What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-26 compared with 2024-03-29 · 146 added, 275 removed, 251 unchanged (63% of the section changed)

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See “Cautionary Note Regarding Forward-Looking Statements.”

Tenon Medical, Inc., a medical

device company formed in 2012, has developed a proprietary, U.S.

Food and Drug Administration (“FDA”) approved surgical implant-system,

which we call The Catamaran™ SI Joint Fusion System (“The Catamaran System”).

The Catamaran System offers a novel, less

invasive inferior-posterior approach to the sacroiliac joint (“SI Joint”) using a single, robust titanium implant to treat

SI Joint dysfunction that often causes severe lower back pain.

The system features the Catamaran™ Fixation Device which passes through

both the axial and sagittal planes of the ilium and sacrum, transfixing the SI Joint along its longitudinal axis.

Published clinical studies

have shown that 15% to 30% of all chronic lower back pain is associated with the SI Joint.

With an entry similar to

the SI Joint injection, the surgical approach is direct to the joint.

The angle and trajectory of the inferior-posterior approach is designed

to point away from critical neural and vascular structures and into the strongest cortical bone.

Joined by a patented osteotome bridge,

the implant design consists of two hollow fenestrated pontoons with an open framework to facilitate bony in-growth through the SI Joint.

Tenon Medical, Inc., a

medical device company formed in 2012, has developed a proprietary, U.S.

Food and Drug Administration (“FDA”) approved

surgical implant-system, which we call The Catamaran™ SI Joint Fusion System (“The Catamaran System”).

Catamaran System offers a novel, less invasive inferior-posterior approach to the sacroiliac joint (“SI Joint”) using a

single, robust titanium implant to treat SI Joint dysfunction that often causes severe lower back pain.

The system features the

Catamaran™ Fixation Device which passes through both the axial and sagittal planes of the ilium and sacrum, transfixing the SI

Joint along its longitudinal axis.

Published clinical studies have shown that 15% to 30% of all chronic lower back pain is

associated with the SI Joint.

With an entry similar

to the SI Joint injection, the surgical approach is direct to the joint.

The angle and trajectory of the inferior-posterior approach

is designed to point away from critical neural and vascular structures and into the strongest cortical bone.

Joined by a patented

osteotome bridge, the implant design consists of two hollow fenestrated pontoons with an open framework to facilitate bony in-growth

through the SI Joint.

One pontoon fixates into the ilium and the other into the sacrum.

The osteotome is designed to disrupt the articular portion of the joint

to help facilitate a fusion response.

The osteotome is designed to disrupt the

articular portion of the joint to help facilitate a fusion response.

Our initial clinical results

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To date, we have financed

our operations primarily through an initial public offering, private placements of equity securities, certain debt-related financing arrangements,

our operations primarily through public equity offerings, private placements of equity securities, certain debt-related financing arrangements,

and sales of our product.

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Reverse Stock Splits

On April 6, 2022, the Company

effected a 1-for-2 reverse stock split (the “2022 Reverse Stock Split”) by filing an amendment to the Company’s Amended

and Restated Certificate of Incorporation, as amended, with the Delaware Secretary of State.

The 2022 Reverse Stock Split combined every

two shares of our common stock issued and outstanding immediately prior to effecting the 2022 Reverse Stock Split into one share of common

Similarly, shares of Series A and Series B Preferred Stock became convertible into common stock at a conversion rate of one-to-0.5,

subject to adjustments for stock dividends, splits, combinations, and similar events.

No fractional shares were issued in connection with

the 2022 Reverse Stock Split.

On November 2, 2023, the

Company effected a 1-for-10 reverse stock split (the “2023 Reverse Stock Split”) by filing an amendment to the Company’s

Amended and Restated Certificate of Incorporation, as amended, with the Delaware Secretary of State.

The 2023 Reverse Stock Split combined

every ten shares of our common stock issued and outstanding immediately prior to effecting the 2023 Reverse Stock Split into one share

of common stock.

On November 2, 2023, we effected

a 1-for-10 reverse stock split (the “2023 Reverse Stock Split”) by filing an amendment to our Amended and Restated Certificate

of Incorporation, as amended, with the Delaware Secretary of State.

The 2023 Reverse Stock Split combined every ten shares of our common

stock issued and outstanding immediately prior to effecting the 2023 Reverse Stock Split into one share of common stock.

No fractional

shares were issued in connection with the 2023 Reverse Stock Split.

On September 6, 2024, we

effected a 1-for-8 reverse stock split (the “2024 Reverse Stock Split”) by filing an amendment to the our Amended and Restated

Certificate of Incorporation, as amended, with the Delaware Secretary of State.

The 2024 Reverse Stock Split combined every eight shares

of our common stock issued and outstanding immediately prior to effecting the 2024 Reverse Stock Split into one share of common stock.

No fractional shares were issued in connection with the 2024 Reverse Stock Split.

All historical share and per share

amounts reflected throughout this document have been adjusted to reflect the 2022 Reverse Stock Split and the 2023 Reverse Stock Split.

The authorized number of shares and the par value per share of the Company’s common stock were not affected by the 2022 Reverse

Stock Split or the 2023 Reverse Stock Split.

All historical share and

per share amounts reflected throughout this document have been adjusted to reflect the 2023 Reverse Stock Split and the 2024 Reverse Stock

The authorized number of shares and the par value per share of our common stock were not affected by the 2023 Reverse Stock Split

or the 2024 Reverse Stock Split.

Critical Accounting Policies and Significant Judgments and Estimates

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For more detail on our critical accounting policies, see Note 2 to our consolidated financial statements.

We classify our investments

in marketable debt securities as available-for-sale and record them at fair value in our consolidated balance sheets.

Net unrealized gains

and losses are recorded as a separate component of stockholders’ equity.

Realized gains and losses are recorded in the consolidated

statements of operations and comprehensive loss.

We determine realized gains or losses on the sale of marketable debt securities on a

specific identification method and record such gains and losses as a component of other income (expense), net.

Revenue Recognition

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We account for rebates and price discounts as a reduction to revenue.

calculated based on the terms agreed to with the customer.

Historically, there have been no significant rebates or price discounts.

prices are specified prior to the transfer of control to the customer, via either the customer contract, agreed price list, purchase order,

or written communication with the customer.

Prior to October 2022, we had an agreement in place with a national distributor, which included

standard terms that did not allow for payment contingent on resale of the product, obtaining financing, or other terms that could impact

the distributor’s payment obligation.

We billed and collected directly with the end-user customers and recognized revenue based

on the gross sales price.

For direct sales to end-user customers, our standard payment terms are generally net 30 days.

Sales prices are specified prior to the transfer of control to the customer, via either the customer contract, agreed price list, purchase

order, or written communication with the customer.

For direct sales to end-user customers, our standard payment terms are generally net

We offer our standard warranty

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We recognize compensation

costs related to stock-based awards granted to employees, directors, and consultants including stock options, based on the estimated fair

value of the awards on the date of grant.

We estimate the grant date fair value, and the resulting stock-based compensation, using the

Black-Scholes option-pricing model.

The grant date fair value of the stock-based awards is generally recognized on a straight-line basis

over the requisite service period, which is generally the vesting period of the respective awards.

costs related to stock-based awards granted to employees, directors, and consultants, including restricted stock units and stock

options, based on the estimated fair value of the awards on the date of grant.

For restricted stock units, we estimate grant date

fair value based on the closing market price on the date of grant.

For stock options, we estimate the grant date fair value using the Black-Scholes option-pricing model.

The grant date fair value of the stock-based awards is

generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the

respective awards.

The Black-Scholes option-pricing

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options on the date of grant.

Prior to our initial public

offering, the estimated fair value of our common stock was determined at each valuation date by a third-party independent valuation firm

in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company

Equity Securities Issued as Compensation.

These valuations took into account numerous factors, including developments at our company and

market conditions.

The May 21, 2021 valuation

used a hybrid method which combines the Probability Weighted Expected Return Method (“PWERM”) with the OPM.

The PWERM considers

a set of discrete potential liquidity scenarios for the Company, the value common stock would receive in each scenario, and the time required

and risk inherent in achieving those values.

The May 21, 2021 valuation examined the following scenarios for the Company:

(ii) remaining private and raising capital;

and (iii) dissolution.

Within the IPO scenario, 100% weighting was placed on the Market Approach

for determining the enterprise value.

The Market Approach assumes that businesses operating in the same industry will share similar characteristics,

and therefore a comparison of the business to similar businesses whose financial information is publicly available may provide a reasonable

basis to estimate a subject business’s value.

The equity value in the IPO scenario was estimated considering guideline IPOs, the

anticipated size of the Company’s offering, and forecasted cash and debt.

The estimated common stock value as of the IPO was present

valued using a discount rate of 22.4% based on Company’s WACC, less an adjustment of 2.0% to reflect the risk reduction of an IPO

The August 31, 2021 valuation

used a hybrid method which combines the Probability Weighted Expected Return Method (“PWERM”) with the OPM.

The PWERM considers

a set of discrete potential liquidity scenarios for the Company, the value common stock would receive in each scenario, and the time required

and risk inherent in achieving those values.

The August 31, 2021 valuation examined the following scenarios for the Company:

(ii) remaining private and raising capital;

and (iii) dissolution.

Within the IPO scenario, 100% weighting was placed on the Market Approach

for determining the enterprise value.

The Market Approach assumes that businesses operating in the same industry will share similar characteristics,

and therefore a comparison of the business to similar businesses whose financial information is publicly available may provide a reasonable

basis to estimate a subject business’s value.

The equity value in the IPO scenario was estimated considering guideline IPOs, the

anticipated size of the Company’s offering, and forecasted cash and debt.

The estimated common stock value as of the IPO was present

valued using a discount rate of 32.0% based on Company’s WACC, less an adjustment of 5.0% to reflect the risk reduction of an IPO

The October 28, 2021 valuation

used a hybrid method which combines the Probability Weighted Expected Return Method (“PWERM”) with the OPM.

The PWERM considers

a set of discrete potential liquidity scenarios for the Company, the value common stock would receive in each scenario, and the time required

and risk inherent in achieving those values.

The October 28, 2021 valuation examined the following scenarios for the Company:

(ii) remaining private and raising capital;

and (iii) dissolution.

Within the IPO scenario, 100% weighting was placed on the Market Approach

for determining the enterprise value.

The Market Approach assumes that businesses operating in the same industry will share similar characteristics,

and therefore a comparison of the business to similar businesses whose financial information is publicly available may provide a reasonable

basis to estimate a subject business’s value.

The equity value in the IPO scenario was estimated considering guideline IPOs, the

anticipated size of the Company’s offering, and forecasted cash and debt.

The estimated common stock value as of the IPO was present

valued using a discount rate of 27.2% based on Company’s WACC, less an adjustment of 5.0% to reflect the risk reduction of an IPO

In determining the enterprise

value within the remain private scenario, 100% weighting was applied to the DCF Method under the income approach, in the same manner as

in the December 31, 2018, 2019, and 2020 valuations.

The discount rate in this scenario was determined to be 22.4% based on Company’s

Adjustments were made to the enterprise value for the Company’s cash and debt as of the valuation date to determine the equity

value in this scenario.

The OPM was used to allocate the equity value to our common stock.

The equity volatility rate was determined to

be 70.0% based on the volatility rate of certain comparable public companies.

DLOMs of (i) 10.0% in the IPO scenario and (ii) 30.0% in

the remaining private scenario were applied to the common stock.

Following the closing of

the initial public offering, the fair value of our common stock was determined based on the closing price of our common stock on the Nasdaq

Capital Market.

Common Stock Warrants

We account for warrants

for shares of common stock as equity or liabilities in accordance with the accounting guidance for derivatives.

The accounting guidance

provides a scope exception from classifying and measuring as a financial liability a contract that would otherwise meet the definition

of a derivative if the contract is both (i) indexed to the entity’s own stock and (ii) classified in the stockholders’ deficit

section of the consolidated balance sheet.

We estimate the fair value of our warrants for shares of common stock by using the Black-Scholes

option pricing model.

Warrants classified as equity are recorded as additional paid-in capital on the consolidated balance sheet and

no further adjustments to their valuation are made after the issuance of the warrants.

We account for income taxes

under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial

statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected

to affect taxable income.

We assess the likelihood that the resulting deferred tax assets will be realized.

A valuation allowance is provided

when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

We did not record a provision

or benefit for income taxes during the twelve months ended December 31, 2023 or 2022.

We continue to maintain a full valuation allowance

against our net deferred tax assets.

We assess all material positions

taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or

challenge by relevant taxing authorities.

Assessing an uncertain tax position begins with the initial determination of the position’s

sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate

As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether (i) the

factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate.

recognition and measurement of tax benefits requires significant judgment.

Judgments concerning the recognition and measurement of a tax

benefit may change as new information becomes available.

The Tax Reform Act of 1986

limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of

We have not completed a study to determine whether any ownership changes per the provisions of Section 382 of the Tax Reform

Act of 1986, as amended, as well as similar state provisions, have occurred.

We account for warrants for shares

of common stock as equity or liabilities in accordance with the accounting guidance for derivatives.

The accounting guidance provides

a scope exception from classifying and measuring as a financial liability a contract that would otherwise meet the definition of a derivative

if the contract is both (i) indexed to the entity’s own stock and (ii) classified in the stockholders’ deficit section of

the consolidated balance sheet.

We estimate the fair value of our warrants for shares of common stock by using the Black-Scholes option

pricing model.

Warrants classified as equity are recorded as additional paid-in capital on the consolidated balance sheet and no further

adjustments to their valuation are made after the issuance of the warrants.

Financial Operations Overview

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Revenue from sales of The Catamaran System fluctuates

based on volume of cases (procedures performed), discounts, and the number of implants used for a particular patient.

Similar to other

orthopedic companies, our revenue can also fluctuate from quarter to quarter due to a variety of factors, including reimbursement, changes

in independent sales representatives and physician activities.

based on volume of cases (procedures performed), discounts, rebates, and the number of implants used for a particular patient.

to other orthopedic companies, our revenue can also fluctuate from quarter to quarter due to a variety of factors, including reimbursement,

changes in independent sales representatives and physician activities.

Cost of Goods Sold, Gross Profit, and Gross Margin

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Cost of goods sold consists primarily of costs of the components

of The Catamaran System implants and instruments, quality inspection, packaging, scrap and inventory obsolescence, as well as distribution-related

expenses such as logistics and shipping costs.

We anticipate that our cost of goods sold will increase in absolute dollars as case levels

of The Catamaran System implants and instruments, overhead related to operation personnel and facility costs, quality inspection, packaging,

scrap and inventory obsolescence, as well as distribution-related expenses such as logistics and shipping costs.

We anticipate that certain

of our cost of goods sold will increase in absolute dollars as case levels increase.

Our gross margins have been

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Sales and marketing expenses

primarily consist of independent sales representative training and commissions in addition to salaries and stock-based compensation expense.

Starting in May 2021, commissions to our national distributor have been based on a percentage of sales and we anticipate that these commissions

will make up a significant portion of our sales and marketing expenses.

primarily consist of salaries, commissions, stock-based compensation expense and travel and entertainment expenses of our sales and market

personnel along with commissions paid to our independent distributors.

We expect our sales and marketing expenses to increase in absolute

dollars with the commercial launch of The Catamaran System resulting in higher commissions and salaries, increased clinician and sales

representative training, and the start of clinical studies to gain wider clinician adoption of The Catamaran System.

dollars with the increased sales of The Catamaran System resulting in higher commissions and salaries, increased clinician and sales representative

training, and the cost to complete our clinical study to gain wider clinician adoption of The Catamaran System.

Our sales and marketing

expenses may fluctuate from period to period due to timing of sales and marketing activities related to the commercial launch of our product.

expenses may fluctuate from period to period due to the timing of sales and marketing activities related to the commercial activity of

Research and Development Expenses

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expenses primarily consist of engineering, product development, regulatory expenses, and consulting services, outside prototyping services,

outside research activities, materials, and other costs associated with development of our product.

Research and development expenses

also include related personnel and consultants’ compensation and stock-based compensation expense.

We expense research and development

costs as they are incurred.

We expect research and development expense to increase in absolute dollars as we improve The Catamaran System,

develop new products, add research and development personnel, and undergo clinical activities that may be required for regulatory clearances

of future products.

outside research activities, materials, and other costs associated with the development and refinement of our product.

Research and development

expenses also include related personnel and consultants’ compensation and stock-based compensation expense.

We expense research

and development costs as they are incurred.

We expect research and development expense to increase in absolute dollars as we improve The

Catamaran System, develop new products, add research and development personnel, and undergo clinical activities that may be required for

regulatory clearances of future products.

General and Administrative Expenses

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Cost of goods sold

Gross profit (loss)

Operating expenses:

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Cost of goods sold

Gross profit (loss)

Operating expenses:

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Cost of goods sold

Gross profit (loss)

Gross profit (loss) percentage

Gross profit percentage

The increase in revenue for

the year ended December 31, 2023 as compared to 2022 was primarily due to an increase of 312% in the number of surgical procedures in

which the Catamaran System was used.

the year ended December 31, 2024 as compared to 2023 was primarily due to an increase in revenue per surgical procedure on a 0% change

in the number of surgical procedures in which The Catamaran System was used.

Cost of Goods Sold, Gross Profit, and Gross

The increase in cost of goods sold for the year ended December 31, 2023 as compared to 2022 was due to an increase of

312% in the number of surgical procedures performed.

Gross profit (loss) and gross margin percentage improved due to higher revenue associated

with the increase in the number of surgical procedures, operating leverage created due to lower relative fixed costs and the absorption

of more overhead into our standard cost.

The change in cost of goods sold for the year ended December 31, 2024 as compared to 2023 was due to the absorption of

production overhead costs into our standard cost and operating leverage created due to lower relative fixed costs.

Operating Expenses

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Research and Development Expenses.

and development expenses for the year ended December 31, 2023 increased as compared to 2022 primarily due to increased stock-based compensation

($509) and payroll expenses ($49), partially offset by decreased professional fees ($137).

and development expenses for the year ended December 31, 2024 decreased as compared to 2023 primarily due to decreased professional fees

($528), stock-based compensation ($73) and payroll expenses ($39) as we move our focus from research to sustaining our Catamaran portfolio.

Sales and Marketing Expenses.

and marketing expenses for the year ended December 31, 2023 decreased as compared to 2022 primarily due to payments in 2022 in association

with the termination of the SpineSource sales agreement ($3,611) and decreased consulting and professional fees ($1,190), partially offset

by increased payroll expenses ($2,388), sales commissions ($1,388) and stock-based compensation ($100).

The increase in payroll and payroll

related expenses is primarily due to the increased number of sales and marketing employees as we build out our sales function.

and marketing expenses for the year ended December 31, 2024 decreased as compared to 2023 primarily due to SpineSource transition fees

in 2023 ($932), decreased payroll and employee expenses ($499), and consulting and professional fees ($178), partially offset by increased

commission expense ($21) due to restructuring of our sales operations.

General and Administrative Expenses .

and administrative expenses for the year ended December 31, 2023 decreased as compared to 2022 primarily due to a legal settlement accrual

in 2022 ($574) and decreased professional service fees ($852), partially offset by increased stock-based compensation ($639) and payroll

expenses ($271).

Gain (Loss) on Investments, Interest Expense

and Other Income (Expense), Net

and administrative expenses for the year ended December 31, 2024 increased as compared to 2023 primarily due to increased insurance costs

($331), legal and professional service fees ($289), payroll and employee expenses ($146), and bad debt expense ($41), partially offset

by decreases in stock-based compensation ($147) due to continued operating expenses.

Gain on Investments, Interest Expense

and Other Expense, Net

Years Ended December 31,

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Gain on investments

for the year ended December 31, 2023 decreased as compared to 2022 due to interest on our lower amounts of investments in money market

for the year ended December 31, 2024 increased as compared to 2023 due to interest on our higher amounts of investments in money market

and corporate debt securities.

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Interest expense for

the year ended December 31, 2023 decreased as compared to 2022 primarily due to the conversion of our convertible debt in association

with our initial public offering in April 2022.

the year ended December 31, 2024 increased as compared to 2023 primarily due to the convertible debt.

Other Expense, Net .

Other income and expenses

were not significant during the twelve months ended December 31, 2023 and 2022.

Other expense, net

for the year ended December 31, 2024 was related to foreign exchange losses on the liquidation of our Swiss subsidiary.

Liquidity and Capital Resources

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Since inception, we have financed our operations through private placements of preferred stock, debt

financing arrangements, our initial public offering and the sale of our products.

As of December 31, 2023, we had outstanding debt of

$1.2 million.

financing arrangements, our initial public offering, additional stock offerings and the sale of our products.

As of December 31, 2024,

we had no outstanding debt.

In March 2025, we raised net proceeds of $2.7 million from the exercise of warrants under an inducement agreement.

Under the inducement agreement, the holder of the existing warrants to purchase an aggregate of 2,445,700 agreed to exercise the warrants

at a reduced exercise price of $1.25 per share in consideration for our agreement to issue new unregistered five-year warrants to purchase

up to an aggregate of 2,445,700 shares of common stock at an exercise price of $1.25 per share and new unregistered three-year warrants

to purchase up to an aggregate of 1,222,850 shares of common stock at an exercise price of $1.25 per share.

On March 25, 2025, we entered into a securities

purchase agreement for the issuance of 733,500 shares of our common stock (or common stock equivalents in lieu thereof) in a registered

direct offering at a purchase price of $2.00 per share.

In a concurrent private placement, we also agreed to issue to the same investor

warrants to purchase up to 733,500 shares of our common stock at an exercise price of $2.00 per share, which will be exercisable immediately,

and will expire five years following the date of issuance.

Pursuant to the agreements, we received proceeds, net of financial advisor

fees and other transaction expenses, of $1,234.

Also on March 25, 2025, we entered into a securities

purchase agreement for the issuance of 1,271,500 shares of our common stock (or common stock equivalents in lieu thereof) in a registered

direct offering at a purchase price of $2.00 per share.

In a concurrent private placement, we also agreed to issue to the same investor

warrants to purchase up to 1,271,500 shares of our common stock at an exercise price of $2.00 per share, which will be exercisable immediately,

and will expire five years following the date of issuance.

Pursuant to the agreements, we received proceeds, net of financial advisor

fees and other transaction expenses, of $2,290.

As of December 31, 2024, we had an accumulated

deficit of $55.1 million.

During the years ended December 31, 2023 and 2022, we incurred net losses of $15.6 million and $18.9 million,

respectively, and expect to incur additional losses in the future.

We have not achieved positive cash flow from operations to date.

upon our current operating plan, our existing cash and cash equivalents will not be sufficient to fund our operating expenses and working

capital requirements through at least the next 12 months from the date these consolidated financial statements were available to be released.

We plan to raise the necessary additional capital through one or a combination of public or private equity offerings, debt financings,

and collaborations.

We continue to face challenges and uncertainties and, as a result, our available capital resources may be consumed

more rapidly than currently expected due to (a) the uncertainty of future revenues from The Catamaran System;

(b) changes we may make

to the business that affect ongoing operating expenses;

deficit of $68.7 million and we expect to incur additional losses in the future.

We have not achieved positive cash flow from operations

Based upon our current operating plan, our existing cash and cash equivalents will not be sufficient to fund our operating expenses

and working capital requirements through at least the next 12 months from the date these consolidated financial statements were available

to be released.

We plan to raise the necessary additional capital through one or a combination of public or private equity offerings,

debt financings, and collaborations.

We continue to face challenges and uncertainties and, as a result, our available capital resources

may be consumed more rapidly than currently expected due to (a) the uncertainty of future revenues from The Catamaran System;

we may make to the business that affect ongoing operating expenses;

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our forecasted level of expenditures and use of cash resources.

On February 20, 2024, we entered into a Securities

Purchase Agreement with certain investors, pursuant to which we agreed to sell, issue and deliver to these investors, in a private placement

offering, a total of 172,239 shares of our Series A Preferred Stock and warrants to purchase 258,374 shares of our common stock, par

value $0.001 per share, at an exercise price equal to $1.2705 per share for an aggregate offering price of $2,605,000.

As we attempt to raise additional capital to fund

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financial statements.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31,

Payments Due By Period

(In thousands)

Operating leases

Convertible debt (1)

(1) Amount represents the principal and accrued interest on the

convertible debt as of December 31, 2023.

Per the terms of the convertible debt, the entire amount was converted to preferred stock in

February 2024.

Obligations under Terminated Sales Representative Agreement :

On October 6, 2022, we entered into the Terminating Amended and Restated Exclusive Sales Representative Agreement (the “Termination

In accordance with the Termination Agreement, (i) we paid the Representative $1,000 in cash;

and (ii) we agreed to

pay the Representative (a) $85 per month during the six months after the date of the Termination Agreement in return for efforts by the

Representative to transition operations to us, (b) 20% of net sales of the Product sold in the United States and Puerto Rico until December

31, 2023 and (c) after December 31, 2023, 10% of net sales until such time as the aggregate amount paid to the Representative under this

clause (c) and clause (b) above equal $3,600.

In the event of an acquisition, we will pay the Representative $3,600 less previous amounts

paid pursuant to clause (b) and clause (c) above.

The timing of the payments under clause (b) and (c) is variable depending on the timing

of our sales.

Cash Flows (in thousands, except percentages)

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Effect of foreign currency translation on cash flow

Net increase (decrease) in cash and cash equivalents

The increase in net cash used in operating activities

for the year ended December 31, 2023 as compared to 2022 was primarily attributable to decreases in our accrued expenses ($2,387) and

accounts payable ($189) and increases in prepaid expenses ($244) and accounts receivable ($138), partially offset by our decreased net

loss ($3,336), adjusted for increases in non-cash stock-based compensation expenses ($1,248) and a decrease in common stock issued for

services ($1,561).

Cash provided by investing activities for the

year ended December 31, 2023 consisted primarily of the net sales of short-term investments of approximately $6.5 million as used those

amounts to fund operations, partially offset by purchases of property and equipment of $0.4 million as we acquired the components for

our surgical tray sets.

Cash used in investing activities for the year ended December 31, 2022 consisted primarily of the net purchase

of short-term investments of approximately $2.0 million as we invested a portion of our IPO proceeds, in addition to purchases of property

and equipment of $0.8 million as we acquired the components for our surgical tray sets.

Net increase in cash and cash equivalents

The decrease in net cash used in operating activities

for the year ended December 31, 2024 as compared to 2023 was primarily attributable to our decreased net loss ($1,908) and decreased prepaid

expenses ($484) and increased depreciation and amortization ($209), partially offset increases in accounts receivable ($96) and decreases

in non-cash stock-based compensation expenses ($300).

Cash used in investing activities for the year

ended December 31, 2024 related to purchases of property and equipment ($186).

Cash provided by investing activities for the year ended

December 31, 2023 consisted primarily of the net sales of short-term investments ($6,503) to fund operations, partially offset by purchases

of property and equipment ($361) as we acquired the components for our surgical tray sets.

Cash provided by financing activities for the

year ended December 31, 2023 consisted of the $5.3 million, net of relevant expenses, received from our offerings of stock in 2023 in

addition to $1.2 million from the issuance of the Convertible Notes.

year ended December 31, 2024 consisted primarily of net proceeds from the issuance of common stock and warrants ($3,846), the exercise

of warrants under the inducement agreement ($4,306), the issuance of Series A Convertible Preferred Stock ($2,567) and Series B Convertible

Preferred Stock ($489) and from issuances of common stock ($2,105).

Cash provided by financing activities for the year ended December

31, 2022 consisted of the $14.1 million cash received from our initial public offering in April 2022, net of relevant expenses.

31, 2023 consisted of the net proceeds received from our offerings of stock in 2023 ($5,303) in addition to proceeds from the issuance

of the Convertible Notes ($1,250).

Off-Balance Sheet Arrangements

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis