rate reconciliation and payment disclosures[63] - FASB issued ASU 2024-03, effective for fiscal years beginning after December 15, 2026, requiring additional disclosure of specific types of income statement expenses[64] Accrued Expenses and Other Current Liabilities (Note 4) This note provides a detailed breakdown of the company's accrued expenses and other current liabilities, including compensation, professional fees, and amounts due to manufacturers Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Compensation and related benefits | $6,439 | $7,343 | | Third-party and professional fees | $3,191 | $2,493 | | Amounts due to contract manufacturer | $2,550 | $2,095 | | Current portion of operating lease liabilities | $518 | $545 | | Research and development expenses | $42 | $20 | | Other | $1,247 | $955 | | Total accrued expenses and other current liabilities | $13,987 | $13,451 | Long-term Debt (Note 5) This note details the company's long-term debt, including the MidCap term loan, its maturity, interest rate, and recent payment extension Long-term Debt (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | MidCap term loan | $40,000 | $40,000 | | Exit fee | $2,000 | $2,000 | | Unamortized exit fee and issuance costs | $(616) | $(876) | | Total debt | $41,384 | $41,124 | | Less current portion | $(3,333) | — | | Long-term debt | $38,051 | $41,124 | - The Company has a $40.0 million MidCap term loan maturing on May 1, 2027, with an interest rate of 6.25% plus the greater of one-month Term SOFR or 1.0%[68][72] - In May 2025, the Company elected to extend monthly interest payments by an additional 12 months, followed by 12 months of straight-line amortization, with the entire principal payment due at maturity[72] Stockholders' Equity (Note 6) This note outlines the components of stockholders' equity, including common stock, additional paid-in capital, and details regarding warrants and offering programs - The Company has an at-the-market offering program for up to $50.0 million in common stock, but no sales were made under it during the six months ended June 30, 2025 or 2024[76] Warrants Outstanding | Type | Outstanding | Exercise Price | Expiration Dates | | :-------------------------- | :---------- | :------------- | :--------------- | | Common stock warrants | 8,379 | $28.65 | 2028 | | Common stock warrants | 80,177 | $28.65 | 2027 | | Pre-funded common stock warrants | 5,800,000 | $0.0001 | NA | | Total | 5,888,556 | | | Sale of Product Line (Note 7) This note describes the sale of the NIVIS Fibrillar Collagen Pack Device assets, including the upfront payment, future revenue-sharing, and the recognized gain - In March 2024, the Company sold its NIVIS Fibrillar Collagen Pack Device assets to MiMedx Group, Inc. for an initial $5.0 million upfront payment and future revenue-sharing payments ranging from $3.0 million to $7.0 million[78] - A gain of $7.6 million on the sale was recognized in the consolidated statement of operations and comprehensive loss during the three months ended March 31, 2024[79] - As of June 30, 2025, $0.6 million of revenue-share payments had been collected, with $1.3 million recorded as a current receivable and $1.1 million as a long-term receivable[79] Stock-Based Compensation (Note 8) This note details the company's stock-based compensation plans, including stock options and restricted stock units, and the associated expense recognition - The Company's board approved an amendment to the 2019 Equity Incentive Plan on April 3, 2025, increasing authorized shares by 3,500,000 and eliminating the 'evergreen' provision[81] - Total stock-based compensation expense for the six months ended June 30, 2025, was $2.029 million, down from $2.192 million in the prior year[82] - Unrecognized compensation expense for unvested stock options was $2.4 million (expected over 2.9 years) and for RSUs was $4.2 million (expected over 2.7 years) as of June 30, 2025[87][89] Stock Options This sub-section provides a summary of stock option activity, including grants, cancellations, and outstanding options, along with their weighted average exercise prices Stock Option Activity | Activity | Number of Shares | Weighted Average Exercise Price per Share | | :-------------------------- | :--------------- | :-------------------------------- | | Outstanding at January 1, 2025 | 2,119,183 | $10.92 | | Granted | 734,100 | $2.19 | | Canceled/forfeited | (35,304) | $9.78 | | Outstanding at June 30, 2025 | 2,817,979 | $8.66 | | Exercisable at June 30, 2025 | 1,813,952 | $11.25 | - The weighted average grant-date fair value per share of options granted was $1.48 during the six months ended June 30, 2025[85] Restricted Stock Units This sub-section summarizes restricted stock unit activity, including grants, vesting, and outstanding units, noting performance-based RSUs Restricted Stock Unit Activity | Activity | Number of shares | | :-------------------------- | :--------------- | | Outstanding at January 1, 2025 | 732,288 | | Granted | 677,050 | | Vested | (231,011) | | Canceled/forfeited | (35,711) | | Outstanding at June 30, 2025 | 1,142,616 | - Performance-based RSUs (216,500 outstanding at June 30, 2025) are subject to continued service and achievement of fiscal year 2026 performance milestones, with no expense recognized yet[88][89] - The weighted average grant-date fair value per RSU granted was $2.39 during the six months ended June 30, 2025[89] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's business, its product portfolio, market opportunities, and recent developments. It also discusses the impact of macroeconomic conditions on operations and details the components of the company's results of operations, including revenue, cost of revenue, operating expenses, and other income/expenses. The section concludes with a comparison of financial results for the three and six months ended June 30, 2025 and 2024, and an analysis of liquidity and capital resources - TELA Bio is a commercial-stage medical technology company focused on soft-tissue reconstruction, with OviTex for hernia repair and OviTex PRS for plastic and reconstructive surgery[91][93][98] - The company has an accumulated deficit of $379.9 million as of June 30, 2025, and expects to incur losses for the foreseeable future[108] - Macroeconomic conditions, including general economic uncertainty, cybersecurity events, supply chain disruptions, and financial strain on hospitals, continue to impact the business[109][111][112][113] Overview This section provides a business overview, detailing TELA Bio's focus on soft-tissue reconstruction, its product lines, market opportunities, and recent financial performance highlights - TELA Bio is a commercial-stage medical technology company focused on soft-tissue reconstruction, with OviTex for hernia repair and OviTex PRS for plastic and reconstructive surgery[91][93][98] - OviTex products address hernia repair and abdominal wall reconstruction, with an estimated annual U.S. total addressable market of approximately $1.8 billion[93][94] - OviTex PRS products address plastic and reconstructive surgery, with an estimated annual U.S. current addressable market of approximately $800 million[98][99] - Recent product launches include OviTex IHR (inguinal hernia repair) in April 2024 (U.S.) and June 2025 (Europe), and larger sizes of OviTex PRS in March 2025[95][98] - The company sold its NIVIS product line distribution rights in March 2024 for an initial $5.0 million and future revenue-sharing payments[103] - Revenue increased by 26% to $20.2 million for Q2 2025 (from $16.1 million in Q2 2024) and by 18% to $38.7 million for H1 2025 (from $32.7 million in H1 2024)[107] - Net loss decreased by 21% to $9.9 million for Q2 2025 (from $12.6 million in Q2 2024) but increased by 16% to $21.2 million for H1 2025 (from $18.3 million in H1 2024), with H1 2024 including a $7.6 million gain on product line sale[107] Business Update Regarding Macroeconomic Conditions This section discusses the impact of general economic uncertainty, tariffs, cybersecurity events, and hospital financial strain on the company's operations and financial outlook - General economic uncertainty, including potential recession, increasing interest rates, and geopolitical issues, has contributed to stock price volatility and could impact capital access[109] - A 15% U.S. tariff on imports from New Zealand, where products are manufactured, is shared equally with Aroa, potentially leading to price increases and impacting demand[110] - Cybersecurity events and supply chain disruptions for critical surgical supplies have adversely impacted procedural volumes at customer accounts[111][112] - Financial strain on hospital customers may adversely affect demand, reimbursement rates, and product adoption[113] Components of Our Results of Operations This section explains the key drivers and components of the company's financial results, including revenue recognition, cost of revenue, gross margin, and operating expenses - Revenue growth is driven by an expanding customer base and deeper penetration, but macroeconomic pressures may impair the ability to sustain historical growth rates[114] - Cost of revenue primarily includes licensed product costs, inventory adjustments, royalties, and shipping, with product purchases from Aroa at 27% of net sales (or fixed transfer cost for OviTex IHR)[115][104] - Gross margin is influenced by sales volume, royalties, and inventory excess and obsolescence costs[117] - Sales and marketing expenses are expected to decrease as a percentage of revenue due to operational leverage and efficiencies[119] - Research and development expenses are expensed as incurred and are expected to vary based on the level and timing of new product development and clinical trial initiatives[122][123] - A $7.6 million gain on the sale of the NIVIS product line was recognized in March 2024[124] Results of Operations This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2025 and 2024, across key income statement metrics Financial Performance Comparison | Metric | Q2 2025 vs Q2 2024 | H1 2025 vs H1 2024 | | :-------------------------------- | :----------------- | :----------------- | | Revenue | +26% | +18% | | Cost of revenue (excl. amortization) | +22% | +18% | | Gross profit | +27% | +19% | | Gross margin | +1 pp (70% vs 69%) | 0 pp (69% vs 69%) | | Sales and marketing expenses | +1% | -2% | | General and administrative expenses | +14% | +7% | | Research and development expenses | -5% | +1% | | Loss from operations | -22% | +19% | | Net loss | -21% | +16% | Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the second quarter of 2025 versus 2024, highlighting changes in revenue, net loss, and gross margin - Revenue increased by $4.1 million (26%) to $20.2 million, driven by new customers, international sales growth, and new larger-sized PRS configurations, partially offset by a decrease in average selling prices for hernia products due to product mix[128] - OviTex unit sales increased by 17% (5,178 units vs. 4,410 units), and OviTex PRS unit sales increased by 40% (1,362 units vs. 971 units)[128] - Net loss decreased by $2.7 million (21%) to $9.9 million, primarily due to increased revenue and gross profit, and lower interest expense[127][131][137] - Gross margin improved to 70% from 69%, mainly due to a lower charge for excess and obsolete inventory as a percentage of revenue[133] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the first half of 2025 versus 2024, focusing on revenue growth, net loss, and expense trends - Revenue increased by $6.0 million (18%) to $38.7 million, driven by new customers, international sales, and new larger-sized PRS configurations, with OviTex unit sales up 23% and OviTex PRS unit sales up 16%[143] - Net loss increased by $2.9 million (16%) to $21.2 million, primarily because the prior year period included a $7.6 million gain on the sale of the NIVIS product line[141][152] - Sales and marketing expenses decreased by $0.8 million (2%) due to lower compensation costs and consulting/travel expenses, partially offset by higher commissions and post-market study spending[149] - Interest expense decreased by $0.3 million (10%) due to a decrease in the variable component of the interest rate[153] Liquidity and Capital Resources This section analyzes the company's cash position, working capital, and capital-raising activities, assessing its ability to meet short-term and long-term financial obligations - As of June 30, 2025, the company had $35.0 million in cash and cash equivalents, $41.7 million in working capital, and an accumulated deficit of $379.9 million[156] - In October 2024, a public offering of common stock and pre-funded warrants generated net proceeds of $42.9 million[157] - The company believes existing cash resources are sufficient for at least the next 12 months but may seek additional financing through equity, debt, or a new credit facility[160] Cash Flows This section details the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 - Net cash used in operating activities was $17.6 million for H1 2025, a decrease from $25.1 million in H1 2024, primarily due to a lower net loss (excluding the 2024 gain on sale)[161][162][164] - Non-cash items in H1 2025 included $2.0 million in stock-based compensation and $0.9 million in inventory excess/obsolescence charges[162][163] Investing Activities This section describes the cash flows generated or used in investing activities, primarily influenced by the sale of the NIVIS product line - Cash provided by investing activities decreased significantly from $4.8 million in H1 2024 to $0.3 million in H1 2025, mainly due to lower proceeds from the NIVIS product line sale[165] Financing Activities This section outlines the cash flows from financing activities, including stock-based compensation related withholding taxes and employee stock purchase plan proceeds - Cash used in financing activities was $0.1 million for H1 2025, primarily for withholding taxes related to stock-based compensation, partially offset by proceeds from the employee stock purchase plan[166] Indebtedness This section details the company's outstanding debt, including the MidCap Credit Agreement terms, interest rates, and associated covenants - The company has $40.0 million outstanding under the MidCap Credit Agreement, which matures on May 1, 2027[168][171] - The loan bears interest at 6.25% plus the greater of one-month Term SOFR or 1.0%, and in May 2025, monthly interest payments were extended by 12 months, followed by 12 months of straight-line amortization[171][173] - The agreement includes covenants limiting additional indebtedness, corporate changes, investments, acquisitions, dispositions, and dividend payments, and requires maintaining minimum net revenue levels[169][171] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily related to interest rate fluctuations and inflation. It also addresses credit risk associated with cash equivalents and accounts receivable, and notes minimal exposure to foreign currency fluctuations - The company is exposed to interest rate risk due to its floating-rate MidCap Credit Facility; a 1% increase in interest rates would increase interest expense by $0.2 million for the six months ended June 30, 2025[180] - Credit risk for cash equivalents is limited by investments in highly-rated money market funds, and for accounts receivable, by performing credit evaluations without requiring collateral[179] - While inflation has not materially impacted financial results to date, a high rate in the future could adversely affect gross margin or operating expenses if selling prices do not keep pace with cost increases[181] - The company has no material exposure to foreign currency fluctuations and does not engage in any hedging activities[182] Item 4. Controls and Procedures This section confirms that management, with the participation of the CEO and COO/CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025. It also states that there were no material changes in internal control over financial reporting during the period - Management concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[184] - No material changes in internal control over financial reporting occurred during the period covered by the report[185] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity security sales, and other disclosures Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - The Company is not currently involved in any material legal proceedings[187] Item 1A. Risk Factors This section refers readers to the risk factors described in the company's Annual Report, noting no material changes since the previous Quarterly Report for the period ended March 31, 2025 - No material changes to risk factors have occurred since the Annual Report and the Quarterly Report for the period ended March 31, 2025[188] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company reported no unregistered sales of equity securities or issuer purchases of equity securities during the period - There were no recent sales of unregistered securities[189] - There were no purchases of equity securities by the issuer[190] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[191] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the Company[192] Item 5. Other Information During the three months ended June 30, 2025, none of the company's directors or officers adopted, terminated, or modified any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[193] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report, including amendments to the Certificate of Incorporation, Equity Incentive Plan, an employment agreement, and various certifications - Exhibits filed include amendments to the Certificate of Incorporation and Equity Incentive Plan, an employment agreement, and certifications from the CEO, CFO, and Chief Accounting Officer[198] Signatures The report is duly signed on behalf of TELA Bio, Inc. by its Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, and Chief Accounting Officer and Controller, dated August 11, 2025 - The report is signed by Antony Koblish (CEO), Roberto Cuca (COO & CFO), and Megan Smeykal (Chief Accounting Officer & Controller) on August 11, 2025[202]