TNON

Business Context and Reporting Period

Tenon Medical, Inc. (TNON) is a medical device company focused on treating sacroiliac (SI) joint disorders. The company markets two primary systems: The Catamaran System (launched nationally in 2022) and The SImmetry + System (acquired in August 2025). This Form 10-K covers the fiscal year ended December 31, 2025. The company is classified as a smaller reporting company and an emerging growth company.

Key Financial Metrics

Note: The filing text does not provide a specific debt balance as of December 31, 2025, stating only that the company had no outstanding debt at that date. Subsequent debt financing occurred in March 2026.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 20% year-over-year, driven by a higher volume of surgical procedures and the inclusion of revenue from the newly acquired SImmetry + System.
• Margin Expansion: Gross margin improved from 52% to 60% due to operating leverage and the absorption of production overhead costs into standard costs.
• Expense Reduction: Total operating expenses decreased 9% to $15.15 million. This was primarily due to significant reductions in stock-based compensation ($2.15 million decrease) and lower insurance and professional fees, partially offset by increased sales commissions and acquisition-related costs.
• Acquisition: In August 2025, the company acquired substantially all assets of SiVantage, Inc. and SIMPL Medical, LLC for a total consideration of approximately $3.13 million (cash, stock, and contingent consideration), adding the SImmetry + System to its portfolio.

Guidance, Outlook, Risks, and Unusual Items

Liquidity and Going Concern

Management has identified substantial doubt about the company's ability to continue as a going concern for the next 12 months. As of December 31, 2025, cash balances were insufficient to fund operations through the next year without additional financing. The company plans to raise capital through equity or debt offerings.

Recent Financing (Subsequent Event)

On March 11, 2026, the company issued $5.2 million in aggregate principal amount of 20% original issue discount senior convertible promissory notes, receiving approximately $4.3 million in gross proceeds. These notes mature in September 2026 (extendable to December 2026) and are convertible into common stock.

Nasdaq Listing Compliance

The company received notice from Nasdaq on February 25, 2026, that its common stock failed to maintain the minimum $1.00 closing bid price for 30 consecutive business days. The company has an initial 180-day compliance period (until August 24, 2026) to regain compliance. Failure to do so may result in delisting.

Internal Controls

Management identified a material weakness in internal control over financial reporting due to a lack of segregation of duties, attributed to the company's size and limited resources. This weakness affects the effectiveness of disclosure controls and procedures.

Risk Factors

• Reimbursement: Adoption depends heavily on third-party payor coverage and reimbursement rates, which face pressure and variability.
• Competition: The SI joint market is competitive with larger, well-funded competitors.
• Manufacturing: The company relies on a limited number of contract manufacturers, some of which are single-source.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $4.3 million raised in March 2026 to cover operating expenses and the timeline for the next capital raise.
• Nasdaq Compliance: Monitor the stock price to ensure it meets the $1.00 bid price requirement for 10 consecutive days before August 24, 2026, to avoid delisting.
• Internal Controls: Assess the progress of remediation efforts regarding the material weakness in segregation of duties.
• Acquisition Integration: Review the commercial performance and revenue contribution of the SImmetry + System post-acquisition.
• Convertible Debt Terms: Analyze the dilution impact of the March 2026 convertible notes, which have a conversion price based on 80% of the VWAP.