Tenon Medical, Inc.

**Notes to Condensed Financial Statements (unaudited)

(in thousands, except share and per-share data)

1. Organization and Business

Nature of operations

Tenon Medical, Inc. (the “Company”) was incorporated in the State of Delaware on June 19, 2012 and was headquartered in San Ramon, California until June 2021 when it relocated to Los Gatos, California. The Company is a medical device company dedicated to transforming care for patients with sacroiliac joint (the “SI Joint”) disorders that has developed The Catamaran™ SI Joint Fusion System (“The Catamaran System”) that offers a novel, less invasive approach to the SI Joint using a single, robust, titanium implant for treatment of the most common types of SI Joint disorders that cause lower back pain. The Company received 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: 1) Primary SI Joint procedures, 2) Revision procedures of failed SI Joint implants and 3) SI Joint fusion adjunct to a spine fusion construct.

2. Summary of Significant Accounting Principles

Basis of presentation

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). As permitted under these rules and regulations, the Company has condensed or omitted certain financial information and footnote disclosures normally included in its annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).* *The condensed balance sheet as of December 31, 2024 has been derived from the Company’s audited financial statements, which are included in its Annual Report on Form 10-K filed with the SEC on March 26, 2025 (the “Annual Report”).

These condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in management’s opinion, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of its financial information. The interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.

These unaudited condensed financial statements and accompanying notes should be read in conjunction with the Company’s audited financial statements as of and for the years ended December 31, 2024 and 2023 included in its Annual Report.

The Company’s significant accounting policies are disclosed in the Annual Report. There have been no material changes in the Company’s significant accounting policies during the six months ended June 30, 2025.

Going concern uncertainty and liquidity requirements

The accompanying condensed 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 and negative cash flows from operations. Management expects to incur additional operating losses and negative cash flows from operations in the foreseeable future as the Company continues its product development programs and the commercialization of The Catamaran System. Based on the Company’s expected level of revenues and expenditures, the Company believes that its existing cash and cash equivalents as of June 30, 2025 will not provide sufficient funds to enable it to meet its obligations for a period of at least twelve months from the date of the filing of these financial statements. The Company plans to raise the necessary additional capital through one or a combination of public or private equity offerings, debt financings, and collaborations (see Note 6). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates made by management include, but are not limited to, collectability of accounts receivable, realization of deferred tax assets, accrued liabilities, accrued commissions, incremental borrowing rate, obsolescence of inventory and stock-based compensation.

Reverse Stock Split

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 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 2024 Reverse Stock Split.

Income Taxes

Income taxes are recorded in accordance with Accounting Standards Codification (“ASC”) 740,Income Taxes, 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 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 June 30, 2025 and December 31, 2024. The Company intends to maintain valuation allowances until sufficient evidence exists to support its reversal. The Company also expects the usage of the net operating loss carryforwards will be limited based on changes in the Company’s ownership.

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 (restricted stock units, stock options, warrants and convertible preferred stock) are converted or exercised. The calculation of diluted net loss per share excludes potential common stock equivalents if the effect is anti-dilutive. 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 June 30, 2025 and 2024 which were excluded from the calculation because their effect was anti-dilutive:

Adoption of New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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. This guidance is effective on a prospective basis, with the option to apply it retrospectively, for fiscal years beginning after December 15, 2025. The adoption of ASU 2023-09 will expand the Company’s income tax disclosures in its Annual Report on Form 10-K, but will have no impact on reported income tax (benefit) expense or related tax assets or liabilities.

Recent Accounting Pronouncements Not Yet Adopted

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.

3. Property and Equipment, net

Property and equipment, net, consisted of the following:

Construction in progress is made up of reusable components that will become reusable Catamaran tray sets. Depreciation expense was approximately $48 and $86 for the three months ended June 30, 2025 and 2024, respectively. Depreciation expense was approximately $90 and $173 for the six months ended June 30, 2025 and 2024, respectively.

4. Accrued Expenses

Accrued expenses consisted of the following:

5. Leases

In June 2021, the Company entered into a facility lease agreement for its company headquarters in Los Gatos, California. This non-cancellable operating lease expires in June 2026. Operating lease costs for the facility lease were $73 and $73 for the three months ended June 30, 2025 and 2024, respectively, and were $146 and $146 for the six months ended June 30, 2025 and 2024, respectively.

Supplemental balance sheet information related to leases was as follows:

Future maturities of operating lease liabilities as of June 30, 2025 were as follows:

Other information:

6. 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. No shares were sold under the program during the three months ended June 30, 2025 and 2024. During the six months ended June 30, 2025 and 2024,0 and 129,199 shares of the Company’s common stock, respectively, were sold under the program at a weighted-average price of $0 and $14.63 per share with aggregate proceeds, net of current and deferred issuance costs, of $0 and $1,709, respectively.

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.

No shares were sold under the program during the three months ended June 30, 2025 and 2024. During the six months ended June 30, 2025 and 2024,0 and 11,231 shares of the Company’s common stock were sold under the program, respectively, at a weighted-average price of $0 and $8.90 per share, respectively, with aggregate net proceeds of $95.

2025 Warrant Inducement

On March 11, 2025, the Company entered into a warrant exercise inducement offer letter agreement (the “Inducement Letter”) with 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 $2,735.

The Company filed a registration statement on Form S-1 on April 4, 2025 providing for the resale of the shares of common stock issuable upon the exercise of the New Warrants. The Company has 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.

2025 Securities Purchase Agreements

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.

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 Board and stockholders, respectively, of the Company approved the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “2022 Plan”), which was effective on April 25, 2022. 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 fiscal year. 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.

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

The following table sets forth stock-based compensation expense recognized for the three and six months ended June 30, 2025 and 2024:

At June 30, 2025, there were 70,387 shares available for issuance under the 2022 Plan.

Warrants

Series C Warrants

On March 11, 2025, in connection with 2025 Warrant Inducement, the Company issued 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 new unregistered three-year warrants (the “Series C-2 Warrants,” and together with the Series C-1 Warrants, the “Series C 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 Series C Warrants are not exercisable without approval by the Company’s stockholders (“Stockholder Approval”), which 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 $2,735.

The fair value of the Series C-1 Warrants on the grant date was $0.97 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 4.0%. The fair value of the Series C-2 Warrants on the grant date was $0.80 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 4.0%. The Company recorded the fair value of these warrants to additional paid-in capital in the first quarter of 2025. The Company recorded the excess of the incremental value of the modified Series A New Warrants and Series B New Warrants and the fair value of the Series C Warrants over the cash proceeds from the exercise of the modified Series A New Warrants and Series B New Warrants as equity offering costs. All of the Series C Warrants remain outstanding as of June 30, 2025.

Series D Warrants

On March 25, 2025, in connection with a securities purchase agreement, the Company issued warrants to purchase up to 733,500 shares of its common stock at an exercise price of $2.00 per share (the “Series D Warrants”), which were exercisable upon issuance, and will expire five years following the date of issuance. The fair value of the Series D Warrants on the grant date was $2.72 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 4.1%. The Company recorded the fair value of these warrants to additional paid-in capital in the first quarter of 2025. All of the Series D Warrants remain outstanding as of June 30, 2025.

Series E Warrants

Also on March 25, 2025, in connection with a securities purchase agreement, the Company issued warrants to purchase up to 1,271,500 shares of its common stock at an exercise price of $2.00 per share (the “Series E Warrants”), which were exercisable upon issuance, and will expire five years following the date of issuance. The fair value of the Series E Warrants on the grant date was $2.72 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 4.1%. The Company recorded the fair value of these warrants to additional paid-in capital in the first quarter of 2025. All of the Series E Warrants remain outstanding as of June 30, 2025.

7. Commitments and Contingencies

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 offive 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. 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 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.

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. 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 originally 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 statements of operations and comprehensive loss and recorded as accrued commissions in the balance sheets. For subsequent periods, the Company has used a discounted cash flow model with an estimated discount rate of 15.4% to adjust the liability for actual payments made and updated projections of the timing of future payments. A reconciliation of the liability under clause (b) and clause (c) for the six months ended June 30, 2025 is as follows:

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

Credit 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. Accounts at the U.S. financial institutions are secured by the Federal Deposit Insurance Corporation. 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.

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.

8. Reportable Segment

The Company operates inone 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 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 assets 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 three and six months ended June 30, 2025 and 2024:

9. Subsequent Event

The SImmetry Acquisition

On August 1, 2025 (the “SI Closing Date”), the Company entered into an asset purchase agreement (the “SI APA”) by and between the Company and SiVantage, Inc., a Delaware corporation (“SI”), pursuant to which the Company acquired substantially all of the assets of SI, including the assignment of its intellectual property related to sacropelvic fixation and fusion procedures (the “SI Products”), and assumed certain of its current liabilities and contract obligations, as set forth in the SI APA (the “SImmetry Acquisition”). The SImmetry Acquisition closed on the SI Closing Date.

On the SI Closing Date, SI received, as consideration for the SImmetry Acquisition, the purchase price consisting of: (i) $750,000 in cash; (ii)710,300 shares of the Company’s common stock, of which 473,533 are to be held in by the Company for a period of one-year as security to satisfy any indemnification claims against SI in accordance with the SI APA; (iii) a royalty equal to 15% of the sales of all SI Products during the one-year period following the SI Closing Date and 10% of the sales of all SI Products during the following four-year period, subject to a cap of $5.0 million; and (iv) a deferred cash payment of up to a maximum of approximately $1.3 million in the event that the all of the currently issued and outstanding warrants of the Company are exercised (which deferred cash payment will be made pro rata based on the actual number of warrants exercised).

In addition, during the three-year period following the SI Closing Date, the Company will issue SI additional shares of its common stock upon the achievement of the following milestones:

The SIMPL Acquisition

On August 1, 2025, the Company entered into an asset purchase agreement (the “ SIMPL APA”) by and between the Company and SIMPL Medical, LLC, a Delaware limited liability (“SIMPL”), pursuant to which the Company acquired substantially all of the assets of SIMPL, including the assignment of its intellectual property related to posterior sacroiliac implant technology (the “SIMPL Products”), and assumed certain of its contract obligations, as set forth in the SIMPL APA (the “SIMPL Acquisition”). The SIMPL Acquisition closed on August 4, 2025.

The aggregate purchase price for the SIMPL Acquisition payable by the Company is a royalty equal to 30% of the net revenue received by the Company from the sale of any SIMPL Products during the five-year period following the first commercial sale of any SIMPL Products; provided that in the event that the aggregate royalty payments made by the Company to SIMPL exceed $20.0 million, then from and after such time, the Company shall pay SIMPL 20% of the net revenue received by the Company from the sale of any SIMPL Products during the remainder of such five-year period. The royalty payments noted above shall be paid quarterly by the Company. The Company has the option, subject to certain limitations, to pay up to 33.3% of any quarterly royalty by the issuance of its shares of common stock, based upon the trailing 10-day VWAP at the end of any applicable quarter.

The SI APA and the SIMPL APA also include various representations, warranties, covenants and indemnities.

Employment Agreements

In connection with the SImmetry Acquisition, the Company has executed employment agreements with two former executives of SI, Wyatt Geist (“Geist”), who has been hired by the Company as Chief Innovation Officer and Nate Grawey (“Grawey”), who has been hired by the Company as Chief Commercial Officer.

The Employment Agreements for Geist and Grawey (collectively the “Employment Agreements”), are at-will employment agreements and provide each of Geist and Grawey with (i) base salary of $290,000; (ii) monthly commissions for sales by the Company above $250,000 as set forth in the Employment Agreements; (iii)138,114 shares of restricted stock equal to 1.75% that are subject to vesting as described in the Employment Agreements; and (iv) other employee benefits applicable to senior executives of the Company.

Accounting

The SImmetry Acquisition, the SIMPL Acquisition and the Employment Agreements are in the process of being evaluated, and management expects that the transactions will be accounted for as a business combination. The Company is in the process of determining the fair value of the tangible assets, intangible assets and liabilities acquired, as well as the acquisition purchase price, and will disclose supplemental pro-forma information in a Current Report on Form 8-K when it is available.