Tenon Medical (TNON) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01We have incurred losses in the past, our financial statements have been prepared on a going concern basis and we may be unable to achieve or sustain profitability in the future
2. 02If hospitals, clinicians, and other healthcare providers are unable to obtain coverage and reimbursement from third-party payors for procedures performed using our products, adoption of our products may be delayed, and it is unlikely that they will gain further acceptance
3. 03If the reimbursement provided by third-party payors to hospitals, clinicians, and other healthcare providers for procedures performed using our products is insufficient, adoption and use of our products and the prices paid for our implants may decline
4. 04The Medicare 2023 national average hospital inpatient payment ranges from approximately $25,661 to approximately $46,437 depending on the procedural approach and the presence of Complication and Comorbidity (CC)/Major Complication and Comorbidity (MCC)
5. 05We may not be able to convince physicians that The Catamaran System is an attractive alternative to our competitors’ products and that our procedure is an attractive alternative to existing surgical and non-surgical treatments of the SI-Joint
6. 06Clinicians and payors may not find our clinical evidence to be compelling, which could limit our sales, and on-going and future research may prove our product to be less safe and effective than initially anticipated
7. 07Pricing pressure from our competitors, changes in third-party coverage and reimbursement, healthcare provider consolidation, payor consolidation and the proliferation of “physician-owned distributorships” may impact our ability to sell our product at prices necessary to support our current business strategies
8. 08We operate in a very competitive business environment and if we are unable to compete successfully against our existing or potential competitors, our sales and operating results may be negatively affected and we may not grow
9. 09We currently manufacture (through third parties) and sell products used in a single procedure, which could negatively affect our operations and financial condition
10. 10We have a limited operating history and may face difficulties encountered by early-stage companies in new and rapidly evolving markets
11. 11Our sales volumes and our operating results may fluctuate over the course of the year
12. 12If we do not successfully implement our business strategy, our business and results of operations will be adversely affected
13. 13Our business could suffer if we lose the services of key members of our senior management, key advisors or personnel
14. 14Various factors outside our direct control may adversely affect manufacturing and distribution of our product
15. 15If any of these risks were to materialize, our ability to provide our product to customers on a timely basis would be adversely impacted
16. 16In addition, our anticipated growth could strain the ability of our contract manufacturers to deliver an increasingly large supply of product. Contract manufacturers often experience difficulties in scaling up production, including financial issues, or problems with production yields and quality control and assurance
17. 17As our sales grow, our contract manufacturers may encounter problems or delays in the manufacturing of our product or fail to meet certain regulatory requirements which could result in an adverse effect on our business and financial results
18. 18In the future our product may become obsolete, which would negatively affect operations and financial condition
19. 19If we experience significant disruptions in our information technology systems, our business, results of operations, and financial condition could be adversely affected
20. 20We may seek to grow our business through acquisitions of or investments in new or complementary businesses, products or technologies, and the failure to manage acquisitions or investments, or the failure to integrate them with our existing business, could have a material adverse effect on us
21. 21We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances, or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenue
22. 22We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks
23. 23Geopolitical conditions, including trade disputes and direct or indirect acts of war or terrorism, could have an adverse effect on our operations and financial results
24. 24Inflation may adversely affect our operations and financial results

Risks Related to Our Legal and Regulatory Environment

1. 25We and our contract manufacturers are subject to extensive governmental regulation both in the United States and abroad, and failure to comply with applicable requirements could cause our business to suffer
2. 26The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, difficulties achieving new product clearances, higher than anticipated costs or lower than anticipated sales
3. 27Any delay in, or failure to receive or maintain, clearance or approval for our product under development could prevent us from generating revenue from these products or achieving profitability
4. 28The FDA and other regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some clinicians from using our product and adversely affect our reputation and the perceived safety and effectiveness of our product
5. 29We and our independent sales representatives must comply with U.S. federal and state fraud and abuse laws, including those relating to physician kickbacks and false claims for reimbursement
6. 30Our failure to adequately protect personal information in compliance with evolving legal requirements could harm our business
7. 31Even if our product is approved by regulatory authorities if our contract manufacturers fail to comply with ongoing FDA, or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the market
8. 32Our employees, independent contractors, consultants, contract manufacturers, and our independent sales representatives may engage in misconduct or other improper activities, relating to regulatory standards and requirements
9. 33We may be subject to enforcement action, including fines, penalties or injunctions, if we are determined to be engaging in the off-label promotion of our product
10. 34We are required to report certain malfunctions, deaths, and serious injuries associated with our product, which can result in voluntary corrective actions or agency enforcement actions
11. 35A recall of our product, either voluntarily or at the direction of the FDA or the discovery of serious safety issues or malfunctions with our product, can result in voluntary corrective actions or agency enforcement actions, which could have a significant adverse impact on us
12. 36The results of our clinical trials may not support our product candidate claims or may result in the discovery of adverse side effects
13. 37We may incur product liability losses, and insurance coverage may be inadequate or unavailable to cover these losses
14. 38We are subject to environmental laws and regulations that can impose significant costs and expose us to potential financial liabilities
15. 39U.S. tax legislation may materially affect our financial condition, results of operations and cash flows
16. 40The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modifies certain provisions of the Tax Act, including increasing the amount of interest expense that may be deducted

Risks Related to Our Intellectual Property

1. 41Our ability to protect our intellectual property and proprietary technology is uncertain
2. 42We may be subject to damages resulting from claims that we, our employees, or independent distributors along with their independent sales representatives have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors
3. 43The medical device industry is characterized by patent litigation, and we could become subject to litigation that could be costly, result in the diversion of management’s time and efforts, require us to pay damages, and/or prevent us from developing or marketing our existing or future products
4. 44Patent terms are limited, and we may not be able to effectively protect our product and business
5. 45Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product
6. 46We may not be able to protect our intellectual property rights throughout the world
7. 47If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed
8. 48Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets

Risks Related to the Ownership of our Common Stock and Warrants

1. 49An active trading market for our shares may not be sustained
2. 50Future sales of substantial amounts of our common stock could adversely affect the market price of our common stock
3. 51We have effected one for eight and a one for ten reverse stock splits in the last two years and we may not be able to cure a Nasdaq listing deficiency if our stock price falls below $0.32 per share
4. 52The trading price of our common stock has been and is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control
5. 53Our Series A Preferred Stock and Series B Preferred Stock rank senior to our common stock
6. 54Conversion of Series A Preferred Stock, the Series B Preferred Stock or the exercise of the Tradeable Warrants, Note Warrants, the Series A Warrants, the Series B Warrants, the New Warrants may cause significant dilution to our stockholders
7. 55If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline
8. 56The price of our common stock may be volatile, and you may be unable to resell your shares at or above the price paid
9. 57Our failure to maintain effective internal controls over financial reporting could have an adverse impact on us
10. 58Our financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm our stock price
11. 59We must implement additional and expensive procedures and controls in order to grow our business and organization and to satisfy reporting requirements, which will increase our costs and require additional management resources
12. 60We may be subject to securities litigation, which is expensive and could divert our management’s attention
13. 61We are an “emerging growth company” under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors
14. 62Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it
15. 63We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock
16. 64The elimination of personal liability against our directors and officers under Delaware law and the existence of indemnification rights held by our directors, officers and employees may result in substantial expenses
17. 65Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us