
Part I Business Tenon Medical, Inc. launched its FDA-cleared Catamaran™ SI Joint Fusion System in October 2022, targeting a potential $2.0 billion U.S. market for SI joint disorders - The company developed the Catamaran™ SI Joint Fusion System, receiving FDA clearance in 2018 for treating SI Joint disorders24 - Tenon estimates the potential annual U.S. market for SI-Joint surgical intervention at approximately $2.0 billion, with current market penetration at only 5-7%4243 - The company initiated its national commercial launch in October 2022, marketing its product primarily through independent distributors and sales representatives3867 - As of March 29, 2024, Tenon owns 4 issued U.S. utility patents and 16 pending U.S. utility patent applications, with U.S. patents expected to expire around 20317880 - The company relies on five contract manufacturers for all instruments, implants, and sterilization cases, without long-term manufacturing agreements108109 Risk Factors The company faces significant risks including recurring losses, going concern doubts, single product dependence, intense competition, and internal control weaknesses - The company has a history of recurring losses and negative cash flows, with its auditor expressing substantial doubt about its ability to continue as a going concern120 - Tenon is solely dependent on the market adoption of its single product, the Catamaran System, where failure to increase sales would materially harm operations144 - The company is dependent on a limited number of single-source contract manufacturers, where the loss of any could materially affect the business154 - The company received a Nasdaq notice on January 4, 2024, for non-compliance with board and committee independence, potentially leading to delisting251 - Management identified a material weakness in internal controls over financial reporting due to a lack of segregation of duties, stemming from limited size and resources256 Unresolved Staff Comments The company reports no unresolved staff comments - None Cybersecurity The company maintains a cyber-risk management program overseen by the Board of Directors, and as of the report date, has not experienced any material cybersecurity attacks - The Board of Directors oversees the company's cyber-risk management program274 - As of the report date, the company has not experienced any significant cybersecurity attacks that materially affected its business or financial condition275 Properties The company leases its principal executive offices in Los Gatos, California, and owns no real estate - The company's principal executive offices are leased and located in Los Gatos, California276 Legal Proceedings The company reports no legal proceedings - None Mine Safety Disclosures This item is not applicable to the company - Not applicable Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "TNON", with 3.7 million shares outstanding as of March 2024, and it has never paid cash dividends - As of March 29, 2024, the company had 3,726,974 shares of common stock outstanding281 - The company has never declared or paid a cash dividend and does not expect to in the foreseeable future282 - On November 21, 2023, the company issued $1,250,000 in secured notes and warrants to purchase 45,000 shares of common stock at $1.94 per share in a private placement288290 | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 179,005 | $42.54 | 37,486 | | Equity compensation plans not approved by security holders | — | $ — | — | | Total | 179,005 | $42.54 | 37,486 | Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations For 2023, revenue increased to $2.9 million from $0.7 million in 2022, with a net loss of $15.6 million, raising substantial doubt about its going concern ability | Consolidated Statements of Operations Data in Dollars (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $ 2,928 | $ 691 | | Gross profit (loss) | 1,241 | (641) | | Loss from operations | (15,727) | (18,725) | | Net loss | $ (15,581) | $ (18,917) | - The 312% increase in 2023 revenue was primarily due to a rise in surgical procedures using the Catamaran System345 - Sales and marketing expenses decreased by 13% in 2023, primarily due to a $3.6 million payment in 2022 for a sales agreement termination, partially offset by increased payroll and commissions in 2023347348 - The company had an accumulated deficit of $55.1 million as of December 31, 2023, with management stating existing cash is insufficient for the next 12 months, raising substantial doubt about its going concern ability354 - In February 2024, the company raised $2.6 million through a private placement of Series A Preferred Stock and warrants355 Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Tenon Medical is not required to provide this information - The Company is a smaller reporting company and is not required to provide the information under this item365 Financial Statements and Supplementary Data The consolidated financial statements for 2023 and 2022 include an auditor's "going concern" paragraph, showing total assets of $6.3 million and a net loss of $15.6 million for 2023 - The independent auditor's report for 2023 expresses substantial doubt about the Company's ability to continue as a going concern due to recurring losses, negative cash flows, and limited capital372 | (In thousands) | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $ 3,889 | $ 9,347 | | TOTAL ASSETS | $ 6,345 | $ 11,089 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $ 3,140 | $ 2,530 | | Total liabilities | $ 5,567 | $ 4,837 | | Total stockholders' equity | $ 778 | $ 6,252 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 6,345 | $ 11,089 | | (In thousands, except per share data) | Years Ended December 31, | | | :--- | :--- | :--- | | | 2023 | 2022 | | Revenue | $ 2,928 | $ 691 | | Net Loss | $ (15,581) | $ (18,917) | | Net Loss Per Share (Basic and diluted) | $ (8.59) | $ (23.62) | - Subsequent to year-end, on February 20, 2024, the company raised $2,605,000 through a private placement of Series A Preferred Stock and warrants, also converting outstanding convertible notes499500 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None Controls and Procedures Management concluded that disclosure controls were not effective as of December 31, 2023, due to a material weakness in internal control over financial reporting from a lack of segregation of duties - The CEO and CFO concluded that as of December 31, 2023, the company's disclosure controls and procedures were not effective at a reasonable assurance level506 - A material weakness was identified in internal control over financial reporting due to a lack of segregation of duties, attributed to the company's limited size and resources507508 - The company plans to remediate the material weakness by increasing the capacity of its qualified financial personnel509 Other Information The company reports no other information - None Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - None Part III Directors, Executive Officers and Corporate Governance The company's Board of Directors consists of seven members, including four independent directors, and has established three standing committees, along with adopting a clawback policy - The Board of Directors consists of seven members, with four determined to be independent531533 - The Board has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee534 - On November 28, 2023, the Board adopted an executive compensation recoupment (clawback) policy consistent with Exchange Act Rule 10D-1540 Executive Compensation In fiscal year 2023, named executive officers received total compensation ranging from $350,225 to $487,600, with independent directors receiving $232,500 in cash compensation | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option/RSU Awards($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Steven M. Foster, CEO | 2023 | 400,000 | 87,600 | — | 487,600 | | | 2022 | 300,000 | 70,000 | 1,926,634 | 2,296,634 | | Steven Van Dick, CFO | 2023 | 325,000 | 60,225 | — | 385,225 | | | 2022 | 275,000 | 148,125 | 808,998 | 1,232,123 | | Richard Ginn, CTO | 2023 | 290,000 | 60,225 | — | 350,225 | | | 2022 | 275,000 | 148,125 | 3,995,603 | 4,418,728 | - Employment agreements for executive officers include severance equal to one year's base salary and 12 months of health care coverage upon termination without cause or for good reason553557561 - Independent directors received $232,500 in total cash compensation for board and committee service in 2023, with no equity compensation issued573574 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 29, 2024, all directors and executive officers as a group beneficially owned 5.6% of common stock, with Zuhlke Ventures AG holding 9.4% and other significant Series A Preferred Stock holders - All officers and directors as a group beneficially own 209,133 shares, representing 5.6% of outstanding common stock as of March 29, 2024586 - Zuhlke Ventures AG is a 5% or greater stockholder, beneficially owning 244,773 shares of common stock, or 9.4%586 - The Beckham-Shufeldt Family Trust and Ascent Special Ventures LLC are significant holders of Series A Preferred Stock, with beneficial ownership of 25.7% and 26.4% respectively586 Certain Relationships and Related Party Transactions, and Director Independence The company has a consulting agreement with Richard Ferrari, its Executive Chairman, dated May 7, 2021, for his services - The company has a consulting agreement with Richard Ferrari, its Executive Chairman, dated May 7, 2021588 Principal Accountant Fees and Services Haskell & White LLP was engaged as the independent auditor for 2023 with $158,500 in fees, while Armanino LLP served as auditor for 2022 and prior, with $234,083 in 2023 and $410,893 in 2022 | Fees Paid to H&W (2023) | Amount | | :--- | :--- | | Audit fees | $158,500 | | Total fees | $158,500 | | Fees Paid to Armanino | 2023 | 2022 | | :--- | :--- | :--- | | Audit fees | $179,102 | $338,253 | | Audit-related fees | $54,981 | $72,640 | | Total fees | $234,083 | $410,893 | Part IV Exhibits, Financial Statement Schedules This section provides an index of all exhibits filed as part of the Annual Report, including consolidated financial statements and various corporate documents - This section provides an index of all exhibits filed with the 10-K, including corporate governance documents, material agreements, and certifications596