Tenon Medical, Inc. (TNON) Risk Analysis

We must meet certain financial and liquidity criteria to maintain the listing of our common stock on the Nasdaq Stock Market LLC ("Nasdaq"). If we violate the maintenance requirements for continued listing of our common stock, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from Nasdaq may materially impair our stockholders' ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital. On January 4, 2024, we received a written notice (the "Notice") from Nasdaq dated January 4, 2024, indicating that, as a result of Frank Fischer's resignation from the Board, audit committee of the Board (the "Audit Committee") and compensation committee of the Board (the "Compensation Committee"), effective November 30, 2023, that the Company was not currently in compliance with Nasdaq Listing Rule 5605, which requires that (i) a majority of the Board be comprised of independent directors, (ii) the Audit Committee is comprised of at least three independent directors and (iii) the Compensation Committee is comprised of at least two independent directors. Kristine Jacques was appointed to the Board on March 25, 2024 and as a result, as of March 25, 2024, the Company partly complied with Nasdaq Listing Rule 5605, specifically the requirement that a majority of the Board be comprised of independent directors. The Audit Committee, however, currently is comprised of only two independent directors and the Compensation Committee is only comprised of one independent director. In accordance with Nasdaq Listing Rule 5605(b)(1)(A), the Company has a "cure period" of until the earlier of the Company's next annual shareholders' meeting or November 30, 2024, or if the next annual shareholders' meeting is held before May 28, 2024, then the Company must evidence compliance no later than May 28, 2024. The Company intends to elect one or more independent directors to serve as a member of the Audit Committee and the Compensation Committee during this cure period. The Notice has no immediate effect on v listing or trading of the Company's common stock on The Nasdaq Capital Market.

Sales of a substantial number of shares of our common stock in the public or the perception that these sales could occur, could adversely affect the market price of our common stock, and may make it more difficult for holders of our common stock to sell their common stock at a time and price that you deem appropriate and affect our ability to raise capital through the sale of equity securities. We may issue our shares of common stock or securities convertible into our common stock from time to time in connection with a financing, acquisition, investments or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.

The trading price of our common stock may be subject to instances of extreme stock price run-ups followed by rapid price declines and stock price volatility unrelated to both our actual and expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our stock. Further, the trading price of our common stock could be highly volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume, actual or anticipated fluctuations in our results of operations; the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; failure of securities analysts to initiate or maintain coverage of our Company, changes in financial estimates or ratings by any securities analysts who follow our Company or our failure to meet these estimates or the expectations of investors; announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments; changes in operating performance and stock market valuations of other companies in our industry; price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; changes in our Board or management; sales of large blocks of our Common Stock, including sales by our executive officers, directors and significant stockholders; lawsuits threatened or filed against us; changes in laws or regulations applicable to our business; the expiration of lock-up agreements; changes in our capital structure, such as future issuances of debt or equity securities; short sales, hedging and other derivative transactions involving our capital stock; general economic and geopolitical conditions, including the current or anticipated impact of military conflict and related sanctions imposed on Russia by the United States and other countries due to Russia's recent invasion of Ukraine; and the other factors described in this section of the report captioned "Risk Factors."

We conducted our initial public offering in April of 2022. Therefore, the market for our common stock is new, and we cannot assure you that an active trading market for our common stock will develop, or if it does develop, it may not be maintained. You may not be able to sell your common stock quickly or at the market price if trading in our securities is not active.

Our Certificate of Incorporation specifies that, except for claims arising under federal securities laws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company's stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our Certificate of Incorporation or Bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our Certificate of Incorporation as described above. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. As such, stockholders of the Company seeking to bring a claim regarding the internal affairs of the Company may be subject to increased costs associated with litigating in Delaware as opposed to their home state or other forum, precluded from bringing such a claim in a forum they otherwise consider to be more favorable, and discouraged from bringing such claims as a result of the foregoing or other factors related to forum selection. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. We believe these provisions benefit us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees, and agents as it may limit any stockholder's ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees or agents. The enforceability of similar choice of forum provisions in other companies' certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

The trading price of our common stock may fluctuate substantially. The market price of our common stock may fluctuate higher or lower, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following: - actual or anticipated fluctuations in our financial condition and operating results;- actual or anticipated changes in our growth rate relative to our competitors;- commercial success and market acceptance of our product;- success of our competitors in developing or commercializing products;- ability to commercialize or obtain regulatory approvals for our product, or delays in commercializing or obtaining regulatory approvals;- strategic transactions undertaken by us;- additions or departures of key personnel;- product liability claims;- prevailing economic conditions;- disputes concerning our intellectual property or other proprietary rights;- FDA or other U.S. or foreign regulatory actions affecting us or the healthcare industry;- healthcare reform measures in the United States;- sales of our common stock by our officers, directors or significant stockholders;- future sales or issuances of equity or debt securities by us;- business disruptions caused by earthquakes, fires or other natural disasters;- the exercise and sale of any outstanding warrants or options;- issuance of new or changed securities analysts' reports or recommendations regarding us;- changes in our capital structure, such as future issuances of debt or equity securities;- short sales, hedging and other derivative transactions involving our capital stock; and - general economic and geopolitical conditions, including the current or anticipated impact of military conflict and related sanctions imposed on Russia by the United States and other countries due to Russia's recent invasion of Ukraine. In addition, if the market for medical device or healthcare stocks or the stock market, in general, experience a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, results of operations, or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation. Securities litigation could result in substantial costs and divert our management's attention and resources from our business. This could have a material adverse effect on our business, results of operations, and financial condition.