Tenon Medical Inc

THE WARRANT INDUCEMENT

On September 16, 2024, we entered into the Inducement Letter with the Selling Stockholder that had previously purchased the Public Offering Warrants on September 16, 2024. Pursuant to the Inducement Letter, the Warrant Selling Stockholder agreed to exercise for cash the Public Offering Warrants to purchase an aggregate of 1,222,850 shares of common stock, at the exercise price of $3.55 per share in consideration for our agreement to issue, for 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 the effective date of this registration statement 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 the effective date of this registration statement. The offer and resale of the shares of common stock underlying the Public Offering Warrants was registered pursuant to our registration statement Form S-1 (File No. 333-281531).

The Company entered into a financial advisory agreement (the “Financial Advisory Agreement”) with A.G.P./Alliance Global Partners (“AGP”) to act as its financial advisor in connection with the transactions summarized above. Pursuant to the Financial Advisory Agreement, the Company will pay AGP a cash fee of 7% of the aggregate gross proceeds. Additionally, the Company agreed to reimburse AGP for its documented accountable legal expenses.

All of the Public Offering Warrants were exercised in full and we received aggregate gross proceeds of approximately $4.6 million (the “Warrant Inducement”). The Company intends to use the net proceeds for working capital and general corporate purposes.

We agreed to file the registration statement related to this prospectus within thirty (30) calendar days following the date of the Inducement Letter, and to use commercially reasonable efforts to cause such registration statement to become effective within sixty (60) calendar days from the date of the Inducement Letter (or within 90 calendar days in case of “full review” of such registration statement by the SEC). Pursuant to the Inducement Letter, we 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 sixty (60) calendar days after the effectiveness of the registration statement related to this prospectus. Furthermore, we are also prohibited from entering into any agreement to issue common stock or common stock equivalents involving a Variable Rate Transaction (as defined below), subject to certain exceptions, for a six-month period commencing on September 16, 2024.

“Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of common stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the common stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security (other than in connection with a stock split or stock dividend or similar event) or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for shares of common stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit or an “at-the-market offering,” whereby the Company may issue securities at a future determined price, regardless of whether shares pursuant to such agreement have actually been issued and regardless of whether such agreement is subsequently cancelled;provided,however, that ninety (90) days after September 16, 2024, the issuance of securities pursuant to the Securities Purchase Agreement dated July 24, 2023 between the Company and Lincoln Park Capital Fund, LLC shall not be deemed a Variable Rate Transaction.