Tenon Medical, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the other information set forth in our Annual Report of Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on March 26, 2025. In addition to historical financial information, this discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. You should not place undue reliance on these forward-looking statements, which involve risks and uncertainties. As a result of many factors, including but not limited to those set forth under “Risk Factors” in our Annual Report of Form 10-K filed with the Securities and Exchange Commission on March 26, 2025, our actual results may differ materially from those anticipated in these forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the other information set forth in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 27, 2026. In addition to historical financial information, this discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. You should not place undue reliance on these forward-looking statements, which involve risks and uncertainties. As a result of many factors, including but not limited to those set forth under “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 27, 2026, our actual results may differ materially from those anticipated in these forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”

Previous wording

We have incurred net losses since our inception in 2012. As of September 30, 2025, we had an accumulated deficit of approximately $78.5 million. To date, we have financed our operations primarily through public equity offerings, private placements of equity securities, certain debt-related financing arrangements, and sales of our product. We have devoted substantially all of our resources to research and development, regulatory matters and sales and marketing of our product.

Current wording

We have incurred net losses since our inception in 2012. As of March 31, 2026, we had an accumulated deficit of approximately $84.8 million. To date, we have financed our operations primarily through public equity offerings, private placements of equity securities, certain debt-related financing arrangements, and sales of our product. We have devoted substantially all of our resources to research and development, regulatory matters and sales and marketing of our product.

Previous wording

We derive substantially all our revenue from sales of The Catamaran System and, since August 2025, the SImmetry SI Joint Fusion System. Revenue from sales of The Catamaran System and the SImmetry SI Joint Fusion System fluctuates based on volume of cases (procedures performed), discounts, rebates, and the number of implants used for a particular patient. Similar to other orthopedic companies, our revenue can also fluctuate from quarter to quarter due to a variety of factors, including reimbursement, changes in independent sales representatives and physician activities.

Current wording

We derive substantially all our revenue from sales of The Catamaran System and The SImmetry+ System to a limited number of clinicians. Revenue from sales of The Catamaran System and The SImmetry+ System fluctuates based on volume of cases (procedures performed), discounts, rebates, and the number of implants used for a particular patient. Similar to other orthopedic companies, our revenue can also fluctuate from quarter to quarter due to a variety of factors, including reimbursement, changes in independent sales representatives and physician activities.

Previous wording

We utilize contract manufacturers for production of The Catamaran System implants, SImmetry implants and the instrument tray sets. Cost of goods sold consists primarily of costs of the components of the implants and instruments, depreciation of instrument tray sets, overhead related to operations personnel and facility costs, quality inspection, packaging, scrap and inventory obsolescence, as well as distribution-related expenses such as logistics and shipping costs. We anticipate that certain of our cost of goods sold will increase in absolute dollars as case levels increase.

Current wording

We utilize contract manufacturers for production of The Catamaran System and The SImmetry+ System implants and tray sets. Cost of goods sold consists primarily of costs of the components of The Catamaran System and The SImmetry+ System implants and instruments, overhead related to operations personnel and facility costs, depreciation of tray sets, quality inspection, packaging, scrap and inventory obsolescence, as well as distribution-related expenses such as logistics and shipping costs. We anticipate that certain of our cost of goods sold will increase in absolute dollars as case levels increase.

Previous wording

Our gross margins have been and will continue to be affected by a variety of factors, including the cost to have our product manufactured for us, pricing pressure from increasing competition, decisions with regard to the level of overhead we choose to maintain, sales volumes to absorb fixed production costs, and the factors described above impacting our revenue.

Current wording

Our gross margins have been and will continue to be affected by a variety of factors, including the cost to have our products manufactured for us, pricing pressure from increasing competition, and the factors described above impacting our revenue.

Previous wording

Sales and marketing expenses primarily consist of salaries, commissions, stock-based compensation expense and travel and entertainment expenses of our sales and market personnel along with commissions paid to our independent distributors. We expect our sales and marketing expenses to increase in absolute dollars with the increased sales resulting in higher commissions and salaries, increased clinician and sales representative training, and the cost to complete our clinical study to gain wider clinician adoption of our products. Our sales and marketing expenses may fluctuate from period to period due to the timing of sales and marketing activities related to the commercial activity of our product.

Current wording

Sales and marketing expenses primarily consist of salaries, commissions, stock-based compensation expense and travel and entertainment expenses of our sales and market personnel along with commissions paid to our independent distributors. We expect our sales and marketing expenses to increase in absolute dollars with the increased sales of The Catamaran System and The SImmetry+ System resulting in higher commissions and salaries, increased clinician and sales representative training, and the cost to complete our clinical study to gain wider clinician adoption of The Catamaran System. Our sales and marketing expenses may fluctuate from period to period due to the timing of sales and marketing activities related to the commercial activity of our product.

Previous wording

Our research and development expenses primarily consist of engineering, product development, regulatory expenses, and consulting services, outside prototyping services, outside research activities, materials, and other costs associated with the development and refinement of our product. Research and development expenses also include related personnel and consultants’ compensation and stock-based compensation expense. We expense research and development costs as they are incurred. We expect research and development expense to increase in absolute dollars as we improve our existing products, develop new products, add research and development personnel, and undergo clinical activities that may be required for regulatory clearances of future products.

Current wording

Our research and development expenses primarily consist of engineering, product development, regulatory expenses, and consulting services, outside prototyping services, outside research activities, materials, and other costs associated with the development and refinement of our product. Research and development expenses also include related personnel and consultants’ compensation and stock-based compensation expense. We expense research and development costs as they are incurred. We expect research and development expense to increase in absolute dollars as we improve The Catamaran System and The SImmetry+ System, develop new products, add research and development personnel, and undergo clinical activities that may be required for regulatory clearances of future products.

Previous wording

General and administrative expenses primarily consist of salaries, consultants’ compensation, stock-based compensation expense, and other costs for finance, accounting, legal, compliance, and administrative matters. We expect our general and administrative expenses to increase in absolute dollars as we add personnel and information technology infrastructure to support the growth of our business. We also expect to continue to incur expenses as a result of operating as a public company, including but not limited to: expenses related to compliance with the rules and regulations of the SEC and those of The Nasdaq Stock Market LLC on which our securities are traded; additional insurance expenses; investor relations activities; and other administrative and professional services. We also may incur acquisition-related expenses at the discretion of management and the Board of Directors. While we expect the general and administrative expenses to increase in absolute dollars, we anticipate that it will decrease as a percentage of revenue over time.

Current wording

General and administrative expenses primarily consist of salaries, consultants’ compensation, stock-based compensation expense, and other costs for finance, accounting, legal, compliance, and administrative matters. We expect our general and administrative expenses to increase in absolute dollars as we add personnel and information technology infrastructure to support the growth of our business. We also expect to incur additional general and administrative expenses as a result of operating as a public company, including but not limited to: expenses related to compliance with the rules and regulations of the SEC and those of The Nasdaq Stock Market LLC on which our securities are traded; additional insurance expenses; investor relations activities; and other administrative and professional services. While we expect the general and administrative expenses to increase in absolute dollars, we anticipate that it will decrease as a percentage of revenue over time.

Previous wording

Gain on investments consists of interest income and realized gains and losses from the sale of our investments in money market and corporate debt securities. Interest expense is related to borrowings, when applicable. Other income and expenses have not been significant to date.

Current wording

Gain on investments consists of interest income and realized gains and losses from the sale of our investments in money market and corporate debt securities. Interest expense is related to borrowings, when applicable. Other income and expenses have not been significant to date and, since March 2026, include changes in the fair value of derivative liabilities.

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024 (in thousands, except percentages)

Current wording

Comparison of the Three Months Ended March 31, 2026 and 2025 (in thousands, except percentages)

Previous wording

*Revenue.*The changes in revenue for the three and nine months ended September 30, 2025 as compared to the same periods in 2024 was primarily due to changes in the number of surgical procedures in which The Catamaran System was used and the addition of sales of the SImmetry SI Joint Fusion System, while implants per procedure remained relatively constant.

Current wording

*Revenue.*The increase in revenue for the three months ended March 31, 2026 as compared to 2025 was primarily due to an increase in the number of surgical procedures and the addition of revenue related to The SImmetry+ System.

Previous wording

Cost of Goods Sold, Gross Profit, and Gross Margin. The change in cost of goods sold for the three and nine months ended September 30, 2025 as compared to the same periods in 2024 was due to the absorption of production overhead costs into our standard cost in 2024 and operating leverage created due to lower relative fixed costs. The gross margin for the three months ended September 30, 2025 benefitted from increased sales volumes that reduced per unit fixed production costs.

Current wording

Cost of Goods Sold, Gross Profit, and Gross Margin. The change in cost of goods sold for the three months ended March 31, 2026 as compared to 2025 was due to the absorption of production overhead costs into our standard cost and operating leverage created due to lower relative fixed costs and increased revenue volume.

Previous wording

Sales and Marketing Expenses. Sales and marketing expenses for the three months ended September 30, 2025 increased as compared to the same period in 2024 primarily due to increased commission expenses ($410) and consulting and professional fees ($38), partially offset by decreases in payroll and employee expenses ($84), and stock-based compensation ($5). Sales and marketing expenses for the nine months ended September 30, 2025 increased as compared to the same period in 2024 primarily due to increased commission expenses ($262) and professional fees ($45), partially offset by decreases in payroll and employee expenses ($27) and stock-based compensation ($18).

Current wording

*Sales and Marketing Expenses.*Sales and marketing expenses for the three months ended March 31, 2026 increased as compared to the same period in 2025 primarily due to increased payroll and employee expenses ($82), commission expenses ($48) and consulting and professional fees ($7), partially offset by decreases in stock-based compensation ($25).

Previous wording

Gain on Investments, Interest Expense and Other Income (Expense), Net

Current wording

Gain on Investments, Interest Expense and Other Expense

Previous wording

Gain on investments for the three and nine months ended September 30, 2025 increased as compared to the same periods in 2024 due to interest on our increased cash and cash equivalent balances. Interest expense for the nine months ended September 30, 2024 related to our convertible debt. Other income (expense), net in 2024 was related to foreign exchange losses on the liquidation of our Swiss subsidiary.

Current wording

Gain on investments for the three months ended March 31, 2026 decreased as compared to 2025 due to interest on lower average cash and cash equivalent balances. Interest expense for the three months ended March 31, 2026 related to interest on our convertible notes. Other expense in 2026 related to losses on the change in fair value of our derivative liability.

Previous wording

As of September 30, 2025, we had cash and cash equivalents of $3.4 million. Since inception, we have financed our operations through private placements of preferred stock, debt financing arrangements, our initial public offering, additional stock offerings and the sale of our products. As of September 30, 2025, we had no outstanding debt. As of September 30, 2025, we had an accumulated deficit of $78.5 million, and we expect to incur additional losses in the future. We have not achieved positive cash flow from operations to date.

Current wording

As of March 31, 2026, we had cash and cash equivalents of $4.6 million. Since inception, we have financed our operations through private placements of preferred stock, debt financing arrangements, our initial public offering, additional stock offerings and the sale of our products. As of March 31, 2026, we had an accumulated deficit of $84.8 million, and we expect to incur additional losses in the future. We have not achieved positive cash flow from operations to date.

Previous wording

As we attempt to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our sales and marketing efforts, research and development activities, or other operations. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, and collaborations. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we are unable to raise capital, we will need to delay, reduce, or terminate planned activities to reduce costs. Doing so will likely harm our ability to execute our business plans. Due to the uncertainty in our ability to raise capital, management believes that there is substantial doubt in our ability to continue as a going concern for the next twelve months from the issuance of these condensed financial statements.

Current wording

As we attempt to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our sales and marketing efforts, research and development activities, or other operations. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, and collaborations. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we are unable to raise capital, we will need to delay, reduce, or terminate planned activities to reduce costs. Doing so will likely harm our ability to execute our business plans. Due to the uncertainty in our ability to raise capital, management believes that there is substantial doubt in our ability to continue as a going concern.

Previous wording

The decrease in net cash used in operating activities for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily attributable to our decreased net loss ($862), adjusted for decreases in non-cash stock-based compensation expenses ($1,615), in addition to increased inventory levels ($501) and decreased accounts payable ($394), partially offset by increases in accrued expenses ($498).

Current wording

The increase in net cash used in operating activities for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily attributable to our increased net loss as adjusted for reduced non-cash expenses ($263) in addition to decreased accounts payable ($326) and increased accounts receivable ($259), partially offset by decreases in inventory ($237).

Previous wording

Cash used in investing activities for the nine months ended September 30, 2025 consisted of the cash payment for the SI Acquisition ($750) and purchases of property and equipment ($81). Cash used in investing activities for the nine months ended September 30, 2024 consisted of purchases of property and equipment ($223).

Current wording

Cash used in investing activities for the three months ended March 31, 2026 consisted of purchases of property and equipment ($56).

Previous wording

Cash provided by financing activities for the nine months ended September 30, 2025 consisted primarily of gross proceeds from the issuance of common stock from our securities purchase agreements ($4,010) and from the exercise of warrants under the inducement agreement ($3,057), net of total cash offering costs ($867). Cash provided by financing activities for the nine months ended September 30, 2024 consisted primarily of gross proceeds from the issuance of common stock and warrants ($4,500), the exercise of warrants under the inducement agreement ($4,647), the issuance of Series A Convertible Preferred Stock ($2,605) and Series B Convertible Preferred Stock ($550) and from issuances of common stock ($2,163), net of total cash offering costs ($1,265).

Current wording

Cash provided by financing activities for the three months ended March 31, 2026 consisted of the net proceeds from the issuance of convertible notes ($3,867). Cash provided by financing activities for the three months ended March 31, 2025 consisted primarily of gross proceeds from the issuance of common stock from our securities purchase agreements ($4,010) and gross proceeds from the exercise of warrants under the inducement agreement ($3,057), net of total offering costs ($808).

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported results of operations during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from three other sources. Actual results could differ from these estimates under different assumptions or conditions. For the nine months ended September 30, 2025, the only significant change to our existing critical accounting policies from those disclosed in our Annual Report on Form 10-K was related to accounting for business combinations, as described below.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported results of operations during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from three other sources. Actual results could differ from these estimates under different assumptions or conditions. For the three months ended March 31, 2026, there were no significant changes to our existing critical accounting policies from those disclosed in our Annual Report on Form 10-K with the exception of our policy for derivative liabilities which is included herein.