What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-26 compared with 2024-03-29 · 1005 added, 884 removed, 239 unchanged (89% of the section changed)

3 unchanged sentences

December 31, 2024 and 2023

Reports of Independent Registered Public Accounting Firms (PCAOB ID No.

200 and PCAOB ID No.

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Audited Consolidated Financial Statements:

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Loss F-4

Consolidated Statements of Convertible Preferred Stock and in Stockholders’ Equity F-6

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and Board of Directors

Tenon Medical, Inc.

on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheet of Tenon Medical, Inc.

(the “Company”) as of December 31, 2023, the related consolidated statements of operations

and comprehensive loss, preferred stock and stockholders’ equity, and cash flows for the year then ended, and the related notes

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Tenon Medical,

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive

loss, convertible preferred stock and stockholders’ equity, and cash flows for each of the years then ended, and the related notes

(collectively, the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of

its operations and its cash flows for the year then ended, in conformity with U.S.

in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results

of its operations and its cash flows for each of the years then ended, in conformity with U.S.

generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As described in Note 2 to the consolidated financial statements,

the Company has experienced recurring losses, negative cash flows from operations, and has limited capital resources.

These matters raise

substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans regarding these matters

are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the consolidated financial statements

based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements

The accompanying consolidated financial statements have been prepared

assuming that the Company will continue as a going concern.

As described in Note 2 to the consolidated financial statements, the Company

has experienced recurring losses, negative cash flows from operations, and has limited capital resources.

These matters raise substantial

doubt about the Company’s ability to continue as a going concern.

Management’s plans regarding these matters are also described

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are

the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements

are free of material misstatement, whether due to error or fraud.

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an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal

As part of our audits, we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

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Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material

Our audits included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for

We believe that our audits provide a reasonable basis for

/s/ Haskell & White LLP

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March 26, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

Stockholders of Tenon Medical, Inc.

and Subsidiary

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Tenon

Medical, Inc and Subsidiary (collectively the “Company”) as of December 31, 2022, and the related consolidated statements

of operations and comprehensive loss, consolidated statements of convertible preferred stock and stockholders’ equity (deficit),

and consolidated statements of cash flows for the year then ended, and the related notes (collectively referred to as the consolidated

financial statements).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash

flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The 2022 consolidated financial statements were prepared assuming that

the Company would continue as a going concern.

As of December 31, 2022, the Company had suffered recurring losses from operations, incurred

negative cash flows from operating activities, and had stated that substantial doubt exists about the Company’s ability to continue

as a going concern.

The 2022 consolidated financial statements did not include any adjustments that might result from the outcome of this

Basis for Opinion

These consolidated financial statements are

the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements

are free of material misstatement, whether due to error or fraud.

Our audit of the consolidated financial

statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements,

whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test

basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating

the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

consolidated financial statements.

Our audit also included performing such other procedures as we considered necessary in the

circumstances.

We believe that our audit provides a reasonable basis for our opinion.

We began serving as the Company’s auditor in 2021.

we became the predecessor auditor.

Medical, Inc.

Balance Sheets

thousands, except share data)

Tenon Medical, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

Current assets:

Cash and cash

Short-term investments

Accounts receivable

Cash and cash equivalents

Accounts receivable, net

Inventory, net

Prepaid expenses and other current assets

Total current assets

Fixed assets, net

Operating lease right-of-use

offering costs

and Stockholders’ EQUITY

Property and equipment, net

Operating lease right-of-use asset

Deferred offering costs

Liabilities and Stockholders’ EQUITY

Current liabilities:

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Accrued expenses

Current portion of accrued

Current portion of operating

lease liability

Current portion of accrued commissions

Current portion of operating lease liability

Convertible notes payable and accrued interest, net of debt discount of $ 0 and $ 77 at December 31, 2024 and 2023, respectively

current liabilities

Accrued commissions, net

of current portion

lease liability, net of current portion

Commitments and contingencies (Notes 6 and

Total current liabilities

Accrued commissions, net of current portion

Operating lease liability, net of current portion

Total liabilities

Commitments and contingencies (Note 9)

Stockholders’ equity:

Series A convertible preferred stock, $ 0.001 par value;

4,500,000 shares authorized at December 31, 2024 and 2023;

256,968 and 0 shares issued and outstanding at December 31, 2024 and 2023, respectively

Series B convertible preferred stock, $ 0.001 par value;

491,222 shares authorized at December 31, 2024 and 2023;

86,454 and 0 shares issued and outstanding at December 31, 2024 and 2023, respectively

Common stock, $ 0.001 par value;

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Accumulated deficit

other comprehensive loss

stockholders’ equity

LIABILITIES AND STOCKHOLDERS’ EQUITY

accompanying notes are an integral part of these consolidated financial statements.

See Reports of Independent Registered Public

Accounting Firms.

Medical, Inc.

Statements of Operations and Comprehensive Loss

thousands, except per share data)

Accumulated other comprehensive loss

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part

of these consolidated financial statements.

See Report of Independent Registered Public

Accounting Firm.

Tenon Medical, Inc.

Consolidated Statements of Operations and Comprehensive

(In thousands, except per share data)

Cost of sales

Gross Profit (Loss)

Operating Expenses

Research and development

General and administrative

Sales and marketing

and administrative

Operating Expenses

Research and development

Total Operating Expenses

Loss from Operations

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Interest expense

Other Income (Expense), net

Other expense, net

Total Other Income (Expense), net

Net Loss Per Share of Common Stock

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Basic and diluted

Consolidated Statements

of Comprehensive Loss:

Consolidated Statements of Comprehensive Loss:

Unrealized loss on investments

currency translation adjustment

Comprehensive Loss

accompanying notes are an integral part of these consolidated financial statements.

See Reports of Independent Registered Public

Accounting Firms.

Medical, Inc.

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

thousands, except share data)

Preferred Stock

Foreign currency translation adjustment

Total Comprehensive Loss

The accompanying notes are an integral part

of these consolidated financial statements.

See Report of Independent Registered Public

Accounting Firm.

Tenon Medical, Inc.

Consolidated Statements of Convertible Preferred

Stock and Stockholders’ Equity

(In thousands, except share data)

Series A Convertible Preferred Stock

Series B Convertible Preferred Stock

Comprehensive

at December 31, 2021

compensation expense

of common stock and warrants, net of issuance costs

stock issued upon conversion of Series A preferred stock

( 2,550,763 )

stock issued upon conversion of Series B preferred stock

stock issued upon conversion of debt

stock issued for services

comprehensive loss

at December 31, 2022

compensation expense

of restricted stock units

of common stock and warrants, net of issuance costs

of common stock, net of issuance costs

stock issued for services

of common stock upon exercise of warrants

issued in connection with convertible debt

issued for reverse stock split

comprehensive income

at December 31, 2023

accompanying notes are an integral part of these consolidated financial statements.

Balance at December 31, 2022

Stock-based compensation expense

Release of restricted stock units

Issuance of common stock and warrants, net of issuance costs

Issuance of common stock, net of issuance costs

Common stock issued for services

Issuance of common stock upon exercise of warrants

Warrants issued in connection with convertible debt

Shares issued for reverse stock split

Other comprehensive income

Balance at December 31, 2023

Stock-based compensation expense

Release of restricted stock units

Issuance of Series A preferred stock and warrants, net of issuance costs

Issuance of Series B preferred stock and warrants, net of issuance costs

Issuance of common stock, prefunded warrants, and warrants, net of issuance costs

Issuance of common stock upon exercise of prefunded warrants

Issuance of common stock and warrants under inducement agreement, net of issuance costs

Issuance of common stock upon exercise of warrants

Issuance of common stock, net of issuance costs

Issuance of common stock for reverse stock split

Other comprehensive income

Balance at December 31, 2024

The accompanying notes are an integral part

of these consolidated financial statements.

See Reports of Independent Registered Public

Accounting Firms.

Medical, Inc.

Statements of Cash Flows

Tenon Medical, Inc.

Consolidated Statements of Cash Flows

(In thousands)

Years Ended December 31,

Cash Flows from Operating Activities

Adjustments to reconcile net loss to net cash

used in operating activities:

Unrealized loss on investments

Non-cash interest expense

Stock-based compensation

Common stock issued for

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

Depreciation and amortization

Loss on write-off of fixed

Amortization of operating

right-of-use asset

Increase (decrease) in

cash resulting from changes in:

Provision for losses on accounts receivable

Amortization of operating right-of-use asset

Increase (decrease) in cash resulting from changes in:

Accounts receivable

Prepaid expenses and other

Prepaid expenses and other assets

Accounts payable

Accrued expenses

lease liability

Operating lease liability

Net cash used in operating activities

Cash Flows from Investing

Cash Flows from Investing Activities

Sales of short-term investments

Purchases of short-term

of property and equipment

Net cash provided by (used in) investing activities

Cash Flows from Financing

Proceeds from issuance

of common stock and warrants, net of issuance costs

Proceeds from issuance

of common stock, net of issuance costs

Proceeds from issuance

of convertible notes payable

Proceeds from exercise of warrants

Purchases of short-term investments

Purchases of property and equipment

Net cash (used in) provided by investing activities

Cash Flows from Financing Activities

Gross proceeds from issuance of Series A convertible preferred stock

Gross proceeds from issuance of Series B convertible preferred stock

Gross proceeds from issuance of common stock, prefunded warrants, and warrants

Gross proceeds from exercise of warrants under inducement agreement

Gross proceeds from issuance of common stock and warrants

Gross proceeds from issuance of common stock

Gross proceeds from issuance of convertible notes payable

Gross proceeds from exercise of warrants

Offering costs

Net cash provided by financing activities

Effect of foreign currency

translation on cash flow

Net Increase (Decrease) in

Cash and Cash Equivalents

and Cash Equivalents at Beginning of Year

and Cash Equivalents at End of Year

Effect of foreign currency translation on cash flow

Net Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

Cash and Cash Equivalents at End of Year

Cash at End of Year

Cash Equivalents at End of Year

Supplemental Disclosures

of Cash Flow Information

Cash paid during the year

Non-cash investment and

financing activities:

Common stock issued upon

conversion of preferred stock

Common stock issued upon

conversion of debt

accompanying notes are an integral part of these consolidated financial statements.

See Reports of Independent Registered Public

Accounting Firms.

to Consolidated Financial Statements (in thousands, except share and per-share data)

Supplemental Disclosures of Cash Flow Information

Non-cash investment and financing activities:

Preferred stock issued upon conversion of debt and accrued interest, net of unamortized debt issuance costs

Reclassification of deferred offering costs to additional paid-in capital

Warrant modification costs

The accompanying notes are an integral part

of these consolidated financial statements.

See Report of Independent Registered Public

Accounting Firm.

Notes to Consolidated Financial Statements (in

thousands, except share and per-share data)

Organization and Business

of operations

Nature of operations

Tenon Medical, Inc.

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The Company received

Food and Drug Administration (“FDA”) clearance in 2018 for The Catamaran System and is currently focused on the U.S.

Food and Drug Administration (“FDA”) clearance in 2018 for The Catamaran System and is currently focused on the US market.

Since the national launch of The Catamaran System in October 2022, the Company is focused on three commercial opportunities:

Primary SI Joint procedures, 2) Revision procedures of failed SI Joint implants and 3) SI Joint fusion adjunct to a spine fusion construct.

of consolidation

condensed financial statements of the Company include the accounts of the Company and its wholly-owned subsidiary, Tenon Technology AG

SI Joint procedures, 2) Revision procedures of failed SI Joint implants and 3) SI Joint fusion adjunct to a spine fusion construct.

Basis of consolidation

The consolidated financial statements of the

Company for the year ended December 31, 2023 include the accounts of its wholly-owned subsidiary, Tenon Technology AG

(“TTAG”), a Swiss company.

All intercompany balances and transactions have been eliminated in consolidation.

The financial

statements of TTAG are prepared for the same reporting period as the parent, using consistent accounting policies in all material respects.

financial statements of TTAG are prepared for the same reporting period as the parent, using consistent accounting policies in all

material respects.

In 2024, TTAG was dissolved and, as such, the financial statements for the year ended December 31, 2024 only

include the accounts of the Company since the date of dissolution.

TTAG had no substantial operations.

Summary of Significant Accounting Principles

of presentation

accompanying consolidated financial statements have been prepared on the accrual basis in accordance with generally accepted accounting

principles as promulgated in the United States of America (“U.S.

concern uncertainty and liquidity requirements

accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates

the realization of assets and the settlement of liabilities and commitments in the normal course of business.

There is substantial doubt

about the Company’s ability to continue as a going concern for one year after the date that these financial statements are issued.

Basis of presentation

The accompanying

consolidated financial statements have been prepared on the accrual basis in accordance with generally accepted accounting principles

as promulgated in the United States of America (“U.S.

Going concern uncertainty and liquidity requirements

The accompanying consolidated financial statements

have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement

of liabilities and commitments in the normal course of business.

There is substantial doubt about the Company’s ability to continue

as a going concern for one year after the date that these financial statements are issued.

Since inception, the Company has incurred losses

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statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of estimates

The preparation of the consolidated financial

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and stock-based compensation.

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.

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 stock.

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.

Reverse Stock Splits

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.

No fractional

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

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.

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.

All historical

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

On September 6, 2024, the Company effected a 1-for-8

reverse stock split (the “2024 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 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 2023 Reverse Stock Split and the 2024 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 2023 Reverse Stock Split or the 2024

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.

Company operates in one business segment.

Although the Company’s Swiss subsidiary is located in a different geographical area,

management uses one measurement of profitability and does not segregate its business for internal reporting.

and cash equivalents

The Company operates in one business segment.

Although the Company’s Swiss subsidiary is located in a different geographical area, management uses one measurement of profitability

and does not segregate its business for internal reporting.

Cash and cash equivalents

The Company considers all highly liquid investments

with maturities of 90 days or less at the date of purchase to be cash equivalents.

Company classifies its investments in marketable securities as available-for-sale and records them at fair value in its consolidated

balance sheets.

The 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.

The Company determines any realized gains

or losses on the sale of marketable debt securities on a specific identification method and records such gains and losses as a component

of other income (expense) net.

receivable and allowance for doubtful accounts

The Company classifies its investments in marketable

securities as available-for-sale and records them at fair value in its consolidated balance sheets.

The 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.

The Company determines any realized gains or losses on the sale of marketable debt securities on

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

Accounts receivable and expected credit

Accounts receivable are derived from products

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greater than the allowance, the Company would increase its general and administrative expenses and increase its reported net losses.

As of December 31, 2023 and 2022, the Company’s allowance for expected credit losses was $ 0 .

is stated at lower of cost or net realizable value.

The Company establishes the inventory basis by determining the cost based on standard

costs approximating the purchase costs on a first-in, first-out basis.

The excess and obsolete inventory is estimated based on future

demand and market conditions.

Company’s allowance for expected credit losses was $ 41 and $0 at December 31, 2024 and 2023, respectively.

Inventory is stated at lower of cost or net

realizable value.

The Company establishes the inventory basis by determining the cost based on standard costs approximating the

purchase costs on a first-in, first-out basis.

The excess and obsolete inventory is estimated based on quantities on hand,

expectations of future demand and market conditions.

Inventory write-downs are charged to cost of goods sold.

As of December 31, 2023 and 2022, inventory consisted

of finished goods and raw materials.

offering costs

Deferred offering costs, which consist of direct

incremental legal, consulting, banking, and accounting fees relating to the Company’s future offerings, are capitalized, and are

offset against proceeds received upon the effectiveness of the offering.

In the event an anticipated offering is terminated, deferred

offering costs will be expensed.

assets are stated at cost less accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful

lives of the assets.

Equipment, computers, software, and furniture and fixtures are depreciated over periods ranging from three to seven

years, and leasehold improvements over the shorter of the lease term or the life of the asset.

Construction in progress pertains to the

cost of individual components of a custom instrument set used for surgical placement of the Company’s products that have not yet

been placed into service.

The cost of maintenance and repairs is charged to expense as incurred;

significant renewals and betterments

are capitalized.

Deductions are made for retirements resulting from renewals or betterments.

As of December 31,

2024 and 2023, inventory consisted of finished goods and raw materials.

Deferred offering costs

Deferred offering costs, which consist of

direct incremental legal, consulting, banking, and accounting fees relating to the Company’s future offerings, are

capitalized, and are offset against proceeds received upon the effectiveness of the offering or the closing of an equity

In the event an anticipated offering is terminated, deferred offering costs will be expensed.

Property and equipment, net

Property and equipment are stated at cost less accumulated

depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Equipment, computers,

software, and furniture and fixtures are depreciated over periods ranging from three to seven years , and leasehold improvements over the

shorter of the lease term or the life of the asset.

Construction in progress pertains to the cost of individual components of a custom

instrument set used for surgical placement of the Company’s products that have not yet been placed into service.

The cost of maintenance

and repairs is charged to expense as incurred;

significant renewals and betterments are capitalized.

Deductions are made for retirements

resulting from renewals or betterments.

The Company leases its headquarters in Los Gatos,

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Leases are classified as either finance leases

or operating leases based on criteria in FASB ASC 842, “Leases”.

The Company’s facility lease is classified as an operating

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent

the obligation to make lease payments arising from the lease.

Operating lease right-of-use assets and liabilities are recognized at the

lease’s commencement date based on the present value of lease payments over the lease term.

When a lease did not provide an implicit

rate, the Company used its estimated incremental borrowing rate based on the information available at the commencement date in determining

the present value of future payments.

The Company has elected not to recognize ROU assets and lease liabilities for short-term operating

leases that have a term of 12 months or less.

Lease expense for operating leases is recognized on a straight-line basis over the lease

term and is included in operating expenses in the consolidated statements of operations and comprehensive loss.

or operating leases based on criteria in accordance with Accounting Standards Codification (“ASC”) 842, Leases .

Company’s facility lease is classified as an operating lease.

Right-of-use assets represent the Company’s right to use an

underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.

lease right-of-use assets and liabilities are recognized at the lease’s commencement date based on the present value of lease payments

over the lease term.

When a lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based on

the information available at the commencement date in determining the present value of future payments.

The Company has elected not to

recognize ROU assets and lease liabilities for short-term operating leases that have a term of 12 months or less.

Lease expense for operating

leases is recognized on a straight-line basis over the lease term and is included in operating expenses in the consolidated statements

of operations and comprehensive loss.

Long-lived assets

The Company regularly reviews the carrying

value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of

impairment may exist that warrant adjustments to carrying values or estimated useful lives.

The determinants used for this

evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive

undiscounted cash flow in future periods as well as the strategic significance of the assets to the Company’s business

value measurements

accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, fair value is the price that would

be received from selling an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants

at the measurement date.

ASC 820 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of

observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent

of the Company.

Unobservable inputs reflect the Company’s assumptions about the inputs that market participants would use in pricing

the asset or liability based on the best information available in the circumstances.

fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 – Quoted

prices are available in active markets for identical assets or liabilities as of the reported date.

Level 2 – Pricing

inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date.

nature of these financial instruments includes cash instruments for which quoted prices are available but are traded less frequently,

derivative instruments whose fair values have been derived using a model where inputs to the model are directly observable in the market

and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level 3 – Instruments

that have little to no pricing observability as of the measurement date.

These financial instruments are measured using management’s

best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

degree of judgment exercised by the Company in determining fair value is greatest for assets categorized in Level 3.

In certain cases,

the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, for disclosure purposes,

the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined by the lowest level

input that is significant to the fair value measurement.

taxes are recorded in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 740, Income Taxes (“ASC

740”), which provides for deferred taxes using an asset and liability approach.

Under this method, the Company records deferred

tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying

amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect when the differences are expected

Valuation allowances are provided when necessary to reduce net deferred tax assets to the amount that is more likely than

not to be realized.

Based on the available evidence, the Company is unable, at this time, to support the determination that it is more

likely than not that its deferred tax assets will be utilized in the future.

Accordingly, the Company recorded a full valuation allowance

as of December 31, 2023 and 2022.

The Company intends to maintain valuation allowances until sufficient evidence exists to support its

income taxes are based upon the year’s income taxable for federal, state, and foreign tax reporting purposes.

Deferred income taxes

are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes.

Company’s policy is not to record deferred income taxes on the undistributed earnings of foreign subsidiaries that are indefinitely

reinvested in foreign operations.

Company’s revenue is derived from the sale of its products to medical groups and hospitals in the United States.

Revenue is recognized

when control is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for

the goods or services, using the following five step approach:

(1) identify the contract with a customer, (2) identify the performance

obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in

the contract, and (5) recognize revenue when a performance obligation is satisfied.

Company generates revenue from the sale of products to hospitals or medical facilities where its products are delivered in advance of

The performance obligation is the delivery of the products along with the completion of the surgery and therefore, revenue

is recognized upon delivery to the customers and completion of the surgery, net of rebates and price discounts.

The Company accounts

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.

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.

Prior to October 2022, the

Company 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.

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, the Company’s standard payment terms are generally net 30 days.

Company offers its standard warranty to all customers and does not sell any warranties on a standalone basis.

The Company’s warranty

provides that its products are free of material defects and conform to specifications, and includes an offer to replace or refund the

purchase price of defective products.

This assurance does not constitute a service and is not considered a separate performance obligation.

The Company estimates warranty liabilities at the time of revenue recognition and records them as a charge to cost of goods sold.

modifications generally do not occur during the performance of the Company’s contracts.

received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the consolidated balance sheets.

of December 31, 2023 and 2022, there were no remaining performance obligations that would give rise to deferred revenue.

commissions are recorded in sales and marketing expenses during the same period as the corresponding revenues.

and development

Company engages in improving existing products and new product development efforts.

Research and development expenses relating to these

efforts are expensed as incurred.

Company accounts for all stock-based compensation awards using a fair-value method on the grant date and recognizes the fair value of

each award as an expense over the requisite service period.

Company recognizes 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.

Black-Scholes option-pricing model requires the use of subjective assumptions to determine the fair value of stock-based awards.

assumptions include:

Term —The expected term represents the period that stock-based awards are expected to be outstanding.

The expected term for

option grants is determined using the simplified method.

The simplified method deems the expected term to be the midpoint between the

vesting date and the contractual life of the stock-based awards.

The Company regularly reviews the carrying value

and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may

exist that warrant adjustments to carrying values or estimated useful lives.

The determinants used for this evaluation include management’s

estimate of the asset’s ability to generate positive income from operations and positive undiscounted cash flow in future periods

as well as the strategic significance of the assets to the Company’s business objectives.

Fair value measurements

In accordance with ASC 820,

Fair Value Measurement , fair value is the price that would be received from selling an asset or paid to transfer a liability (i.e.,

the exit price) in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a fair value hierarchy

for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring

that the most observable inputs be used when available.

Observable inputs are those that market participants

would use in pricing the asset or liability based on market data obtained from sources independent of the Company.

Unobservable inputs

reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability based on

the best information available in the circumstances.

The fair value hierarchy is categorized into three

levels based on the inputs as follows:

Level 1 – Quoted prices are available

in active markets for identical assets or liabilities as of the reported date.

Level 2 – Pricing inputs are other

than quoted prices in active markets, which are either directly or indirectly observable as of the reported date.

The nature of these

financial instruments includes cash instruments for which quoted prices are available but are traded less frequently, derivative instruments

whose fair values have been derived using a model where inputs to the model are directly observable in the market and instruments that

are fair valued using other financial instruments, the parameters of which can be directly observed.

Level 3 – Instruments that have

little to no pricing observability as of the measurement date.

These financial instruments are measured using management’s best

estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

The degree of judgment exercised by the Company

in determining fair value is greatest for assets categorized in Level 3.

In certain cases, the inputs used to measure fair value may fall

into different levels of the fair value hierarchy.

In such cases, for disclosure purposes, the level in the fair value hierarchy within

which the fair value measurement falls in its entirety is determined by the lowest level input that is significant to the fair value measurement.

Income taxes are recorded in accordance with

ASC 740, Income Taxes , which provides for deferred taxes using an asset and liability approach.

this method, the Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences

between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in

effect when the differences are expected to reverse.

Valuation allowances are provided when necessary to reduce net deferred tax assets

to the amount that is more likely than not to be realized.

Based on the available evidence, the Company is unable, at this time, to support

the determination that it is more likely than not that its deferred tax assets will be utilized in the future.

Accordingly, the Company

recorded a full valuation allowance as of December 31, 2024 and 2023.

The Company intends to maintain valuation allowances until sufficient

evidence exists to support its reversal.

Current income taxes are based upon the year’s

income taxable for federal, state, and foreign tax reporting purposes.

Deferred income taxes are provided for certain income and expenses,

which are recognized in different periods for tax and financial reporting purposes.

The Company’s policy is not to record deferred

income taxes on the undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations.

Revenue recognition

The Company’s revenue is derived from the

sale of its products to medical groups and hospitals in the United States.

Revenue is recognized when control is transferred to the customer,

in an amount that reflects the consideration we expect to be entitled to in exchange for the goods or services, using the following five

step approach:

(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the

transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a

performance obligation is satisfied.

The Company generates revenue from the sale of

products to hospitals or medical facilities where its products are delivered in advance of a procedure.

The performance obligation is

the delivery of the products along with the completion of the surgery and therefore, revenue is recognized upon delivery to the customers

and completion of the surgery, net of rebates and price discounts.

The Company accounts for rebates and price discounts as a reduction

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, the Company’s standard payment

terms are generally net 30 days.

The Company offers its standard warranty to all

customers and does not sell any warranties on a standalone basis.

The Company’s warranty provides that its products are free of

material defects and conform to specifications, and includes an offer to replace or refund the purchase price of defective products.

assurance does not constitute a service and is not considered a separate performance obligation.

The Company estimates warranty liabilities

at the time of revenue recognition and records them as a charge to cost of goods sold.

Contract modifications generally do not occur

during the performance of the Company’s contracts.

Payments received prior to satisfying the revenue

recognition criteria are recorded as deferred revenue on the consolidated balance sheets.

As of December 31, 2024 and 2023, there were

no remaining performance obligations that would give rise to deferred revenue.

Except as described in Note 9, sales commissions are recorded in sales and marketing

expenses during the same period as the corresponding revenues.

Research and development

The Company engages in improving existing products

and new product development efforts.

Research and development expenses relating to these efforts are expensed as incurred.

Stock-based compensation

The Company accounts for all stock-based compensation

awards using a fair-value method on the grant date and recognizes the fair value of each award as an expense over the requisite service

The Company recognizes compensation 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, the Company estimates grant

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

For stock options, the company estimates 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 model requires

the use of subjective assumptions to determine the fair value of stock-based awards.

These assumptions include:

Expected Term —The expected term

represents the period that stock-based awards are expected to be outstanding.

The expected term for option grants is determined

using the simplified method as the Company does not have significant stock option exercises in its history.

The simplified method

deems the expected term to be the midpoint between the vesting date and the contractual life of the stock-based awards.

Expected Volatility —Since the Company

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The comparable companies were chosen based on their similar size, stage in the life cycle, or area of

Interest Rate —The risk-free interest rate is based on the U.S.

Treasury zero coupon issues in effect at the time of grant for

periods corresponding with the expected term of option.

Dividend s—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock.

an expected dividend yield of zero is used.

Company account for forfeitures as they occur.

Company’s board of directors intends all options granted to be exercisable at a price per share not less than the per share fair

value of our common stock underlying those options on the date of grant.

to the Company’s initial public offering, the estimated fair value of its 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.

May 21, 2021 valuation used a hybrid method which combines the Probability Weighted Expected Return Method (“PWERM”) with

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 event.

August 31, 2021 valuation used a hybrid method which combines the Probability Weighted Expected Return Method (“PWERM”) with

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

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 event.

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

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 event.

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 WACC.

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.

the closing of the initial public offering, the fair value of the Company’s common stock was determined based on the closing price

of its common stock on the Nasdaq Capital Market.

currency translation and other comprehensive income

functional currency of Tenon Technology AG is the Swiss franc.

Accordingly, TTAG’s assets and liabilities are translated from their

respective functional currency into U.S.

Dollars at period-end rates, and TTAG’s revenue and expenses are translated at the weighted-average

exchange rate for the period.

Adjustments resulting from this translation process are classified as other comprehensive income or loss

and shown as a separate component of equity.

intercompany foreign currency transactions between entities included in the consolidated financial statements are of a long-term investment

nature (i.e., those for which settlement is not planned or anticipated in the foreseeable future) foreign currency translation adjustments

resulting from those transactions are included in stockholders’ equity (deficit) as accumulated other comprehensive loss or income.

When intercompany transactions are deemed to be of a short-term nature, translation adjustments are required to be included in the consolidated

statements of operations.

loss per share

net loss per share is based upon the weighted-average number of common shares outstanding.

Diluted net loss per share is based on the

assumption that all potential common stock equivalents (convertible preferred stock, stock options, and warrants) are converted or exercised.

The calculation of diluted net loss per share excludes potential common stock equivalents if the effect is anti-dilutive.

For the periods

presented, the Company’s weighted-average common shares outstanding for basic and diluted are the same because the effect of the

potential common stock equivalents is anti-dilutive.

Company had the following dilutive common stock equivalents as of December 31, 2023 and 2022 which were excluded from the calculation

because their effect was anti-dilutive.

Risk-Free Interest Rate —The risk-free

interest rate is based on the U.S.

Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected

term of option.

Expected Dividend s—The Company has

never paid dividends on its common stock and has no plans to pay dividends on its common stock.

Therefore, an expected dividend yield

of zero is used.

The Company accounts for forfeitures as they occur.

The Company’s board of directors intends

all options granted to be exercisable at a price per share not less than the per share fair value of our common stock underlying those

options on the date of grant.

Foreign currency translation and other comprehensive

The functional currency of Tenon Technology AG

is the Swiss franc.

Accordingly, TTAG’s assets and liabilities are translated from their respective functional currency into U.S.

Dollars at period-end rates, and TTAG’s revenue and expenses are translated at the weighted-average exchange rate for the period.

Adjustments resulting from this translation process are classified as other comprehensive income or loss and shown as a separate component

When intercompany foreign currency transactions

between entities included in the consolidated financial statements are of a long-term investment nature (i.e., those for which settlement

is not planned or anticipated in the foreseeable future) foreign currency translation adjustments resulting from those transactions are

included in stockholders’ equity as accumulated other comprehensive loss or income.

When intercompany transactions are

deemed to be of a short-term nature, translation adjustments are required to be included in the consolidated statements of operations.

Net loss per share

Basic net loss per share is based upon the weighted-average

number of common shares outstanding.

Diluted net loss per share is based on the assumption that all potential common stock equivalents

(convertible preferred stock, stock options, and warrants) are converted or exercised.

The calculation of diluted net loss per share excludes

potential common stock equivalents if the effect is anti-dilutive.

For the periods presented, the Company’s weighted-average common

shares outstanding for basic and diluted are the same because the effect of the potential common stock equivalents is anti-dilutive.

The Company had the following dilutive common

stock equivalents as of December 31, 2024 and 2023 which were excluded from the calculation because their effect was anti-dilutive.

Outstanding restricted stock units

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Outstanding warrants

of New Accounting Pronouncements

In June 2016, the Financial Accounting Standards

Board issued Accounting Standards Update 2016-13, “ Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit

Losses on Financial Instruments ”.

This standard requires an impairment model (known as the current expected credit loss (“CECL”)

model) that is based on expected losses rather than incurred losses.

Under the new guidance, each reporting entity should estimate an

allowance for expected credit losses, which is intended to result in more timely recognition of losses.

The Company adopted this guidance

effective January 1, 2023.

The adoption of this guidance did not have a significant impact on the Company’s consolidated financial

statements or results of operations.

following table sets forth by level, within the fair value hierarchy, the Company’s investments at fair value as of December 31,

2023 and 2022:

Corporate debt securities:

December 31, 2023

December 31, 2022

and fair value of available-for-sale investments as of December 31, 2023 and 2022 are as follows:

Unrealized Losses

Corporate debt securities:

December 31, 2023

Outstanding Convertible Preferred Shares

Adoption of New Accounting Pronouncements

In November 2023, the Financial Accounting Standards

Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which increases the disclosures about reportable segments including more detailed

information about a reportable segment’s expenses.

This guidance is effective for the Company for the fiscal year ended December

31, 2024 and the interim periods thereafter.

Adoption of this guidance had no effect on the Company’s results of operations, as the

changes are disclosure related.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU

2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures , which requires additional tax

disclosures about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

guidance will be effective on a prospective basis, with the option to apply it retrospectively, for fiscal years beginning after

December 15, 2024.

of the investments with gross unrealized losses have been in a continuous loss position for less than 12 months.

the years ended December 31, 2023 and 2022, the Company did not recognize any significant other-than-temporary impairment losses because

the Company does not intend to sell the investments before recovery of their amortized cost bases.

During the years ended December 31, 2023 and 2022,

there were net gains of approximately $ 167 and $ 180 , respectively, included in the Company’s net loss.

Accrued interest as of December

31, 2023 and 2022 was approximately $ 8 and $ 13 , respectively, and is included in prepaid expenses in the Company’s consolidated

balance sheets.

We are currently evaluating the impact of adopting this new accounting guidance.

In November 2024, the FASB issued ASU 2024-03,

Disaggregation of Income Statement Expenses , which requires additional disclosure of specific types of expenses included in the

expense captions presented on the face of the income statement as well as disclosures about selling expenses.

ASU 2024-03 is effective

for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

The requirements

will be applied prospectively with the option for retrospective application.

Early adoption is permitted.

We are currently evaluating

the impact of adopting this new accounting guidance.

Inventory, net

Inventory, net of reserves,

consisted of the following:

Inventory, net of reserves, consisted of the following:

Raw materials

Finished goods

Fixed Assets, net

assets, net, consisted of the following:

Propety and Equipment, net

Property and equipment, net, consisted of the following:

Construction in progress

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Office furniture

Fixed assets, gross

Property and equipment, gross

accumulated depreciation

in progress is made up of reusable components that will become Catamaran Tray Sets.

Depreciation expense was approximately $ 193 and $ 78

for the years ended December 31, 2023 and 2022, respectively.

expenses consisted of the following:

Property and equipment, net

Construction in progress is made up of reusable

components that are intended to be assembled into Catamaran Tray Sets.

Depreciation expense was approximately $ 395 and $ 193 for the years ended December 31,

2024 and 2023, respectively.

Accrued Expenses

Accrued expenses consisted of the following:

Accrued compensation

Accrued professional services fees

Other accrued expenses

accrued expenses

notes payable

November 2023, the Company entered into Securities Purchase Agreements with certain investors (the “Investors”), pursuant

to which the Company sold to the Investors a total of $ 1,250,000 in secured notes (the “Convertible Notes”) and warrants

to purchase 45,000 shares of the Company’s common stock at an exercise price equal to $ 1.94 per share.

Convertible Notes bear an interest rate of 10 % per annum with a default rate of 12 % per annum and have a maturity date of November 21,

All principal and accrued interest is payable at maturity.

At any time during the term of the Convertible Notes, the principal

amount together with all accrued interest thereon (the “Prepayment Amount”) may be paid in full, but not in part, by the

The Prepayment Amount may be paid by the Company in cash or by the issuance to the Investors of shares of Series A Preferred

Stock, if prior to such payment with Series A Preferred Stock (i) certain stockholder proposals described in the Convertible Notes are

approved by the Company’s stockholders;

and (ii) the Company has commitments from investors other than the Investors to purchase

shares of Series A Preferred Stock with a stated value of at least $ 3,750,000 .

The Convertible Notes are secured by a first priority

security interest in all of the assets of the Company.

The warrants expire five years from the issuance date.

The warrants contain a

“cashless exercise” feature and contain anti-dilution rights on subsequent issuances of equity or equity equivalents.

Total accrued expenses

Convertible notes payable

In November 2023, the Company entered into Securities

Purchase Agreements with certain investors (the “Investors”), pursuant to which the Company sold to the Investors a total

of $ 1,250 ,000 in secured notes (the “Convertible Notes”) and warrants to purchase 5,625 shares of the Company’s common

stock at an exercise price equal to $ 15.52 per share.

The Convertible Notes bear an interest rate of

10 % per annum with a default rate of 12 % per annum and have a maturity date of November 21, 2024 .

All principal and accrued interest is

payable at maturity.

At any time during the term of the Convertible Notes, the principal amount together with all accrued interest thereon

(the “Prepayment Amount”) may be paid in full, but not in part, by the Company.

The Prepayment Amount may be paid by the Company

in cash or by the issuance to the Investors of shares of Series A Preferred Stock, if prior to such payment with Series A Preferred Stock

(i) certain stockholder proposals described in the Convertible Notes are approved by the Company’s stockholders;

and (ii) the Company

has commitments from investors other than the Investors to purchase shares of Series A Preferred Stock with a stated value of at least

$ 3,750 ,000.

The Convertible Notes are secured by a first priority security interest in all of the assets of the Company.

expire five years from the issuance date.

The warrants contain a “cashless exercise” feature and contain anti-dilution rights

on subsequent issuances of equity or equity equivalents.

On February 20, 2024, the Investors agreed to

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This non-cancellable operating lease expires in June 2026 .

Operating lease costs for the facility lease were

$ 292 and $ 292 for the years ended December 31, 2023 and 2022, respectively.

balance sheet information related to leases was as follows:

lease right-of-use asset

lease costs for the facility lease were $ 292 and $ 292 for the years ended December 31, 2024 and 2023, respectively.

Supplemental balance sheet information related

to leases was as follows:

Operating lease right-of-use asset

Operating lease liability, current

Operating lease liability,

operating lease liabilities

maturities of operating lease liabilities as of December 31, 2023 were as follows:

Operating lease liability, noncurrent

Total operating lease liabilities

Future maturities of operating lease liabilities

as of December 31, 2024 were as follows:

Total lease payments

imputed interest

value of operating lease liabilities

Cash paid for operating leases

for the year ended December 31, 2023

Cash paid for operating leases for the year

ended December 31, 2022

Remaining lease term - operating leases (in

Present value of operating lease liabilities

Other information:

Cash paid for operating leases for the year ended December 31, 2024 $ 301

Cash paid for operating leases for the year ended December 31, 2023 $ 293

Remaining lease term - operating leases (in years) 1.50

Average discount rate - operating leases 8.0 %

Stockholders’

Company’s current Amended and Restated Certificate of Incorporation dated February 18, 2014 authorizes the issuance of 130,000,000

shares of common stock and 20,000,000 shares of preferred stock, both with a par value of $ 0.001 per share.

With respect to the preferred

stock, 4,500,000 shares are designated Series A Preferred Stock and 491,222 shares are designated Series B Preferred Stock.

As of December

31, 2023 and 2022, there were no shares of Series A Preferred stock or Series B Preferred Stock issued and outstanding.

Public Offering

April 26, 2022, the Company’s Registration Statement relating to the IPO was declared effective by the SEC.

The IPO consisted of

320,000 shares of common stock, par value $ 0.001 per share at a public offering price of $ 50.00 per share.

Pursuant to the Underwriting

Agreement dated April 26, 2022, between the Company, The Benchmark Company, LLC (“Benchmark”) and Valuable Capital Limited

(together with Benchmark, the “Underwriters”), the Company granted the Underwriters warrants to purchase a total of 9,600

shares of the Company’s common stock at an exercise price of $ 50.00 per share.

The warrants expire on the fifth anniversary of

the commencement of sales under the IPO.

On April 27, 2022, the shares of the Company’s common stock began trading on the Nasdaq

Capital Market LLC under the symbol “TNON.”

April 29, 2022, the IPO closed, and the Company received approximately $ 13.8 million in net proceeds from the IPO after deducting the

underwriting discount and commission and other estimated IPO expenses payable by the Company.

As a result of the completion of the IPO,

the Company converted the entirety of the outstanding principal and accrued interest of the convertible notes payable to 395,542 shares

of the Company’s common stock.

April 29, 2022, as result of the completion of the IPO, the Company converted all shares of Series A and Series B Preferred Stock to

269,334 shares of the Company’s common stock at the conversion rate detailed below and issued the common stock to the preferred

stockholders.

with the completion of the IPO and in accordance with the Amended and Restated Exclusive Sales Representative Agreement executed in May

2021, the counterparty to the agreement received anti-dilution protections to maintain ownership of 3.0 % of the fully diluted equity

of the Company through the date of an initial public offering and was issued 31,235 shares of the Company’s common stock to the

Representative, fully satisfying the Company’s obligations.

Also, as a result of the completion of the IPO, the Company issued

8,574 shares of its common stock to a consultant.

The value of these shares issued at the IPO price of $ 50.00 per share was charged to

operating expenses in the Company’s consolidated financial statements.

On June 16, 2023, the Company closed the Registered

Offering of a total of 1,000,000 units (the “Units”) for proceeds, net of issuance costs, of $ 4,808 , with each Unit consisting

of (i) one share of the Company’s common stock, and (ii) two warrants, each warrant to purchase one share of the Company’s

common stock at an exercise price equal to $ 5.60 per share (the “Offering Warrants”).

The Offering Warrants were exercisable

upon issuance and will expire five years from the date of issuance.

Per the terms of the Offering Warrants, the exercise price reset

on July 16, 2023 to $ 3.146 per share.

At-the-Market

Offering Program

May 4, 2023, the Company entered into an Equity Distribution Agreement to establish an at-the-market offering program, under which the

Company may sell from time to time, at its option, shares of its common stock having an aggregate gross sales price of $ 5.5 million.

The Company is required to pay the Sales Agents a commission of 3 % of the gross proceeds from the sale of shares and has also agreed

to provide the Sales Agents with customary indemnification rights.

Stockholders’ Equity

The Company’s current Amended and Restated

Certificate of Incorporation dated February 18, 2014 authorizes the issuance of 130,000,000 shares of common stock and 20,000,000 shares

of preferred stock, both with a par value of $ 0.001 per share.

With respect to the preferred stock, 4,500,000 shares are designated Series

A Preferred Stock and 491,222 shares are designated Series B Preferred Stock.

At-the-Market Offering Program

On May 4, 2023, the Company entered into an Equity

Distribution Agreement to establish an at-the-market offering program, under which the Company may sell from time to time, at its option,

shares of its common stock having an aggregate gross sales price of $ 5.5 million.

The Company is required to pay the Sales Agents a commission

of 3 % of the gross proceeds from the sale of shares and has also agreed to provide the Sales Agents with customary indemnification rights.

During the year ended December 31, 2023, 29,013 shares of the Company’s common stock were sold under the program at a weighted-average

price of $ 18.16 per share with aggregate net proceeds of $ 495 .

During the year ended December 31, 2024, 129,199 shares of the Company’s

common stock were sold under the program at a weighted-average price of $ 2.27 per share with aggregate net proceeds of $ 495 .

Line of Credit

July 24, 2023, the Company entered into a purchase agreement (“Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln

Park”), under which, subject to specified terms and conditions, the Company may sell to Lincoln Park up to $ 10 million of shares

of common stock from time to time during the term of the Purchase Agreement.

On September 22, 2023 (the “Commencement Date”),

the Company filed a registration statement with the Securities and Exchange Commission (the “SEC”), covering the resale of

shares of common stock issued to Lincoln Park under the Purchase Agreement.

on the Commencement Date and for a period of 24 months thereafter, under the terms and subject to the conditions of the Purchase Agreement,

from time to time, at the Company’s discretion, the Company has the right, but not the obligation, to sell to Lincoln Park, and

Lincoln Park is obligated to purchase, up to $ 10 million of shares of common stock, subject to certain limitations set forth in the Purchase

Specifically, from time to time from and after the Commencement Date, the Company may, at its discretion, direct Lincoln Park

to purchase on any single business day on which the closing price of its common stock on The Nasdaq Capital Market (“Nasdaq”)

is equal to or greater than $ 1.50 up to 10,000 shares of common stock (a “Regular Purchase”);

provided, that the Company

may direct Lincoln Park to purchase in a Regular Purchase (i) up to 12,500 shares of common stock, if the closing sale price of its common

stock on Nasdaq on such business day is at least $15.00 per share and (ii) up to 15,000 shares of common stock, if the closing sale price

of its common stock on Nasdaq on such business day is at least $25.00 per share .

In no case, however, will Lincoln Park’s commitment

with respect to any single Regular Purchase exceed $ 500,000 ;

provided, that the parties may mutually agree at any time to increase the

maximum number of shares of common stock the Company may direct Lincoln Park to purchase in any single Regular Purchase to up to 100,000

shares or any number of shares that shall not exceed 4.99 % of the then outstanding shares of common stock.

The foregoing share amounts

and per share prices will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or

other similar transaction occurring after the date of the Purchase Agreement with respect to our common stock.

The purchase price per

share for each such Regular Purchase will be based on prevailing market prices of the Company’s common stock immediately preceding

the time of sale, as determined under the Purchase Agreement.

holders of vested shares of common stock are entitled to vote on any matter submitted to a vote of the stockholders and each such holder

is entitled to one vote per share of common stock held.

The holders of Series A and Series B Preferred Stock were entitled to vote together

with the common stock as a single class on any matter submitted to a vote of the stockholders.

Holders of Series A and Series B Preferred

Stock were entitled to the number of votes equal to the number of common stock issuable upon conversion of their respective Series A

and Series B Preferred Stock at the time such shares are voted.

The holders of a majority of the preferred stock had additional voting

rights as specified in the Company’s Amended and Restated Certificate of Incorporation, as amended.

2012, the Board of Directors of the Company (the “Board”) approved the Tenon Medical, Inc.

2012 Equity Incentive Plan (the

“2012 Plan”).

The 2012 Plan provided for the issuance of common stock options, appreciation rights, and other awards to employees,

directors, and consultants.

Options issued under the 2012 Plan generally vest over a period of two to four years and have a 10 -year expiration

common stock were sold under the program at a weighted-average price of $ 14.63 per share with aggregate proceeds, net of issuance costs,

2023 Registered Offering

On June 16, 2023, the Company closed the Registered Offering of a total of 1,000,000 units (the “Units”)

for proceeds, net of issuance costs, of $ 4,808 , with each Unit consisting of (i) one share of the Company’s common stock, and (ii)

two warrants, each warrant to purchase one share of the Company’s common stock at an exercise price equal to $ 44.80 per share (the

“Offering Warrants”).

The Offering Warrants were exercisable upon issuance and will expire five years from the date of issuance.

Per the terms of the Offering Warrants, the exercise price reset on July 16, 2023 to $ 25.168 per share.

Equity Line of Credit

On July 24, 2023, the Company entered into a purchase

agreement (“Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), under which, subject to

specified terms and conditions, the Company may sell to Lincoln Park up to $ 10 million of shares of common stock from time to time during

the term of the Purchase Agreement.

On September 22, 2023 (the “Commencement Date”) and on May 10, 2024, the Company filed

registration statements with the SEC covering the resale of shares of common stock issued to Lincoln Park under the Purchase Agreement.

Beginning on the Commencement Date and for a period

of 24 months thereafter, under the terms and subject to the conditions of the Purchase Agreement, from time to time, at the Company’s

discretion, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up

to $ 10 million of shares of common stock, subject to certain limitations set forth in the Purchase Agreement.

Specifically, from time

to time from and after the Commencement Date, the Company may, at its discretion, direct Lincoln Park to purchase on any single business

day on which the closing price of its common stock on The Nasdaq Capital Market (“Nasdaq”) is equal to or greater than $ 1.50

up to 10,000 shares of common stock (a “Regular Purchase”);

provided, that the Company may direct Lincoln Park to purchase

in a Regular Purchase (i) up to 12,500 shares of common stock, if the closing sale price of its common stock on Nasdaq on such business

day is at least $15.00 per share and (ii) up to 15,000 shares of common stock, if the closing sale price of its common stock on Nasdaq

on such business day is at least $25.00 per share .

In no case, however, will Lincoln Park’s commitment with respect to any single

Regular Purchase exceed $ 500,000 ;

provided, that the parties may mutually agree at any time to increase the maximum number of shares of

common stock the Company may direct Lincoln Park to purchase in any single Regular Purchase to up to 100,000 shares or any number of shares

that shall not exceed 4.99 % of the then outstanding shares of common stock.

The foregoing share amounts and per share prices will be adjusted

for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring after

the date of the Purchase Agreement with respect to our common stock.

The purchase price per share for each such Regular Purchase will

be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale, as determined under the

Purchase Agreement.

During the year ended December 31, 2024, 48,849

shares of the Company’s common stock were sold under the program at a weighted-average price of $ 5.56 per share with aggregate net

proceeds of $ 260 .

Series A Preferred Stock

On February 20, 2024, the Company entered into

a Securities Purchase Agreement with certain investors, pursuant to which the Company agreed to sell, issue and deliver to these investors,

in a private placement offering, a total of 172,239 shares of the Company’s Series A Preferred Stock and warrants (the “Series

A Warrants”) to purchase 258,374 shares of Common Stock at an exercise price equal to $ 1.2705 per share for net proceeds of $ 2,437

after deducting offering costs.

Additionally, on February 20, 2024, the Investors

agreed to a complete prepayment of the Company’s obligations under the Convertible Notes, including accrued interest, in exchange

for 84,729 shares of Series A Preferred Stock and warrants to purchase 157,094 shares of our common stock at $ 1.2705 per share and the

Convertible Notes were cancelled.

The Series A Warrants are immediately exercisable and expire five years from the date of issuance.

The Series A Preferred Stock is convertible, at

any time, at the option of the holder into shares of Common Stock.

Each share of Series A Preferred Stock shall be convertible, at any

time after the date of issuance, at the option of the holder thereof (or, upon a Required Conversion (as defined below), at the option

of the Corporation), into that number of shares of Common Stock determined by dividing the Stated Value (as defined below) for such share

of Series A Preferred Stock by the Conversion Price (as defined below).

“Stated Value” means for any share of Series A Preferred

Stock, an amount equal to the product of (x) $15.125 multiplied by (y) the sum of 1 plus the product of (A) 0.06 multiplied by (B) a fraction

equal to the number of days that such share of Series A Preferred Stock has been issued divided by 365.

“Conversion Price”

means (i) for the shares of Series A Preferred Stock issued on the Closing Date, $1.5125 and (ii) for each share of Series A Preferred

Stock issued thereafter, an amount equal to the greater of (x) $1.5125 and the average of the VWAPs for the 10 Trading Days prior the

issuance date of such share of Series A Preferred Stock, in each case subject to adjustment as set forth herein.

On any date that ten

out of the last 15 daily VWAPs of the Common Stock is 250% higher than the Conversion Price on such date, then the Company will have the

right to require 50% of the Preferred Stock to be converted into shares of Common Stock.

Additionally, on and after the time on which

the Company has $2.25 million in revenues in any single financial quarter, the Company will have the right to require 50% of the Preferred

Stock to be converted into shares of Common Stock (a “Required Conversion”).

No dividends are payable on the Series A Preferred

The Series A Preferred Stock will vote together with the Common Stock on all matters other than as required by law;

provided however

that any additional shares underlying the Series A Preferred Stock as a result of the anti-dilution provision described below shall not

vote on an “as converted” basis and shall only vote when issued upon conversion.

Notwithstanding the foregoing, the vote of

an individual holder of Series A Preferred Stock (and underlying Common Stock) shall be capped at 9.99% (or 4.99% if selected by the holder).

The Conversion Price is subject to anti-dilution

adjustment as the result of any subdivision, combination of shares or recapitalization, stock dividends, stock splits and similar transactions

affecting the Common Stock.

In addition, the Series A Preferred Stock will have weighted average anti-dilution protection providing for

adjustment of the Conversion Price in the event of issuance of, or commitments to issue, Common Stock for less than the Conversion Price

then in effect immediately prior to such issue or sale (a “Dilutive Issuance”), subject to customary exceptions;

however the anti-dilution for Dilutive Issuances shall not be operative until the stockholders of the Company have approved the terms

of the Series A Preferred Stock, which approval was granted at the annual shareholder meeting on July 23, 2024.

Upon any liquidation or winding up of the Company (a “Liquidation”), the holders of Series

A Preferred Stock will be entitled to receive in preference to any other class or series of the Company’s equity securities the

greater of (i) the Stated Value plus accrued and unpaid dividends and (ii) what would be paid if the Series A Preferred Stock plus accrued

and unpaid dividends had been converted into Common Stock.

A consolidation or merger of the Company or sale or transfer of all or substantially

all of its assets, or any transaction which results in the stockholders of the Company owning less than 50 % of the equity or voting power

of the surviving entity (excluding the issuance of Common Stock in any financing transaction unless more than 50 % of the Company’s

shares are issued to one stockholder or a number of stockholders who act as a one group) shall be deemed a Liquidation (a “Deemed

Liquidation”) with respect to the shares of Series A Preferred Stock of any holder who opts to have such occurrence treated as a

Deemed Liquidation;

provided that if the liquidation preference payable on a Deemed Liquidation is less than 110 % of the stated value

of the Series A Preferred Stock, the dividend rate on any accrued and unpaid dividends payable with respect to such Deemed Liquidation

will increase to 10 %.

All liquidation preferences payable in respect of a Deemed Liquidation will be payable in shares of Common Stock

based on the closing price of the Common Stock on the date of such Deemed Liquidation.

Consent of the majority of the holders will be

required to (i) amend the Certificate of Incorporation or Bylaws of the Company so as to adversely alter the rights, preferences, privileges

of the Series A Preferred Stock, (ii) create any new class of shares pari passu or senior to the Series A Preferred Stock or increase

or decrease the number of authorized shares of Common Stock or preferred stock, (iii) pay or declare any dividend on Common Stock or other

junior securities, or incur indebtedness in any single transaction in excess of $ 1 million or (iv) redeem, purchase or otherwise acquire

any share or shares of preferred stock or Common Stock (other than (a) the repurchase of shares of Common Stock pursuant to a written

benefit plan or employment or consulting agreement, or (b) the repurchase of any equity securities in connection with the Company’s

right of first offer with respect to those securities contained in any written agreement with the Company).

Series B Preferred Stock

On September 5, 2024, the Company entered into

a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors, pursuant to which the Company agreed to

sell, issue and deliver to the Investors, in a private placement offering, a total of 86,454 shares of the Company’s Series B Preferred

Stock (the “Series B Preferred Stock”) and warrants (the “Series B Warrants”) to purchase 16,214 shares of Common

Stock at an exercise price equal to $ 4.2756 per share for net proceeds of $ 489,000 after deducting offering costs.

The Series B Warrants

are immediately exercisable and expire five years from the date of issuance.

The Series B Preferred Stock is convertible, at

any time, at the option of the holder into shares of Common Stock.

Each share of Series B Preferred Stock shall be convertible, at any

time after the date of issuance, at the option of the holder thereof (or, upon a Required Conversion (as defined below), at the option

of the Corporation), into that number of shares of Common Stock determined by dividing the Stated Value (as defined below) for such share

of Series B Preferred Stock by the Conversion Price (as defined below).

“Stated Value” means for any share of Series B Preferred

Stock, an amount equal to the product of (x) $6.3625 multiplied by (y) the sum of 1 plus the product of (A) 0.06 multiplied by (B) a fraction

equal to the number of days that such share of Series B Preferred Stock has been issued divided by 365.

“Conversion Price”

means $5.09 per share, subject to adjustment as set forth herein.

On any date that ten out the last 15 daily VWAPs of the Common Stock

is 250% higher than the Conversion Price on such date, then the Company will have the right to require 50% of the Preferred Stock to be

converted into shares of Common Stock.

Additionally, on and after the time on which the Company has $2.25 million in revenues in any single

financial quarter, the Company will have the right to require 50% of the Preferred Stock to be converted into shares of Common Stock (a

“Required Conversion”).

No dividends are payable on the Series B Preferred Stock.

The Series B Preferred Stock will vote together

with the Common Stock on all matters other than as required by law;

provided however that any additional shares underlying the Series

B Preferred Stock as a result of the anti-dilution provision described below shall not vote on an “as converted” basis and

shall only vote when issued upon conversion.

Notwithstanding the foregoing, the vote of an individual holder of Series B Preferred Stock

(and underlying Common Stock) shall be capped at 9.99% (or 4.99% if selected by the holder).

The Conversion Price is subject to anti-dilution

adjustment as the result of any subdivision, combination of shares or recapitalization, stock dividends, stock splits and similar transactions

affecting the Common Stock.

In addition, the Series B Preferred Stock will have weighted average anti-dilution protection providing for

adjustment of the Conversion Price in the event of issuance of, or commitments to issue, Common Stock for less than the Conversion Price

then in effect immediately prior to such issue or sale (a “Dilutive Issuance”), subject to customary exceptions;

however the anti-dilution for Dilutive Issuances shall not be operative until the stockholders of the Company have approved the terms

of the Series B Preferred Stock.

Upon any liquidation or winding up of the Company (a “Liquidation”), the holders of Series

B Preferred Stock will be entitled to receive in preference to any other class or series of the Company’s equity securities the

greater of (i) the Stated Value plus accrued and unpaid dividends and (ii) what would be paid if the Series B Preferred Stock plus accrued

and unpaid dividends had been converted into Common Stock.

A consolidation or merger of the Company or sale or transfer of all or substantially

all of its assets, or any transaction which results in the stockholders of the Company owning less than 50 % of the equity or voting power

of the surviving entity (excluding the issuance of Common Stock in any financing transaction unless more than 50 % of the Company’s

shares are issued to one stockholder or a number of stockholders who act as a one group) shall be deemed a Liquidation (a “Deemed

Liquidation”) with respect to the shares of Series B Preferred Stock of any holder who opts to have such occurrence treated as a

Deemed Liquidation;

provided that if the liquidation preference payable on a Deemed Liquidation is less than 110 % of the stated value

of the Series B Preferred Stock, the dividend rate on any accrued and unpaid dividends payable with respect to such Deemed Liquidation

will increase to 10 %.

All liquidation preferences payable in respect of a Deemed Liquidation will be payable in shares of Common Stock

based on the closing price of the Common Stock on the date of such Deemed Liquidation.

Consent of the majority of the holders will be

required to (i) amend the Certificate of Incorporation or Bylaws of the Company so as to adversely alter the rights, preferences, privileges

of the Series B Preferred Stock, (ii) create any new class of shares pari passu or senior to the Series B Preferred Stock or increase

or decrease the number of authorized shares of Common Stock or preferred stock, (iii) pay or declare any dividend on Common Stock or other

junior securities, or incur indebtedness in any single transaction in excess of $ 1 million or (iv) redeem, purchase or otherwise acquire

any share or shares of preferred stock or Common Stock (other than (a) the repurchase of shares of Common Stock pursuant to a written

benefit plan or employment or consulting agreement, or (b) the repurchase of any equity securities in connection with the Company’s

right of first offer with respect to those securities contained in any written agreement with the Company)

2024 Public Offering

On September 12, 2024, the Company entered into

a placement agency agreement (the “Placement Agency Agreement”) with A.G.P./Alliance Global Partners (the “Placement

Agent”), and a securities purchase agreement (the “Purchase Agreement”) with a single health-care focused institutional

investor pursuant to which the Company agreed to issue and sell, in a “reasonable best efforts” public offering (the “Offering”),

(i) 55,000 shares (the “Shares”) of the Company’s common stock, par value $ 0.001 (the “Common Stock”), (ii)

pre-funded warrants to purchase up to 1,167,850 shares of Common Stock (the “Pre-Funded Warrants”) and (iii) warrants to purchase

up to 1,222,850 shares of Common Stock at an exercise price of $ 3.55 per share (the “Common Warrants”) at a combined offering

price of $ 3.68 per Share and accompanying Common Warrant, and $ 3.68 , less $ 0.0001 per Pre-Funded Warrant and accompanying Common Warrant

for net proceeds of $ 3,846 after deducting offering costs.

The Common Warrants were exercisable upon issuance and will expire five years

from the date of issuance.

2024 Warrant Inducement

On September 16, 2024, the Company entered into

an Inducement Letter with Armistice Capital, LLC (the “Selling Stockholder”) who held all of the Common Warrants.

to the Inducement Letter, the Selling Stockholder agreed to exercise the Common Warrants for cash at the exercise price of $ 3.55 per share

in consideration for the Company’s agreement to issue, for an additional payment of $ 0.125 per New Warrant, (i) the Series A New

Warrants to purchase up to an aggregate of 1,222,850 shares of Common Stock at an exercise price of $ 4.28 per share, which are exercisable

for five years after issuance and (ii) the Series B New Warrants to purchase up to an aggregate of 1,222,850 shares of Common Stock at

an exercise price of $ 4.28 per share, which are exercisable for three years after issuance.

The Company received net proceeds of approximately

$ 4,306 from the exercise of the Common Warrants and the placement of the New Warrants, after deducting financial advisor fees and other

transaction expenses.

The warrant inducement was accounted for as a modification of the Common Warrants.

Voting rights

The holders of vested shares of common stock are

entitled to vote on any matter submitted to a vote of the stockholders and each such holder is entitled to one vote per share of common

The holders of Series A and Series B Preferred Stock are entitled to vote together with the common stock as a single class

on any matter submitted to a vote of the stockholders.

Holders of Series A and Series B Preferred Stock are entitled to the number of

votes equal to the number of common stock issuable upon conversion of their respective Series A and Series B Preferred Stock at the time

such shares are voted.

The holders of a majority of the preferred stock had additional voting rights as specified in the Company’s

Amended and Restated Certificate of Incorporation, as amended.

Equity awards

In 2012, the Board of Directors of the Company

(the “Board”) approved the Tenon Medical, Inc.

2012 Equity Incentive Plan (the “2012 Plan”).

The 2012 Plan provides

for the issuance of common stock options, appreciation rights, and other awards to employees, directors, and consultants.

Options issued

under the 2012 Plan generally vest over a period of two to four years and have a 10-year expiration date.

In April 2021, the Board increased

the number of shares of common stock reserved for issuance under the 2012 Plan to 662,516 .

In July 2021, the Board increased the number

of shares of common stock reserved for issuance under the 2012 Plan to 737,516 .

In August 2021, the Board increased the number of shares

of common stock reserved for issuance under the 2012 Plan from 737,516 shares to 799,266 shares and approved the form of a 2022 Equity

Incentive Plan.

On January 10, 2022 and February 2, 2022, the

2 unchanged sentences

which was effective on April 25, 2022.

The initial number of shares of common stock subject to awards under the 2022 Plan was 160,000 .

The 2022 Plan calls for automatic annual increases in the number of shares available for issuance equal to the least of (a) 110,000 shares,

(b) 4 % of the total number of shares of all classes of common stock outstanding on the last day of the immediately preceding fiscal year,

or (c) such number determined by the 2022 Plan administrator no later than the last day of the immediately preceding fiscal year.

increases will continue until the tenth anniversary of the earlier of the Board or stockholder approval of the 2022 Plan, which is January

Upon the effective date of the 2022 Plan, the Board terminated the 2012 Plan such that no new equity awards will be issued

by the 2012 Plan.

expense for the years ended December 31, 2023 and 2022 includes the portion of awards vested in the periods for all equity-based awards

granted, based on the grant date fair value.

estimated using a Black-Scholes option valuation model.

Grant date fair value for restricted

stock units is estimated using the fair value of the Company’s common stock on the date of grant.

Grant date fair value for stock

options is estimated using a Black-Scholes option valuation model using the weighted-average assumptions in the table below:

The number of shares of common stock that may be subject to awards and sold under the 2022 Plan

is equal to 1,600,000 .

Automatic annual increases in number of shares available for issuance under the 2022 Plan is equal to the least

of (a) 1,100,000 shares, (b) 4 % of the total number of shares of all classes of common stock outstanding on the last day of the immediately

preceding fiscal year, or (c) such number determined by the 2022 Plan administrator no later than the last day of the immediately preceding

Annual increases will continue until the tenth anniversary of the earlier of the Board or stockholder approval of the 2022

Plan, which is January 10, 2032.

Upon the effective date of the 2022 Plan, the Board terminated the 2012 Plan such that no new equity

awards will be issued by the 2012 Plan.

Option Exchange

On April 8, 2024, the Company issued an offer

to holders of outstanding stock options to purchase an aggregate of 11,387 shares of the Company’s common stock to exchange their

options for a lesser number of new restricted stock units (“RSUs”) to be granted under the 2022 Plan upon the terms and subject

to the conditions set forth in the Offer to Exchange Certain Outstanding Stock Options for Restricted Stock Units (the “Offer to

The Offer to Exchange expired on May 6, 2024.

A total of 27 eligible participants participated in the exchange.

Company accepted for exchange options to purchase an aggregate of 10,436 shares of common stock of the Company.

All surrendered options

were cancelled effective as of the expiration of the Option Exchange, and immediately thereafter, in exchange therefor, the Company granted

a total of 5,226 new RSUs under the 2022 Plan.

The incremental fair value of the new RSUs that were vested at the issuance date was $ 32

and was immediately expensed.

Compensation expense for the years ended December

31, 2024 and 2023 includes the portion of awards vested in the periods for all equity-based awards granted, based on the grant date fair

value as estimated using a Black-Scholes option valuation model.

Grant date fair value for restricted stock units is estimated using the

fair value of the Company’s common stock on the date of grant.

Grant date fair value for stock options is estimated using a Black-Scholes

option valuation model using the weighted-average assumptions in the table below:

Years ended December 31,

Expected volatility 68.37 % 63.89 %

2 unchanged sentences

Expected term in years 5.61 5.85

of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards,

and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company in accordance

with authoritative guidance.

summary of the Company’s share option and restricted stock unit activity under its plans is as follows:

Estimates of fair value are not intended to predict

actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative

of the reasonableness of the original estimates of fair value made by the Company in accordance with authoritative guidance.

A summary of the Company’s share option

and restricted stock unit activity under its plans is as follows:

Price per Share

RSUs Weighted

Average Grant

of December 31, 2021

Balance as of December 31, 2022 11,252 $ 379.44 8.10 16,492 $ 634.20

Granted 1,882 $ 103.25 938 $ 23.28

( 7,637 ) $ 656.51

Canceled ( 357 ) $ 319.39 ( 156 ) $ 708.80

Balance as of December 31, 2023 12,777 $ 340.44 7.41 9,637 $ 555.85

Granted 10,621 $ 5.59 21,309 $ 6.67

( 10,072 ) $ 344.54

Canceled ( 12,076 ) $ 346.20 ( 650 ) $ 22.64

Balance as of December 31, 2024 11,322 $ 20.79 9.32 20,244 $ 99.58

Exercisable at December 31, 2024 2,733 $ 66.44 8.89

weighted-average grant-date fair value of options granted during the years ended December 31, 2023 and 2022 was $ 7.63 and $ 12.90 , respectively.

The aggregate intrinsic value of outstanding options at December 31, 2023 was $ 0 .

The aggregate intrinsic value is equal to the difference

between the exercise price of the underlying option and the fair value of the Company’s common stock for in-the-money options.

As of December 31, 2023, total compensation cost not yet recognized related to unvested options was $ 414 , which is expected to be recognized

over a weighted-average period of 0.99 years, and total compensation costs not yet recognized related to unvested RSUs was $ 4,773 , which

is expected to be recognized over a weighted-average period of 1.40 years.

following table sets forth stock-based compensation expense recognized for the years ended December 31, 2023 and 2022:

The weighted-average grant-date fair value of

options granted during the years ended December 31, 2024 and 2023 was $ 3.95 and $ 61.00 , respectively.

The aggregate intrinsic value of

outstanding options at December 31, 2024 was $0 .

The aggregate intrinsic value is equal to the difference between the exercise price of

the underlying option and the fair value of the Company’s common stock for in-the-money options.

As of December 31, 2024, total

compensation cost not yet recognized related to unvested options was $ 29 , which is expected to be recognized over a weighted-average period

of 1.57 years, and total compensation costs not yet recognized related to unvested RSUs was $ 1,443 , which is expected to be recognized

over a weighted-average period of 0.48 years.

The following table sets forth stock-based compensation

expense recognized for the years ended December 31, 2024 and 2023:

Years ended December 31,

Research and development

1 unchanged sentence

General, and administrative

stock-based compensation expense

December 31, 2023, there were 37,486 shares available for issuance under the 2022 Plan.

April 2022, as noted above, the Company granted the Underwriters warrants to purchase a total of 9,600 shares of the Company’s

common stock.

The warrants are immediately exercisable at an exercise price of $ 50.00 per share and expire on the fifth anniversary of

the commencement of sales under the IPO.

The fair value of the warrants on the grant date was $ 27.50 per warrant, which was calculated

using a Black-Scholes option valuation model with an expected term of 5.00 years, expected volatility of 62.55 %, dividend yield of 0 %,

and risk-free interest rate of 2.92 %.

The Company recorded the fair value of these warrants of approximately $ 264 as an issuance cost

to additional paid-in capital in 2022.

As the IPO issuance costs were also recorded to additional paid-in capital, the net impact was

June 2023, as noted above, in connection with the Registered Offering, the Company issued Offering Warrants to purchase a total of 2,000,000

shares of the Company’s common stock.

The Offering Warrants were exercisable upon issuance at an exercise price of $ 5.60 per share

and will expire five years from the date of issuance.

Per the terms of the Offering Warrants, the exercise price of the Offering Warrants

reset on July 16, 2023, to a price equal to the greater of (i) $ 2.80 per share and (ii) 100 % of the last VWAP (as defined in the Warrants)

on July 14, 2023, which was $ 3.146 per share.

The fair value of the Offering Warrants on the grant date was approximately $ 3,164 , or

$ 1.58 per warrant, which was calculated using a Monte-Carlo simulation to estimate the final exercise price, which is considered a Level

3 fair value measurement, using as inputs;

the starting value of $ 3.00 per share, the Company’s VWAP on June 16;

an assumed daily

distribution of returns;

Total stock-based compensation expense

At December 31, 2024, there were 135,971 shares

available for issuance under the 2022 Plan.

In April 2022, in association with the Company’s

initial public offering, the Company granted to The Benchmark Company, LLC and Valuable Capital Limited warrants to purchase a total of

1,200 shares of Common Stock.

The warrants were immediately exercisable at an exercise price of $ 400.00 per share and expire on the fifth

anniversary of the commencement of sales under the IPO.

The fair value of the warrants on the grant date was $ 220.00 per warrant, which

was calculated using a Black-Scholes option valuation model with an expected term of 5.00 years, expected volatility of 62.55 %, dividend

yield of 0 %, and risk-free interest rate of 2.92 %.

The Company recorded the fair value of these warrants of $ 264 as an issuance cost to

additional paid-in capital in 2022.

In June 2023, in connection with a registered

offering of stock, the Company issued warrants to purchase a total of 250,000 shares of Common Stock (the “Offering Warrants”).

The Offering Warrants were exercisable upon issuance and will expire five years from the date of issuance.

Per the terms of the Offering

Warrants, the exercise price of the Offering Warrants reset on July 16, 2023, to $ 25.168 per share.

The fair value of the Offering Warrants

on the grant date of $ 3,164 , or $ 12.64 per warrant, was calculated using a Monte-Carlo simulation to estimate the final exercise price,

which is considered a Level 3 fair value measurement, using as inputs;

the starting value of $ 24.00 per share, the Company’s VWAP

an assumed daily distribution of returns;

a mean daily return of 5.18 %;

a short-term annual volatility of 100 % and a standard deviation of 6.3 %.

used Black-Scholes to then calculate the estimated fair value of the Offering Warrants, using an estimated time to maturity of 4.9 years,

a risk-free interest rate of 3.99 % and a long-term volatility of 60 %.

Based on the accounting guidance under ASC 815, the Company determined

that the Offering Warrants did not meet the criteria for classification as equity as of June 30, 2023.

Accordingly, the Company classified

the fair value of the Offering Warrants as a liability.

As of July 16, 2023, with the resolution of the reset value, the Company has

determined that the Offering Warrants do meet the criteria for classification as equity and the fair value of the Offering Warrants has

been reclassified to additional paid-in capital on the Company’s consolidated balance sheet as of that date.

November 2023, in connection with the issuance of the Convertible Notes, the Company issued warrants to purchase a total of 45,000 shares

of the Company’s common stock at an exercise price equal to $ 1.94 per share.

a short-term annual volatility of 100 % and a standard

deviation of 6.3 %.

The model used Black-Scholes to then calculate the estimated fair value of the Offering Warrants, using an estimated

time to maturity of 4.9 years, a risk-free interest rate of 3.99 % and a long-term volatility of 60 %.

In November 2023, in connection with the issuance

of the Convertible Notes, the Company issued warrants to purchase a total of 5,625 shares of Common Stock at an exercise price equal to

$ 15.52 per share.

The warrants expire five years from the issuance date.

The fair value of the warrants on the grant date was $ 1.29 per warrant, which was calculated using a Black-Scholes option valuation model

The fair value of the warrants on the grant date was $ 10.32 per

warrant, which was calculated using a Black-Scholes option valuation model with an expected term of 5 .00 years, expected volatility of

68.89 %, dividend yield of 0 %, and risk-free interest rate of 4.41 %.

The Company recorded the fair value of these warrants of approximately

$ 58 as an issuance cost to additional paid-in capital in 2023.

On February 20, 2024, in connection with the issuance

of Series A Preferred Stock, the Company issued the Series A Warrants to purchase a total of 51,937 shares of Common Stock at an exercise

price equal to $ 4.28 per share.

The Series A Warrants are immediately exercisable and expire five years from the date of issuance.

fair value of the Series A Warrants on the grant date was $ 4.88 per warrant, which was calculated using a Black-Scholes option valuation

model with an expected term of 5 .00 years, expected volatility of 68.24 %, dividend yield of 0 %, and risk-free interest rate of 4.3 %.

Company recorded the fair value of these warrants of $ 254 to additional paid-in capital in 2024.

On September 5, 2024, in connection with the issuance

of Series B Preferred Stock, the Company issued the Series B Warrants to purchase a total of 16,214 shares of Common Stock at an exercise

price equal to $ 4.28 per share.

The Series B Warrants are immediately exercisable and expire five years from the date of issuance.

fair value of the Series B Warrants on the grant date was $ 2.25 per warrant, which was calculated using a Black-Scholes option valuation

model with an expected term of 5 .00 years, expected volatility of 68.40 %, dividend yield of 0 %, and risk-free interest rate of 3.5 %.

Company recorded the fair value of these warrants of $ 37 to additional paid-in capital in 2024.

On September 16, 2024, in connection with the

Warrant Inducement agreement, the Company issued Series A New Warrants to purchase a total of 1,222,850 shares of Common Stock at an exercise

price of $ 4.28 per share, which are exercisable for five years after issuance and Series B New Warrants to purchase a total of 1,222,850

shares of Common Stock at an exercise price of $ 4.28 per share, which are exercisable for three years after issuance.

The fair value of

the Series A New Warrants on the grant date was $ 5.49 per warrant, which was calculated using a Black-Scholes option valuation model with

an expected term of 5.00 years, expected volatility of 68.40 %, dividend yield of 0 %, and risk-free interest rate of 3.4 %.The fair value

of the Series B New Warrants on the grant date was $ 4.87 per warrant, which was calculated using a Black-Scholes option valuation model

with an expected term of 3.00 years, expected volatility of 68.40 %, dividend yield of 0 %, and risk-free interest rate of 3.4 %.

recorded the fair value of these warrants of approximately $ 58 as an issuance cost to additional paid-in capital in 2023.

recorded the fair value of these warrants to additional paid-in capital in 2024.

Commitments and Contingencies

Representative Agreement

April 2020, the Company entered into an Exclusive Sales Representative Agreement, under which the counterparty to the agreement (the

“Representative”) received exclusive rights to market, promote, and distribute The Catamaran System in the United States

and Puerto Rico.

The agreement is for an initial period of five years , and automatically renews for an additional five years unless written

notice is given by either party prior to April 27, 2023.

The agreement provides for a bonus to be paid to the Representative upon an

acquisition or IPO.

In May 2021, the Company entered into an Amended and Restated Exclusive Sales Representative Agreement (the “Restated

Sales Agreement”).

In connection with the amended agreement, the Company paid $ 500 cash and issued 53,757 shares of common stock

to the Representative, for which the Company recorded a combined total of approximately $ 880 as sales and marketing expense.

the Representative received anti-dilution protections to maintain ownership of 3.0 % of the fully diluted equity of the Company through

the date of an initial public offering.

In October 2021, the Company issued 4,445 shares of common stock with a fair value of approximately

$ 333 to the Representative in accordance with the anti-dilution provision.

In April 2022, the Company issued 31,235 shares of common

stock to the Representative in accordance with the anti-dilution provision, fully satisfying the Company’s obligations.

Restated Sales Agreement restructured the calculation of the bonus paid to the Representative upon an acquisition, removed the bonus

payable upon an IPO, and allows the Company to terminate the Restated Sales Agreement as long as the bonus paid to the Representative

is at least $ 6,000 .

Sales Representative Agreement

In April 2020, the Company entered into an Exclusive

Sales Representative Agreement, under which the counterparty to the agreement (the “Representative”) received exclusive rights

to market, promote, and distribute The Catamaran System in the United States and Puerto Rico.

The agreement is for an initial period of

five years , and automatically renews for an additional five years unless written notice is given by either party prior to April 27, 2023.

The agreement provides for a bonus to be paid to the Representative upon an acquisition or IPO.

In May 2021, the Company entered into

an Amended and Restated Exclusive Sales Representative Agreement (the “Restated Sales Agreement”).

In connection with the

amended agreement, the Company paid $ 500 cash and issued 53,757 shares of common stock to the Representative, for which the Company recorded

a combined total of $ 880 as sales and marketing expense.

In addition, the Representative received anti-dilution protections to maintain

ownership of 3.0 % of the fully diluted equity of the Company through the date of an initial public offering.

In October 2021, the Company

issued 4,445 shares of common stock with a fair value of approximately $ 333 to the Representative in accordance with the anti-dilution

In April 2022, the Company issued 31,235 shares of common stock to the Representative in accordance with the anti-dilution

provision, fully satisfying the Company’s obligations.

The Restated Sales Agreement restructured the

calculation of the bonus paid to the Representative upon an acquisition, removed the bonus payable upon an IPO, and allows the Company

to terminate the Restated Sales Agreement as long as the bonus paid to the Representative is at least $ 6,000 .

On October 6, 2022, the Company entered into

the Terminating Amended and Restated Exclusive Sales Representative Agreement (the “Termination Agreement”) with the Representative,

which terminated the Restated Sales Agreement.

In accordance with the Termination Agreement, (i) the Company paid the Representative

$ 1,000 in cash;

and (ii) the Company 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 the Company, (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 of

the Company, the Company will pay the Representative $ 3,600 less previous amounts paid pursuant to clause (b) and clause (c) above.

Company recorded a charge of $ 1,000 for the payment to the Representative in the fourth quarter of 2022 and expensed the $ 85 per month

charges as incurred over the six-month period.

For payments under clause (b) and clause (c) above, the Company estimated the fair value

of the liability using level 3 hierarchy inputs based on a Monte Carlo simulation of future revenues with a 25 % quarterly estimated standard

deviation of growth rates and a 10 % probability of dissolution, discounted at an estimated discount rate of 15.4 %.

Based on the Company’s

fair value analysis, a total of $ 2,611 was charged to sales and marketing expense in the consolidated statements of operations and comprehensive

loss and recorded as accrued commissions in the consolidated balance sheets.

A reconciliation of the liability under clause (b) and clause

the Terminating Amended and Restated Exclusive Sales Representative Agreement (the “Termination Agreement”) with the

Representative, which terminated the Restated Sales Agreement.

In accordance with the Termination Agreement, (i) the Company paid

the Representative $1,000 in cash;

and (ii) the Company 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 the Company, (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

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

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

The Company recorded a charge of $1,000 for the payment to the Representative in the

fourth quarter of 2022 and expensed the $85 per month charges as incurred over the six-month period.

For payments under clause (b)

and clause (c) above, the Company estimated the fair value of the liability using level 3 hierarchy inputs based on a Monte Carlo

simulation of future revenues with a 25% quarterly estimated standard deviation of growth rates and a 10% probability of

dissolution, discounted at an estimated discount rate of 15.4%.

Based on the Company’s fair value analysis, a total of $2,611

was charged to sales and marketing expense in the 2022 consolidated statements of operations and comprehensive loss and recorded as

accrued commissions in the consolidated balance sheets.

A reconciliation of the liability under clause

(b) and clause (c) for the year ended December 31, 2024 is as follows:

Balance at January 1, 2024

1 unchanged sentence

Balance at December 31, 2024

the terms of the Termination Agreement, the Company ultimately expects to expense $ 3,600 under clause (b) and clause (c).

Simultaneously

with the execution of the Termination Agreement, the Company entered into a Consulting Agreement dated October 6, 2022, with the Representative

(the “Consulting Agreement”).

Under the terms and conditions of the Consulting Agreement, the Representative is tasked with

organizing, recruiting, training, and coordinating the Company’s Clinical Specialist program, Physician Education program and Sales

Education program as more specifically described in the Consulting Agreement.

Per the terms of the Termination Agreement, the

Company ultimately expects to expense $ 3,600 under clause (b) and clause (c).

Simultaneously with the execution of the Termination

Agreement, the Company entered into a Consulting Agreement dated October 6, 2022, with the Representative (the “Consulting Agreement”).

Under the terms and conditions of the Consulting Agreement, the Representative is tasked with organizing, recruiting, training, and coordinating

the Company’s Clinical Specialist program, Physician Education program and Sales Education program as more specifically described

in the Consulting Agreement.

The term of the Consulting Agreement was from

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along with additional compensation of $ 62.5 per quarter, if certain sales targets were met, for four quarters;

along with any travel

and related out-of-pocket expenses incurred by the Representative in connection with the performance of the services.

the normal course of business, the Company may possibly be named as a defendant in various lawsuits.

Concentrations

instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents.

Company maintains cash balances at financial institutions located in California and Switzerland.

along with any travel and

related out-of-pocket expenses incurred by the Representative in connection with the performance of the services.

In the normal course of business, the Company

may possibly be named as a defendant in various lawsuits.

Concentrations of Risk

Financial instruments that potentially subject

the Company to concentrations of credit risk consist principally of cash and cash equivalents.

The Company maintains cash balances at financial

institutions located in California and Switzerland.

Accounts at the U.S.

financial institutions

are secured by the Federal Deposit Insurance Corporation.

financial institutions are secured by the Federal Deposit Insurance

At times, balances may exceed federally insured limits.

The Company has not

experienced any losses in such accounts.

Management believes that the Company is not exposed to any significant credit risk with respect

to its cash and cash equivalents.

Company grants unsecured credit to its customers based on an evaluation of the customer’s financial condition and a cash deposit

is generally not required.

Management believes its credit policies do not result in significant adverse risk and historically has not

experienced significant credit-related losses.

Company’s subsidiary, Tenon Technology AG, realizes a portion of its expenses in Swiss francs.

Consequently, certain assets and

liabilities are exposed to foreign currency fluctuations.

At December 31, 2023 and 2022, approximately $ 741 and $ 8 , respectively, of

the Company’s net monetary assets were denominated in Swiss francs.

The Company has not entered into any hedging transactions to

reduce the exposure to currency risk.

components of loss before income taxes are as follows:

The Company has not experienced any losses in such accounts.

believes that the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.

The Company grants unsecured credit to its customers

based on an evaluation of the customer’s financial condition and a cash deposit is generally not required.

Management believes its

credit policies do not result in significant adverse risk and historically has not experienced significant credit-related losses.

Currency risk

The Company’s subsidiary, Tenon Technology

AG, realizes a portion of its expenses in Swiss francs.

Consequently, certain assets and liabilities are exposed to foreign currency fluctuations.

At December 31, 2024 and 2023, approximately $0 and $ 741 , respectively, of the Company’s net monetary assets were denominated in

Swiss francs.

The Company has not entered into any hedging transactions to reduce the exposure to currency risk.

The components of loss before income taxes are

Years ended December 31,

United States

International

before income taxes

components of current income tax expense are as follows:

income tax expense

reconciliation of the expected tax computed at the U.S.

statutory federal income tax rate to the total provision for income taxes for

the years ended December 31, 2023 and 2022 is as follows:

Loss before income taxes

The components of current income tax expense are

Years ended December 31,

Total income tax expense

A reconciliation of the expected tax computed

statutory federal income tax rate to the total provision for income taxes for the years ended December 31, 2024 and 2023 is

Years ended December 31,

Statutory rate

1 unchanged sentence

Non-deductible differences

Change in valuation

components of the Company’s net deferred tax assets at December 31, 2023 and 2022 are as follows:

Change in valuation allowance

Provision for taxes

Significant components of the Company’s net deferred

tax assets at December 31, 2024 and 2023 are as follows:

Years ended December 31,

2 unchanged sentences

Credit carryforwards

Property and equipment

Accruals and reserves

6 unchanged sentences

Deferred tax liabilities:

Unrecognized tax benefits

Operating lease right of use

1 unchanged sentence

Net deferred tax assets

assessing the realizability of deferred tax assets at December 31, 2023, management considered whether it is more likely than not that

some portion or all of the deferred tax assets will be realized, and determined that a valuation allowance was required for those deferred

tax assets that are not expected to provide future tax benefits.

The ultimate realization of deferred tax assets is dependent upon the

generation of future taxable income during the periods in which those temporary differences become deductible.

In assessing the realizability of deferred tax

assets at December 31, 2024, management considered whether it is more likely than not that some portion or all of the deferred tax assets

will be realized, and determined that a valuation allowance was required for those deferred tax assets that are not expected to provide

future tax benefits.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during

the periods in which those temporary differences become deductible.

At December 31, 2024, the Company has available

3 unchanged sentences

$ 222 , which was generated prior to 2018, will start to expire in 2034 if not utilized.

At December 31, 2023, the net operating loss carryforwards

for state purposes are approximately $ 32,147 and will begin to expire in 2032 if not utilized.

In addition, the Company had foreign net

operating loss carryforwards of approximately $ 1,378 at December 31, 2023 that will start to expire in 2024 if not utilized.

At December 31, 2024, the net operating loss

carryforwards for state purposes are approximately $ 27,347 and will begin to expire in 2032 if not utilized.

In addition, the

Company had foreign net operating loss carryforwards of approximately $ 1,378 at December 31, 2024 that will start to expire in 2025

if not utilized.

The Company had credit carryforwards of approximately

1 unchanged sentence

The federal tax credits will begin to expire in 2041.

The Company also had credit carryforwards of approximately

$ 101 for California income tax purposes.

The Company also had credit carryforwards of

approximately $ 30 for California income tax purposes.

These credits have no expiration.

Company has not completed a study to determine whether any ownership change per the provisions of Section 382 of the Internal Revenue

Code of 1986, as amended, as well as similar state provisions, has occurred.

Utilization of the Company’s net operating loss and

income tax credit carryforwards may be subject to a substantial annual limitation due to ownership changes that may have occurred or

that could occur in the future.

These ownership changes may limit the amount of the net operating loss and income tax credit carryover

that can be utilized annually to offset future taxable income.

In general, an “ownership change” as defined by Section 382

of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than

50 percentage points of the outstanding stock of a company by certain stockholders.

tax positions

accordance with authoritative guidance, the impact of an uncertain income tax position on the income tax return must be recognized at

the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority.

An uncertain income tax

position will not be recognized if it has less than a 50% likelihood of being sustained.

The following shows the changes in the gross

amount of recognized tax benefits:

The Company has not completed a study to determine whether any ownership

change per the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions, has occurred;

however, it believes that, given the equity transactions undertaken, such a change has most likely occurred.

In general, an “ownership

change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting

in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders.

Utilization of

the Company’s net operating loss and income tax credit carryforwards may be subject to a substantial annual limitation due to ownership

changes that may have occurred or that could occur in the future.

These ownership changes may limit the amount of the net operating loss

and income tax credit carryover that can be utilized annually to offset future taxable income.

Uncertain tax positions

In accordance with authoritative guidance, the

impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than

not to be sustained upon audit by the relevant taxing authority.

An uncertain income tax position will not be recognized if it has less

than a 50 % likelihood of being sustained.

The following shows the changes in the gross amount of recognized tax benefits:

Years ended December 31,

15 unchanged sentences

operating loss and credit carryforwards, all of its years are subject to federal and state examination.

February 20, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors,

pursuant to which the Company agreed to sell, issue and deliver to these investors, in a private placement offering (the “Offering”),

a total of 172,239 shares of the Company’s Series A Preferred Stock and warrants (the “Warrants”) to purchase 258,374

shares of common stock, par value $ 0.001 per share, of the Company (“Common Stock”) at an exercise price equal to $ 1.2705

per share for an aggregate offering price of $ 2,605,000 .

Additionally, on February 20, 2024, the Investors

agreed to a complete prepayment of the Company’s obligations under the Convertible Notes, including accrued interest, in exchange

for 84,729 shares of Series A Preferred Stock and warrants to purchase 157,094 shares of our common stock at $ 1.2705 per share and the

Convertible Notes were cancelled.

The Warrants are immediately exercisable and expire five years from the date of issuance.

The Series A Preferred Stock is convertible, at

any time, at the option of the holder into shares of Common Stock.

Each share of Series A Preferred Stock shall be convertible, at any

time after the date of issuance, at the option of the holder thereof (or, upon a Required Conversion (as defined below), at the option

of the Corporation), into that number of shares of Common Stock determined by dividing the Stated Value (as defined below) for such share

of Series A Preferred Stock by the Conversion Price (as defined below).

“Stated Value” means for any share of Series A Preferred

Stock, an amount equal to the product of (x) $ 15.125 multiplied by (y) the sum of 1 plus the product of (A) 0.06 multiplied by (B) a fraction

equal to the number of days that such share of Series A Preferred Stock has been issued divided by 365 .

“Conversion Price”

means (i) for the shares of Series A Preferred Stock issued on the Closing Date, $ 1.5125 and (ii) for each share of Series A Preferred

Stock issued thereafter, an amount equal to the greater of (x) $ 1.5125 and the average of the VWAPs for the 10 Trading Days prior the

issuance date of such share of Series A Preferred Stock, in each case subject to adjustment as set forth herein.

On any date that ten

out of the last 15 daily VWAPs of the Common Stock is 250 % higher than the Conversion Price on such date, then the Company will have the

right to require 50 % of the Preferred Stock to be converted into shares of Common Stock.

Additionally, on and after the time on which

the Company has $ 2.25 million in revenues in any single financial quarter, the Company will have the right to require 50 % of the Preferred

Stock to be converted into shares of Common Stock (a “Required Conversion”).

No dividends are payable on the Series A Preferred

The Series A Preferred Stock will vote together with the Common Stock on all matters other than as required by law;

provided however

that any additional shares underlying the Series A Preferred Stock as a result of the anti-dilution provision described below shall not

vote on an “as converted” basis and shall only vote when issued upon conversion.

Notwithstanding the foregoing, the vote of

an individual holder of Series A Preferred Stock (and underlying Common Stock) shall be capped at 9.99 % (or 4.99 % if selected by the holder).

Conversion Price is subject to anti-dilution adjustment as the result of any subdivision, combination of shares or recapitalization,

stock dividends, stock splits and similar transactions affecting the Common Stock.

In addition, the Series A Preferred Stock will have

weighted average anti-dilution protection providing for adjustment of the Conversion Price in the event of issuance of, or commitments

to issue, Common Stock for less than the Conversion Price then in effect immediately prior to such issue or sale (a “Dilutive Issuance”),

subject to customary exceptions;

provided however the anti-dilution for Dilutive Issuances shall not be operative until the stockholders

of the Company have approved the terms of the Series A Preferred Stock.

Upon any liquidation or winding up of the Company (a “Liquidation”),

the holders of Series A Preferred Stock will be entitled to receive in preference to any other class or series of the Company’s

equity securities the greater of (i) the Stated Value plus accrued and unpaid dividends and (ii) what would be paid if the Series A Preferred

Stock plus accrued and unpaid dividends had been converted into Common Stock.

A consolidation or merger of the Company or sale or transfer

of all or substantially all of its assets, or any transaction which results in the stockholders of the Company owning less than 50 % of

the equity or voting power of the surviving entity (excluding the issuance of Common Stock in any financing transaction unless more than

50 % of the Company’s shares are issued to one stockholder or a number of stockholders who act as a one group) shall be deemed a

Liquidation (a “Deemed Liquidation”) with respect to the shares of Series A Preferred Stock of any holder who opts to have

such occurrence treated as a Deemed Liquidation;

provided that if the liquidation preference payable on a Deemed Liquidation is less

than 110 % of the stated value of the Series A Preferred Stock, the dividend rate on any accrued and unpaid dividends payable with respect

to such Deemed Liquidation will increase to 10 %.

All liquidation preferences payable in respect of a Deemed Liquidation will be payable

in shares of Common Stock based on the closing price of the Common Stock on the date of such Deemed Liquidation.

Consent of the majority

of the holders will be required to (i) amend the Certificate of Incorporation or Bylaws of the Company so as to adversely alter the rights,

preferences, privileges of the Series A Preferred Stock, (ii) create any new class of shares pari passu or senior to the Series A Preferred

Stock or increase or decrease the number of authorized shares of Common Stock or preferred stock, (iii) pay or declare any dividend on

Common Stock or other junior securities, or incur indebtedness in any single transaction in excess of $ 1 million or (iv) redeem, purchase

or otherwise acquire any share or shares of preferred stock or Common Stock (other than (a) the repurchase of shares of Common Stock

pursuant to a written benefit plan or employment or consulting agreement, or (b) the repurchase of any equity securities in connection

with the Company’s right of first offer with respect to those securities contained in any written agreement with the Company).

As of March 29, 2024, with the issuance of the

Series A Preferred Stock, the conversion of the Convertible Notes, and proceeds from the Company’s ATM and ELOC facilities, the

Company believes that its Stockholders’ Equity will exceed $ 2.5 million and will therefore meet the minimum stockholder equity

amount required by the Nasdaq Stock Market, LLC.

Changes in and Disagreements with

Accountants on Accounting and Financial Disclosures

Reportable Segment

The Company operates in one business segment,

the SI Joint segment.

The SI Joint segment derives revenue from the sale of the Catamaran System for treatment of the most common types

of SI Joint disorders that cause lower back pain, which is the Company’s only product.

The accounting policies of the SI Joint segment

are the same as those described in the summary of significant accounting principles in Note 2.

The chief operating decision maker, which

is the Company’s senior executive committee that includes the chief executive officer, the chief financial officer and the chief

technology officer, assesses the performance of the SI Joint segment and decides how to allocate resources based on net income which is

reported in the consolidated statements of operations as net loss.

The measure of segment assests is reported on the balance sheet as

total assets.

The chief operating decision maker uses net loss

to evaluate income generated from segment assets in deciding whether to continue investing in the segment.

Net loss is used to monitor

budget versus actual results, to prepare operating budgets, and to assess the performance of the segment and in establishing management

compensation.

The Company does not have intra-entity sales or transfers.

The following table presents selected financial

information for the Company’s single business segment for the year ended December 31, 2024:

Year ended December 31,

Cost of sales

Sales and marketing

Research and development

General and administrative

Other expenses, net

Subsequent Events

On March 11, 2025, the Company entered into a

warrant exercise inducement offer letter agreement (the “Inducement Letter”) with the holder (the “Holder”) of

the Series A New Warrants and Series B New Warrants (the “Existing Warrants”), pursuant to which, the Holder agreed to exercise

the Existing Warrants at a reduced exercise price of $ 1.25 per share in consideration for the Company’s agreement to issue (i) new

unregistered five-year warrants (the “Series C-1 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 (ii) new unregistered three-year warrants (the “Series C-2 Warrants,” and together

with the Series C-1 Warrants, the “New Warrants”) to purchase up to an aggregate of 1,222,850 shares of common stock at an

exercise price of $1.25 per share (the “Inducement Transaction”).

The New Warrants are not exercisable without approval by

the Company’s stockholders (“Stockholder Approval”), which, pursuant to the Inducement Letter, the Company is required

to obtain at a meeting of stockholders no later than 165 days after the consummation of the Inducement Transaction.

The Series C-1 Warrants

will be exercisable five years from the date on which Stockholder Approval is obtained, and the Series C-2 Warrants will be exercisable

three years from the date on which Stockholder Approval is obtained.

Pursuant to the Inducement Transaction, the Company received proceeds,

net of financial advisor fees and other transaction expenses, of $ 2,727 .

The Company has agreed to file a registration statement on Form S-3 (or other appropriate form, including on

Form S-1, if it is not eligible to utilize Form S-3) providing for the resale of the shares of common stock issuable upon the exercise

of the New Warrants within 30 calendar days following the date of the Inducement Letter.

The Company has also agreed not to issue, enter

into any agreement to issue or announce the issuance or proposed issuance of any common stock or common stock equivalents or file any

registration statement or any amendment or supplement to any existing registration statement, subject to certain exceptions, for a period

of 60 calendar days after the effectiveness of the Resale Registration Statement.

Furthermore, the Company is also prohibited from entering

into any agreement to issue common stock or common stock equivalents involving a variable rate transaction (as defined in the Inducement

Letter), subject to certain exceptions, for a six-month period commencing on March 12, 2025.

On March 25, 2025, the Company

entered into a securities purchase agreement for the issuance of 733,500 shares of its 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, the Company also

agreed to issue to the same investor warrants to purchase up to 733,500 shares of its 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,

the Company received proceeds, net of financial advisor fees and other transaction expenses, of $ 1,234 .

Also on March 25, 2025, the Company entered into

a securities purchase agreement for the issuance of 1,271,500 shares of its 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, the Company also agreed to

issue to the same investor warrants to purchase up to 1,271,500 shares of its 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, the Company received

proceeds, net of financial advisor fees and other transaction expenses, of $ 2,290 .

Changes in and Disagreements with Accountants

on Accounting and Financial Disclosures

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 8. Financial Statements and Supplementary Data