TNON

Business Context and Reporting Period

Tenon Medical, Inc. (TNON) is a medical device company focused on sacro-pelvic disorders, offering The Catamaran System and the recently acquired SImmetry+ System. This Form 10-Q covers the quarterly and six-month periods ended June 30, 2026. The company is classified as a smaller reporting company and an emerging growth company. As of August 13, 2026, there were 667,047 shares of common stock outstanding following a 1-for-35 reverse stock split effected on August 10, 2026.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 127% year-over-year for the quarter and 106% for the six-month period, driven by a significant increase in surgical procedures and the inclusion of revenue from the SImmetry+ System acquired in August 2025.
• Margin Expansion: Gross margin improved to 64% (Q2 2026) and 66% (YTD 2026) compared to 43% and 44% in the prior year periods, attributed to operating leverage and absorption of fixed costs.
• Expense Increases: Operating expenses rose 34% for the quarter and 18% for the six-month period. Sales and marketing expenses increased 67% (Q2) and 35% (YTD) due to higher commissions and payroll. R&D expenses increased 53% (Q2) and 20% (YTD) primarily due to professional fees.
• Debt and Interest: The company incurred $852k in interest expense for the quarter and $1.028M for the six months, related to the issuance of $5.16M in convertible promissory notes in March 2026. This contrasts with zero interest expense in the prior year periods.
• Liquidity: Cash and cash equivalents decreased from $3.756M at year-end 2025 to $1.677M at June 30, 2026, due to a net cash burn of $5.718M from operating activities.

Outlook, Risks, and Unusual Items

• Going Concern Uncertainty: Management has expressed substantial doubt about the company's ability to continue as a going concern for one year from the filing date. Existing cash and proceeds from a July 2026 offering ($3.62M net) are deemed insufficient to meet obligations for the next 12 months without additional capital.
• Recent Capital Raise: On July 1, 2026, the company consummated a public offering raising approximately $3.62M net. Proceeds are intended for partial debt repayment, commercial expansion, and working capital.
• Nasdaq Compliance: The company received notices regarding non-compliance with the minimum bid price ($1.00) and stockholders' equity ($2.5M) rules. A 1-for-35 reverse stock split was executed on August 10, 2026, to regain bid price compliance. The company believes it regained equity compliance following the July offering but must evidence this in the September 30, 2026 filing to avoid delisting.
• Internal Controls: The company identified a material weakness in internal controls over financial reporting due to a lack of segregation of duties, concluding that disclosure controls and procedures were not effective as of June 30, 2026.
• Derivative Liability: A derivative liability of $475k was recorded related to the conversion features of the March 2026 convertible notes, with changes in fair value impacting other income/expense.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $3.62M July 2026 offering proceeds combined with current cash to fund operations through the next 12 months, given the "substantial doubt" disclosure.
• Debt Maturity: Confirm the repayment status of the $4.332M convertible notes maturing September 11, 2026 (extendable to December 11, 2026), and the impact of the 102.5% prepayment penalty if refinancing is required.
• Nasdaq Status: Monitor the upcoming September 30, 2026 filing to confirm continued compliance with Nasdaq listing standards (bid price and equity) to avoid delisting.
• Revenue Sustainability: Assess whether the 106% YTD revenue growth is sustainable or driven by one-time factors, given the high operating expense base relative to revenue.
• Internal Control Remediation: Review plans and progress regarding the remediation of the material weakness in internal controls over financial reporting.