# EDGAR Filing Document

**Accession Number:** 0001794546
**File Stem:** 0001193125-25-269545
**Filing Date:** 2025-11
**Character Count:** 157572
**Document Hash:** 007bcb05006aa8fa442ff235d49144a6
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-25-269545.hdr.sgml**: 20251106

**ACCESSION NUMBER**: 0001193125-25-269545

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 68

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251106

**DATE AS OF CHANGE**: 20251106

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** CARLSMED, INC.
- **CENTRAL INDEX KEY:** 0001794546
- **STANDARD INDUSTRIAL CLASSIFICATION:** SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
- **ORGANIZATION NAME:** 08 Industrial Applications and Services
- **EIN:** 831081863
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-42756
- **FILM NUMBER:** 251458433

**BUSINESS ADDRESS:**
- **STREET 1:** 1800 ASTON AVENUE
- **STREET 2:** SUITE 100
- **CITY:** CARLSBAD
- **STATE:** CA
- **ZIP:** 92008
- **BUSINESS PHONE:** 858-295-9290

**MAIL ADDRESS:**
- **STREET 1:** 1800 ASTON AVENUE
- **STREET 2:** SUITE 100
- **CITY:** CARLSBAD
- **STATE:** CA
- **ZIP:** 92008

?xml version='1.0' encoding='ASCII'? 10-Q

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

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**FORM** 10-Q

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**(Mark One)**

☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

**For the quarterly period ended** **September 30,** 2025

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from to** 

**Commission File Number:** 001-42756

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CARLSMED, INC.

**(Exact Name of Registrant as Specified in its Charter)**

------

---

| | |
|:---|:---|
| Delaware | 83-1081863 |
| (State or other jurisdiction of<br>incorporation or organization) | (I.R.S. Employer<br>Identification No.) |
| 1800 Aston Ave**,** Suite 100<br>Carlsbad**,** California | 92008 |
| (Address of principal executive offices) | (Zip Code) |

---

**Registrant's telephone number, including area code: (**760**)** 766-1923

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Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading**<br>**Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, $0.00001 par value per share | CARL | The Nasdaq Stock Market LLC |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |  |  |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2025, the registrant had 26,592,908 shares of common stock, $0.00001 par value per share, outstanding.

------

**Table of Contents**

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
| **PART I.** | [<u>FINANCIAL INFORMATION</u>](#part_i_financial_information) | 1 |
| Item 1. | [<u>Financial Statements (Unaudited)</u>](#financial_statements) | 1 |
|  | [<u>Condensed Balance Sheets as of September 30, 2025 and December 31, 2024</u>](#condensed_balance_sheets) | 1 |
|  | [<u>Condensed Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2025 and 2024</u>](#condensed_statements_of_operations_and) | 2 |
|  | [<u>Condensed Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2025 and 2024</u>](#preferred_stock_and_stockholders_deficit) | 3 |
|  | [<u>Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024</u>](#condensed_statements_of_cash_flows) | 5 |
|  | [<u>Notes to Condensed Financial Statements</u>](#notes_to_condensed_financial_statements) | 7 |
| Item 2. | [<u>Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#managements_discussion_and_analysis) | 22 |
| Item 3. | [<u>Quantitative and Qualitative Disclosures About Market Risk</u>](#item_3_quantitative_and_qualitative) | 33 |
| Item 4. | [<u>Controls and Procedures</u>](#item_4_controls_and_procedures) | 33 |
| **PART II.** | [<u>OTHER INFORMATION</u>](#part_ii_other_information) | 34 |
| Item 1. | [<u>Legal Proceedings</u>](#item_1_legal_proceedings) | 34 |
| Item 1A. | [<u>Risk Factors</u>](#item_1a_risk_factors) | 34 |
| Item 2. | [<u>Unregistered Sales of Equity Securities and Use of Proceeds</u>](#item_2_unregistered_sales_of_equity) | 34 |
| Item 3. | [<u>Defaults Upon Senior Securities</u>](#item_3_defaults_upon_senior_securities) | 34 |
| Item 4. | [<u>Mine Safety Disclosures</u>](#item_4_mine_safety_disclosures) | 34 |
| Item 5. | [<u>Other Information</u>](#item_5_other_information) | 34 |
| Item 6. | [<u>Exhibits</u>](#item_6_exhibits) | 35 |
|  | [<u>Signatures</u>](#signatures) | 36 |

---

i

------

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to advance the aprevo Technology Platform and any potential future products through applicable regulatory approval processes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•existing regulations and regulatory developments in the United States and other jurisdictions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to maintain or improve our third-party payor reimbursement strategy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to attract and retain hospitals and surgeons;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our expectations concerning orders for our products and utilization by existing hospitals and surgeons;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our expectations regarding the potential market size for the aprevo Technology Platform;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to maintain our competitive technological advantages;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our intentions to pursue adjacent and international markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to continue improving our products and technology;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our commercialization and marketing capabilities and strategies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to maintain or reduce the manufacturing times of our CMOs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our reliance on a limited number of CMOs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the implementation of our business model and strategic plans for our business and products and technology;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our relationships with, and the capabilities of, our suppliers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the scope of protection we are able to establish and maintain for intellectual property rights covering our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to effectively manage our growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the increased expenses associated with being a public company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•estimates of our expenses, future revenue, capital requirements, our needs for additional financing, and our ability to obtain additional capital;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our future financial performance; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•those other factors described in the section titled "Risk Factors" in our prospectus dated July 22, 2025 (File No. 333-288339) (the "IPO Prospectus"), as filed with the Securities and Exchange Commission (the "SEC") on July 24, 2025 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the "Securities Act") and in periodic reports that we file with the SEC, and our reports to stockholders. These filings are available at www.sec.gov and on our website at https://www.carlsmed.com.

In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled "*Risk Factors*" and elsewhere in this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date on which the statements are made. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

ii

------

We own certain trademarks and trademark applications used in this Quarterly Report on Form 10-Q that are important to our business, including, among others, Carlsmed®, aprevo®, and myaprevo®. We also intend to apply for various trademarks that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q may also contain trademarks, service marks, and trade names of third parties, which are the property of their respective owners. Our use or display of third parties' trademarks, service marks, trade names, or products in this prospectus is not intended to, and does not, imply a relationship with, or endorsement or sponsorship by, us. Solely for convenience, the trademarks, service marks, and trade names referred to in this prospectus may appear without the "™," "®," or "SM" symbol, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks, and trade names.

iii

------

**PART I—FINANCIAL INFORMATION**

**Item 1. Financial Statements.**

# CARLSMED, INC.

# CO NDENSED BALANCE SHEETS
**(in thousands, except for share and par value amounts)**

**(unaudited)**

---

| | | |
|:---|:---|:---|
|  | **September 30, 2025** | **December 31, 2024** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $115373 | $40125 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash | 100 | 100 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net of allowances of $1,601 and $1,239, as of September 30, 2025 and<br> December 31, 2024, respectively | 11296 | 6766 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | 1340 | 995 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 3356 | 1365 |
| Total current assets | 131465 | 49351 |
| Property and equipment, net | 1187 | 260 |
| Operating lease right-of-use assets | 1986 | 1644 |
| Other assets | 225 | 569 |
| Total assets | $134863 | $51824 |
| **Liabilities, Convertible Preferred Stock, and Stockholders' Equity (Deficit)** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $2672 | $2412 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 3186 | 2687 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued compensation | 4409 | 3270 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term operating lease liabilities | 661 | 449 |
| Total current liabilities | 10928 | 8818 |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term portion of term loan, net | 15440 | 15414 |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term operating lease liabilities | 1513 | 1317 |
| &nbsp;&nbsp;&nbsp;&nbsp;Warrant liabilities | 32 | 457 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other long-term liabilities | 290 | 222 |
| Total liabilities | 28203 | 26228 |
| Commitments and contingencies (*Note 9*) |  |  |
| Series A convertible preferred stock, $0.00001 par value; zero and 4,902,814 shares authorized, issued, and outstanding, and zero and $13,767 liquidation preference as of September 30, 2025 and December 31, 2024, respectively |  | 13578 |
| Series B convertible preferred stock, $0.00001 par value; zero and 4,393,481 shares authorized, zero and 4,335,051 shares issued and outstanding, and zero and $30,000 liquidation preference as of September 30, 2025 and December 31, 2024, respectively |  | 29801 |
| Series C convertible preferred stock, $0.00001 par value; zero and 4,910,500 shares authorized, zero and 4,890,123 shares issued and outstanding, and zero and $52,500 liquidation preference as of September 30, 2025 and December 31, 2024, respectively |  | 52847 |
| Stockholders' equity (deficit): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, $0.00001 par value; 10,000,000 and zero shares authorized, zero shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common stock, $0.00001 par value; 600,000,000 and 21,835,801 shares authorized, 26,652,775 and 4,234,798 shares issued, and 26,584,077 and 4,139,219 shares outstanding as of September 30, 2025 and December 31, 2024, respectively |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 198852 | 541 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (92192) | (71171) |
| Total stockholders' equity (deficit) | 106660 | (70630) |
| Total liabilities, convertible preferred stock, and stockholders' equity (deficit) | $134863 | $51824 |

---

The accompanying notes are an integral part of these Condensed Financial Statements.

------

# CARLSMED, INC.

# CONDEN SED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

# (in thousands, except share and per share amounts)
(unaudited)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenue | $13074 | $6590 | $35346 | $17757 |
| Cost of sales | 3147 | 1792 | 8914 | 4733 |
| Gross profit | 9927 | 4798 | 26432 | 13024 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development | 4445 | 4035 | 11755 | 11289 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 9610 | 6622 | 24218 | 15092 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 4907 | 1918 | 11715 | 6068 |
| Total operating expenses | 18962 | 12575 | 47688 | 32449 |
| Loss from operations | (9035) | (7777) | (21256) | (19425) |
| Other income (expense): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (380) | (402) | (1100) | (943) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income | 954 | 394 | 1670 | 920 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant liabilities | (65) | (28) | (335) | (89) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense), net | 509 | (36) | 235 | (112) |
| Net loss and comprehensive loss | (8526) | (7813) | (21021) | (19537) |
| Deemed dividend to preferred stockholders |  | (592) | (584) | (592) |
| Net loss attributable to common stockholders | $(8526) | $(8405) | $(21605) | $(20129) |
| Net loss per share attributable to common stockholders, basic<br> and diluted | $(0.40) | $(2.06) | $(2.15) | $(4.97) |
| Weighted-average number of common shares used to compute<br> basic and diluted net loss per share | 21081330 | 4088553 | 10051623 | 4046210 |

---

The accompanying notes are an integral part of these Condensed Financial Statements.

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# CARLSMED, INC.

# CONDEN SED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

# (in thousands, except for share amounts)
(unaudited)

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** |
|  | **Series A Convertible<br>Preferred Stock** | **Series A Convertible<br>Preferred Stock** | **Series B Convertible<br>Preferred Stock** | **Series B Convertible<br>Preferred Stock** | **Series C Convertible<br>Preferred Stock** | **Series C Convertible<br>Preferred Stock** | **Common Stock** | **Common Stock** | **Additional<br>Paid-In** | **Accumulated** | **Total<br>Stockholders'** |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Capital** | **Deficit** | **Equity (Deficit)** |
| **Balance as of December 31, 2024** | **4902814** | $**13578** | **4335051** | $**29801** | **4890123** | $**52847** | **4139219** | $**—** | $**541** | $**(71171)** | $**(70630)** |
| Issuance of Series C convertible preferred stock, net of issuance costs of $80 |  |  |  |  | 1117743 | 12503 |  |  |  |  |  |
| Deemed dividend related to issuance of Series C convertible preferred stock |  |  |  |  |  |  |  |  | (584) |  | (584) |
| Vesting of early exercised stock options |  |  |  |  |  |  | 8960 |  | 10 |  | 10 |
| Exercise of vested stock options |  |  |  |  |  |  | 422364 |  | 149 |  | 149 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 175 |  | 175 |
| Net loss |  |  |  |  |  |  |  |  |  | (5729) | (5729) |
| **Balance as of March 31, 2025** | **4902814** | $**13578** | **4335051** | $**29801** | **6007866** | $**65350** | **4570543** | $**—** | $**291** | $**(76900)** | $**(76609)** |
| Vesting of early exercised stock options |  |  |  |  |  |  | 8960 |  | 10 |  | 10 |
| Exercise of vested stock options |  |  |  |  |  |  | 24253 |  | 34 |  | 34 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 258 |  | 258 |
| Net loss |  |  |  |  |  |  |  |  |  | (6766) | (6766) |
| **Balance as of June 30, 2025** | **4902814** | $**13578** | **4335051** | $**29801** | **6007866** | $**65350** | **4603756** | $**—** | $**593** | $**(83666)** | $**(83073)** |
| Conversion of convertible preferred stock into common stock on initial public offering | (4902814) | (13578) | (4335051) | (29801) | (6007866) | (65350) | 15245731 |  | 108729 |  | 108729 |
| Issuance of common stock in initial public offering, net of underwriting discounts and commissions and offering costs of $12,446 |  |  |  |  |  |  | 6700000 |  | 88054 |  | 88054 |
| Reclassification of warrants from liability classified to equity classified |  |  |  |  |  |  |  |  | 760 |  | 760 |
| Cashless exercise of warrants |  |  |  |  |  |  | 25184 |  |  |  |  |
| Vesting of early exercised stock options |  |  |  |  |  |  | 8960 |  | 11 |  | 11 |
| Exercise of vested stock options |  |  |  |  |  |  | 446 |  | 1 |  | 1 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 704 |  | 704 |
| Net loss |  |  |  |  |  |  |  |  |  | (8526) | (8526) |
| **Balance as of September 30, 2025** | **—** | $**—** | **—** | $**—** | **—** | $**—** | **26584077** | $**—** | $**198852** | $**(92192)** | $**106660** |

---

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# CARLSMED, INC.

# CONDENSED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

# (in thousands, except for share amounts)
(unaudited)

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** |
|  | **Series A Convertible<br>Preferred Stock** | **Series A Convertible<br>Preferred Stock** | **Series B Convertible<br>Preferred Stock** | **Series B Convertible<br>Preferred Stock** | **Series C Convertible<br>Preferred Stock** | **Series C Convertible<br>Preferred Stock** | **Common Stock** | **Common Stock** | **Additional<br>Paid-In** | **Accumulated** | **Total<br>Stockholders'** |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Capital** | **Deficit** | **Equity (Deficit)** |
| **Balance as of December 31, 2023** | **4902814** | $**13578** | **4335051** | $**29801** | **—** | $**—** | **3970811** | $**—** | $**784** | $**(46914)** | $**(46130)** |
| Issuance of Series C convertible preferred stock, net of issuance costs of $172 |  |  |  |  | 3586091 | 38328 |  |  |  |  |  |
| Issuance of common stock |  |  |  |  |  |  | 29121 |  | 6 |  | 6 |
| Exercise of vested stock options |  |  |  |  |  |  | 43506 |  | 12 |  | 12 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 35 |  | 35 |
| Net loss |  |  |  |  |  |  |  |  |  | (5447) | (5447) |
| **Balance as of March 31, 2024** | **4902814** | $**13578** | **4335051** | $**29801** | **3586091** | $**38328** | **4043438** | $**—** | $**837** | $**(52361)** | $**(51524)** |
| Exercise of vested stock options |  |  |  |  |  |  | 19957 |  | 11 |  | 11 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 52 |  | 52 |
| Net loss |  |  |  |  |  |  |  |  |  | (6277) | (6277) |
| **Balance as of June 30, 2024** | **4902814** | $**13578** | **4335051** | $**29801** | **3586091** | $**38328** | **4063395** | $**—** | $**900** | $**(58638)** | $**(57738)** |
| Issuance of Series C convertible preferred stock, net of issuance costs of $73 |  |  |  |  | 1304032 | 14519 |  |  |  |  |  |
| Deemed dividend related to issuance of Series C convertible preferred stock |  |  |  |  |  |  |  |  | (592) |  | (592) |
| Vesting of early exercised stock options |  |  |  |  |  |  | 38829 |  | 45 |  | 45 |
| Exercise of vested stock options |  |  |  |  |  |  | 8637 |  | 4 |  | 4 |
| Stock-based compensation expense |  |  |  |  |  |  |  |  | 66 |  | 66 |
| Net loss |  |  |  |  |  |  |  |  |  | (7813) | (7813) |
| **Balance as of September 30, 2024** | **4902814** | $**13578** | **4335051** | $**29801** | **4890123** | $**52847** | **4110861** | $**—** | $**423** | $**(66451)** | $**(66028)** |

---

The accompanying notes are an integral part of these Condensed Financial Statements.

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# CARLSMED, INC.

# CONDEN SED STATEMENTS OF CASH FLOWS

# (in thousands)
(unaudited)

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** |
| **Cash flows from operating activities** |  |  |
| Net loss | $(21021) | $(19537) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 183 | 108 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 1137 | 153 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-cash interest | 163 | 151 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on remeasurement of warrant liabilities | 335 | 89 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-cash lease expense | 376 | 278 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 362 | 310 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for excess and obsolete inventory | 1337 | 882 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other non-cash items | 17 |  |
| **Changes in operating assets and liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | (4893) | (2379) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | (1681) | (1703) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | (2138) | (631) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 683 | 832 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 530 | 564 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued compensation | 1139 | (173) |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease liabilities | (185) | (207) |
| **Net cash used in operating activities** | **(23656)** | **(21263)** |
| **Cash flows from investing activities:** |  |  |
| Purchase of property and equipment | (569) | (119) |
| Capitalized internal use software costs | (558) |  |
| Payment of initial direct costs related to operating leases | (126) |  |
| **Net cash used in investing activities** | **(1253)** | **(119)** |
| **Cash flows from financing activities:** |  |  |
| Proceeds from initial public offering, net of underwriting discounts and commissions | 93465 |  |
| Payments for deferred initial public offering costs | (5411) |  |
| Proceeds from issuance of Series C convertible preferred stock, net of issuance costs | 11919 | 52288 |
| Proceeds from term loan, net of issuance costs |  | 6235 |
| Proceeds from exercises of stock options | 184 | 27 |
| **Net cash provided by financing activities** | **100157** | **58550** |
| Increase in cash, cash equivalents, and restricted cash | 75248 | 37168 |
| Cash, cash equivalents, and restricted cash at beginning of the period | 40225 | 7372 |
| Cash, cash equivalents, and restricted cash at end of the period | $**115473** | $**44540** |

---

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# CARLSMED, INC.

# CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED

# (in thousands)
(unaudited)

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** |
| **Supplemental Disclosure of Noncash Investing and Financing Activities:** |  |  |
| Conversion of convertible preferred stock upon initial public offering | $108729 | $— |
| Reclassification of warrants from liability classified to equity classified | $760 | $— |
| Vesting of early exercised common stock options | $31 | $45 |
| Right-of-use asset obtained in exchange for lease liability | $593 | $— |
| Preferred stock warrants issued in connection with term loan modifications | $— | $203 |
| **Cash, Cash Equivalents, and Restricted Cash Information:** |  |  |
| Cash and cash equivalents, beginning of period | $40125 | $7222 |
| Restricted cash, beginning of period | 100 | 150 |
| Cash, cash equivalents, and restricted cash, beginning of period | 40225 | 7372 |
| Cash and cash equivalents, end of period | 115373 | 44440 |
| Restricted cash, end of period | 100 | 100 |
| Cash, cash equivalents, and restricted cash, end of period | $115473 | $44540 |

---

The accompanying notes are an integral part of these Condensed Financial Statements.

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# CARLSMED, INC.

# NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)

1. Organization

***Description of Business***

Carlsmed, Inc. (the "Company") is a commercial-stage company within the surgical device with enabling technology sector. The Company was incorporated in Delaware in June 2018 and is headquartered in Carlsbad, California. The Company designs, manufactures, and markets *aprevo*®, a comprehensive technology platform for spine fusion surgery procedures.

The aprevo platform includes proprietary surgical planning software, using outcomes-based algorithms that are aided with artificial intelligence, and resulting custom-built, anatomically designed vertebral interbody implants. These implants provide each patient with a personalized vertebral fit to address their pathology and anatomy.

The U.S. Food and Drug Administration ("FDA") cleared the aprevo interbody implants through its 510(k) regulatory pathway for the correction of adult lumbar spinal deformity in December 2020 and several degenerative conditions of the lumbar spine in August 2022. The Company commenced its limited clinical release with its first U.S. patient implant in February 2021, and in October 2021, the Company commenced its U.S. commercial launch of aprevo.

***Reverse Stock Split*** 

On July 10, 2025, the Company effectuated a 1-for-5.58 reverse stock split of the Company's issued and outstanding shares of common stock, Series A, Series B, and Series C convertible preferred stock, as well as stock option awards to purchase shares of common stock, restricted stock units ("RSUs"), and warrants to purchase shares of common stock, Series B convertible preferred stock, and Series C convertible preferred stock. Consequently, all issued and outstanding shares of stock, stock option awards, RSUs, warrants, and per share data have been retroactively adjusted in these financial statements to reflect the reverse stock split for all periods presented. The par value of the common stock and convertible preferred stock remain unchanged. As the number and issuance price of all outstanding convertible preferred stock were adjusted, the conversion ratios for each series of the Company's convertible preferred stock were unchanged. Stockholders entitled to fractional shares as a result of the reverse stock split received cash payment in lieu of receiving fractional shares.

***Initial Public Offering***

On July 24, 2025, the Company completed its initial public offering of 6,700,000 shares of its common stock, at a price to the public of $15.00 per share (the "IPO"). The net proceeds received by the Company from the IPO were $93.5 million, after deducting underwriting discounts and commissions and before additional offering expenses of $5.4 million paid by the Company. The underwriters had the option for a period of 30 days from the IPO date to purchase an additional 1,005,000 shares of common stock at the IPO price, less underwriting discounts and commissions, which was not exercised. Immediately prior to the closing of the IPO on July 24, 2025, all shares of the Company's convertible preferred stock converted into shares of the Company's common stock. In connection with this conversion, all warrants to purchase convertible preferred stock are now exercisable into common stock.

***Liquidity and Capital Resources***

As of September 30, 2025, the Company had $115.4 million of cash and cash equivalents, $15.6 million debt outstanding under its loan and security agreement with Customers Bank (the "Customers Loan Agreement"), and an accumulated deficit of $92.2 million.

On July 24, 2025, the Company completed the IPO and received net proceeds of $93.5 million, after deducting underwriting discounts and commissions and before additional offering expenses paid by the Company of $5.4 million.

The Company expects to continue to generate operating losses for the foreseeable future as it continues to expand commercial operations and develop its product portfolio. The Company believes that its existing cash on hand will be sufficient to meet anticipated capital requirements for its operations for at least 12 months from the date of the issuance of the accompanying Condensed Financial Statements.

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2. Summary of Significant Accounting Policies

***Basis of Presentation***

The accompanying unaudited Condensed Financial Statements have been prepared by management in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial reporting and as required by S-X, Rule 10-1. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for a complete set of financial statements. In the opinion of the Company's management, the accompanying unaudited Condensed Financial Statements and notes have been prepared on the same basis as the audited financial statements for the year ended December 31, 2024, and include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the interim periods presented.

The accompanying unaudited Condensed Financial Statements should be read in conjunction with the Company's audited annual financial statements and notes thereto included in the Company's final prospectus, dated July 22, 2025, filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Securities Act") on July 24, 2025. The Company's results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other interim period.

***Use of Estimates***

The preparation of the unaudited Condensed Financial Statements in conformity with GAAP requires management to make informed estimates that require assumptions that affect the reported amounts in the accompanying unaudited Condensed Financial Statements. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ materially under different assumptions and conditions.

***Cash and Cash Equivalents***

"Cash and cash equivalents" in the accompanying condensed Balance Sheets consist of bank deposits and highly liquid investments, including money market fund accounts, that are readily convertible into cash without penalty, with original maturities of three months or less from the purchase date. The carrying amounts reported in the accompanying condensed Balance Sheets for cash and cash equivalents are valued at cost, which approximate their fair value.

***Restricted Cash***

"Restricted cash" in the accompanying condensed Balance Sheets as of September 30, 2025 and December 31, 2024 represents cash held as collateral for the Company's facility leases.

***Accounts Receivable and Allowance for Credit Losses*** 

"Accounts receivable, net of allowances" in the accompanying condensed Balance Sheets are presented net of allowances for credit losses. The Company maintains an allowance for expected credit losses for accounts receivable, which is recorded as an offset to accounts receivable. Changes in this allowance are recorded as "general and administrative" expense in the condensed Statements of Operations and Comprehensive Loss. Expected credit losses include losses expected based on known credit issues with certain customers as well as a general expected credit loss allowance based on relevant information, including historical loss rates, current conditions, and reasonable economic forecasts that affect collectability. The Company maintained an allowance for credit losses accounts of $1.6 million and $1.2 million as of September 30, 2025 and December 31, 2024, respectively. The Company recorded a provision for credit losses of less than $0.1 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively, and $0.4 million and $0.3 million for the nine months ended September 30, 2025 and 2024, respectively.

***Concentrations of Financial Instrument Credit Risk*** 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents in deposits at financial institutions that may exceed federally insured limits and certain accounts receivable balances. Risks associated with cash and cash equivalents are mitigated by banking with creditworthy institutions with platforms that administer deposits across multiple banks within federally insured limits. The Company mitigates potential losses from uncollectible accounts receivable through its credit approval and ongoing collection and customer monitoring activities. To date, the Company has not experienced any losses on its financial instruments and believes that it has adequately recorded allowances for uncollectible accounts receivable in each reported period.

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As of September 30, 2025, the Company had one customer that accounted for 11% of the Company's total accounts receivable balance. As of December 31, 2024, the Company did not have accounts receivable balances from any one customer exceeding 10% of total accounts receivable. The Company did not have revenue from any one customer exceeding 10% of total revenue for the three and nine months ended September 30, 2025. There were no customers exceeding 10% of total revenue for the three months ended September 30, 2024. There was one customer that accounted for 10% of the Company's revenue for the nine months ended September 30, 2024.

***Fair Value of Financial Instruments***

Assets and liabilities are recorded at fair value on a recurring basis in the accompanying condensed Balance Sheets. These accounts are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative accounting guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•*Level 1*: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are publicly accessible at the measurement date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•*Level 2*: Observable prices that are based on inputs not quoted on active markets, but that are corroborated by market data. These inputs may include quoted prices for similar assets or liabilities or quoted market prices in markets that are not active to the general public.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•*Level 3*: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of the Company's condensed financial instruments consisting of cash, cash equivalents, accounts receivables, prepaid expenses, accounts payable, and accrued liabilities approximate fair value due to the short maturities for each.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. The Company did not have any transfers of assets and liabilities between the levels of the fair value hierarchy during the periods presented.

---

| | | | | |
|:---|:---|:---|:---|:---|
| ***(in thousands)*** | **Total<br>Fair Value** | **Quoted<br>Market<br>Prices for<br>Identical<br>Assets<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** |
| **As of September 30, 2025** |  |  |  |  |
| Money market funds <sup>(1)</sup> | $112661 | $112661 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Total financial assets | $112661 | $112661 | $— | $— |
| Warrant liabilities | $32 | $— | $— | $32 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total financial liabilities | $32 | $— | $— | $32 |
| **As of December 31, 2024** |  |  |  |  |
| Money market funds <sup>(1)</sup> | $37744 | $37744 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Total financial assets | $37744 | $37744 | $— | $— |
| Warrant liabilities | $457 | $— | $— | $457 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total financial liabilities | $457 | $— | $— | $457 |

---

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(1) Included as a component of "cash and cash equivalents" on the accompanying condensed Balance Sheets.

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***Inventory***

The Company maintains minimal inventories because aprevo is made specific to each patient's anatomy to address their pathology and is not otherwise made-to-stock. Work-in-process inventory consists of titanium alloy implants for spine fusion surgical procedures, pending sterilization and packaging. Finished goods inventory is ready for shipment to the customer for use in a spine fusion surgical procedure.

Inventories are valued at the lower of cost or net realizable value, determined by the specific identification method. At each balance sheet date, the Company evaluates its inventories for obsolescence, based on notification of permanently canceled surgeries and ongoing estimates of permanent cancellations. The Company records the corresponding charge for obsolete inventory through "cost of sales."

The components of reported "inventory" are as follows:

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| | | |
|:---|:---|:---|
| ***(in thousands)*** | **As of September 30, 2025** | **As of December 31, 2024** |
| Finished goods | $1304 | $595 |
| Work in process | 36 | 400 |
| **Total** | $1340 | $995 |

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***Warrant Liabilities***

Prior to the closing of the IPO on July 24, 2025, the Company had issued warrants to purchase convertible preferred stock in conjunction with the Customers Loan Agreement (see *Note 4*). The Company accounted for its issued convertible preferred stock warrants as liabilities in accordance with *ASC 480*. The liability-classified warrants were initially measured at fair value, resulting in an implied discount on the related financing arrangement that was deferred as an asset as it relates to tranches of the Customers Loan Agreement. The deferred asset is recorded within "other assets" on the accompanying condensed Balance Sheets and is amortized into interest expense using the straight-line method over the period in which the Company can draw on the remaining tranches of the credit facility. Changes in fair value of the warrant liabilities are recognized in the condensed Statements of Operations and Comprehensive Loss.

In conjunction with the IPO, all of the outstanding shares of convertible preferred stock were converted into common stock. As a result, the Series B Warrant and Series C Warrant that had previously been exercisable for convertible preferred stock became exercisable for common stock. Upon the closing of the IPO on July 24, 2025, the Series B Warrant that was exercisable into 52,776 shares of common stock and the Series C Warrant that was exercisable into 5,093 shares of common stock met the criteria for equity classification and accordingly were reclassified from liabilities to equity, with the difference between their fair value immediately prior to reclassification and their prior recorded fair value being recognized in the accompanying condensed Statements of Operations and Comprehensive Loss. The fair value of these warrants immediately before reclassification was $0.7 million and are included in additional paid-in capital as of September 30, 2025. On the closing of the IPO on July 24, 2025, the Series B Warrant contained 5,644 shares of common stock and the Series C Warrant contained 15,282 shares of common stock that were exercisable contingent on specified revenue and loan draw milestones (see *Note 4*) and therefore continued to be classified as liabilities because they did not meet the criteria for equity classification.

Subsequently, as of September 30, 2025, the Company achieved a revenue milestone, causing 5,095 additional shares of common stock underlying the Series C Warrant to become exercisable and accordingly were reclassified from liabilities to equity as they met the criteria for equity classification. The difference between the fair value of the warrants immediately prior to reclassification and their prior recorded fair value was recognized in the accompanying condensed Statements of Operations and Comprehensive Loss. The fair value of these warrants at the time of reclassification was $0.1 million, and are included in "additional paid-in capital" as of September 30, 2025.

As of September 30, 2025, the Series B Warrant contains 5,644 shares of common stock and the Series C Warrant contains 10,187 shares of common stock that are exercisable contingent on loan draw milestones and continue to be classified as liabilities because they do not meet the equity classification criteria. On October 29, 2025, as a part of the Fifth Amendment to the Customers Loan Agreement, the Series B Warrant and Series C Warrant were amended and restated and the remaining aggregate 15,831 shares of common stock that were exercisable contingent on loan draw milestones were canceled (see *Note 4*).

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The fair value of the warrant liabilities was determined based on significant inputs not observable in the market, which represents a "Level 3" measurement within the fair value hierarchy. Prior to the IPO, the fair values of the warrant liabilities were measured using the "hybrid method." The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods. Estimates and assumptions impacting the fair value measurement included the fair value per share of the underlying shares of convertible preferred stock, the remaining contractual term of the warrants, and probability of number of shares the warrants will become exercisable into. The most significant assumption in the model impacting the fair value of the warrants was the fair value of the Company's convertible preferred stock as of each remeasurement date. Subsequent to the IPO, the fair value of the warrant liabilities is measured using the Black-Scholes option pricing model.

A summary of the changes in the total fair value of the warrant liabilities for the nine months ended September 30, 2025 and 2024, is as follows:

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| | |
|:---|:---|
| ***(in thousands)*** | **Warrant<br>Liabilities** |
| Fair value as of December 31, 2024 | $457 |
| Change in fair value of warrant liabilities | 335 |
| Reclassification of warrants from liability classified to equity classified | (760) |
| Fair value as of September 30, 2025 | $32 |
| Fair value as of December 31, 2023 | $— |
| Issuance of Series B preferred stock warrants | 203 |
| Change in fair value of warrant liabilities | 89 |
| Fair value as of September 30, 2024 | $292 |

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***Deferred Offering Costs***

The Company capitalizes certain legal, professional, accounting, and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in "stockholders' equity (deficit)" or the applicable series of convertible preferred stock as a reduction of proceeds generated as a result of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the condensed Statements of Operations and Comprehensive Loss. As of September 30, 2025 and December 31, 2024, there were zero and $0.4 million deferred offering costs, respectively, which are included in "other assets" in the accompanying condensed Balance Sheets.

The Company completed its IPO on July 24, 2025. As a result, the deferred offering costs were offset against the proceeds of the IPO (see *Note 1*).

***Comprehensive Loss***

Comprehensive loss encompasses all changes in equity other than those arising from transactions with stockholders. For the three and nine months ended September 30, 2025 and 2024, the Company had no other comprehensive loss items and accordingly, "net loss" equaled "comprehensive loss."

***Recent Accounting Pronouncements***

*Recently Issued Accounting Standards Not Yet Effective*

*Expense Disaggregation Disclosures* **-** In November 2024, the FASB issued ASU 2024-03, *Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses* ("ASU 2024-03"). This ASU requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions. ASU 2024-03 will be effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting the standard.

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*Income Taxes* **-** In December 2023, the FASB issued ASU 2023-09, *Income Taxes (Topic 740): Improvements to Tax Disclosures* ("ASU 2023-09"). This ASU expands disclosures in an entity's income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting the standard.

*Financial Instruments - Credit Losses* - In July 2025, the FASB issued ASU 2025-05, *Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets* ("ASU 2025-05"). This ASU provides entities with the option to elect a practical expedient that assumes that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. ASU 2025-05 will be effective for fiscal years beginning after December 15, 2025 and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting the standard.

*Internal-Use Software* - In September 2025, the FASB issued ASU 2025-06, *Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software* ("ASU 2025-06"). This ASU is intended to simplify the capitalization guidance by removing all references to prescriptive and sequential software development stages. This ASU also requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable that the project will be completed and the software will be used for its intended purpose. ASU 2025-06 will be effective for fiscal years beginning after December 15, 2027 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting the standard.

3. Balance Sheet Account Detail

## The composition of selected captions within the accompanying condensed Balance Sheets are summarized below:
***Property and Equipment, Net***

The components of "property and equipment, net" as of September 30, 2025 and December 31, 2024 are as follows:

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| | | |
|:---|:---|:---|
| ***(in thousands)*** | **As of September 30, 2025** | **As of December 31, 2024** |
| Office equipment | $573 | $488 |
| Furniture and fixtures | 144 | 91 |
| Leasehold improvements | 340 | 80 |
| Construction in progress | 380 |  |
| Software | 178 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 1615 | 659 |
| Less: accumulated depreciation | (428) | (399) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Property and equipment, net** | $1187 | $260 |

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"Depreciation expense" for the three months ended September 30, 2025 and 2024 was $0.1 million and less than $0.1 million, respectively. Depreciation expense for the nine months ended September 30, 2025 and 2024 was $0.2 million and $0.1 million, respectively. The Company has not recognized any impairment loss for any long-lived assets for the three and nine months ended September 30, 2025 and 2024.

***Accrued Liabilities***

The components of "accrued liabilities" as of September 30, 2025 and December 31, 2024 are as follows:

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| | | |
|:---|:---|:---|
| ***(in thousands)*** | **As of September 30, 2025** | **As of December 31, 2024** |
| Accrued sales agent commissions | $1617 | $1420 |
| Accrued clinical studies | 352 | 529 |
| Liability associated with stock option exercises prior to vesting | 81 | 112 |
| Accrued professional fees | 811 | 90 |
| Other accrued expenses | 325 | 536 |
| **Total accrued liabilities** | $3186 | $2687 |

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4. Debt

*Customers Bank Credit Facility*

As of September 30, 2025, $15.6 million of principal was outstanding under the $27.5 million Customers Loan Agreement that was set to mature on October 31, 2029. As of September 30, 2025, an aggregate $11.9 million was available to draw and the Company was in compliance with all applicable Customers Loan Agreement covenants. The Customers Loan Agreement was subsequently amended on October 29, 2025, which among other changes, amended the maturity date and amount available to draw as discussed in more detail below.

In December 2022, the Company and Signature Bank, subsequently succeeded by Customers Bank, entered into a loan and security agreement (the "Customers Loan Agreement") with an initial maturity to December 2026 that provided $12.5 million of available principal. The Customers Loan Agreement required the Company to pay a tiered cash-based "Success Fee" upon a defined Liquidity Event that was eliminated in March 2024 in connection with the Third Amendment, as discussed below.

The Customers Loan Agreement bore interest at the *greater of* (a) 1.0% below Prime Rate or (b) 5.25%. The Customers Loan Agreement also included an end of term charge of 4.21% of the aggregate principal amount funded, and such end of term charge remains in effect through the Third Amendment and Fourth Amendment. The end of term charge is recorded within "other long-term liabilities" within the condensed Balance Sheets and is accrued over the term of the loan through interest expense within the condensed Statements of Operations and Comprehensive Loss using the "effective interest method." Debt issuance costs are accounted for as a debt discount and amortized as "interest expense" within the condensed Statements of Operations and Comprehensive Loss over the term of the loan using the "effective interest method."

On March 7, 2024, the Company amended the Customers Loan Agreement (the "Third Amendment") to increase the total principal available under the credit facility from $12.5 million to $18.8 million, subject to the achievement of certain revenue and other milestones, with extended maturity up to December 20, 2027, if certain conditions are met. The applicable per annum interest rate was adjusted to the greater of (a) WSJ Prime Rate + 0.25% or (b) 5.25%, and was 7.50% as of September 30, 2025.

As part of the Third Amendment, the Success Fee was contractually eliminated and replaced with the issuance of a warrant exercisable for up to 58,420 shares of Series B convertible preferred stock at an exercise price of $6.93 per share (the "Series B Warrant"). Upon issuance, the Series B Warrant was immediately exercisable for 26,881 shares with the remaining 31,539 additional shares becoming exercisable upon the required achievement of certain revenue milestones and/or draws of this expanded credit facility. The Series B Warrant was scheduled to expire 10 years from the issuance date of March 6, 2024, but was amended and restated in connection with the subsequent Fourth Amendment (see below). The fair value of the Series B Warrant at issuance in conjunction with the Third Amendment was $0.2 million.

In May 2024, the Company drew $6.3 million under the Customers Loan Agreement upon the achievement of requisite revenue milestones.

On December 30, 2024, the Company further amended the Customers Loan Agreement (the "Fourth Amendment") to expand the credit facility from $18.8 million to $27.5 million, with the addition of two new debt draw tranches. Upon the Fourth Amendment, the Company had the ability to draw $7.5 million immediately and the remaining $4.4 million was contingent upon the achievement of a requisite revenue milestone. As of September 30, 2025, a requisite revenue milestone was met which resulted in the interest-only period being extended through January 31, 2027, followed by principal repayment over 33 months thereafter. Additionally, as a result of the requisite revenue milestone being met, the remaining $4.4 million became available to draw. Upon achievement of an additional revenue milestone, the interest-only period and repayment terms may be further extended to an interest-only period through July 31, 2027, followed by principal repayment over 27 months thereafter. However, such additional revenue milestone was not met as of September 30, 2025.

As part of the Fourth Amendment, the Company partially modified the aggregate 58,420 Series B Warrant issued with the Third Amendment, reducing the number of shares exercisable subject to remaining future draws of the credit facility as of the date of the Fourth Amendment from 11,289 shares to 5,644, with the remaining 5,644 shares becoming exercisable ratably with debt draws that had not occurred as of September 30, 2025. Additionally, the expiration date for the Series B Warrant was extended to December 30, 2034. The modification of the Series B Warrant upon the Fourth Amendment resulted in an immaterial increase in the warrant liability.

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Additionally, as part of the Fourth Amendment, the Company issued a new warrant that was exercisable into the Company's Series C convertible preferred stock ("Series C Warrant"), subject to certain revenue and debt draw milestones. The Series C Warrant is exercisable for up to 20,375 shares at an exercise price of $10.74 per share and expires on December 30, 2034. Upon issuance, the Series C Warrant was immediately exercisable into 5,093 shares with the remaining 15,282 additional shares becoming exercisable upon the required achievement of certain revenue milestones and/or draws of this expanded credit facility. As of September 30, 2025, the Company achieved the revenue milestone, causing the Series C Warrant to be exercisable into an additional 5,095 shares. As of September 30, 2025, the Series C Warrant is exercisable into 10,188 shares, with the remaining 10,187 shares becoming exercisable upon draws of this expanded credit facility which have not yet occurred.

In connection with the close of the Company's IPO on July 24, 2025, all of the outstanding shares of convertible preferred stock were converted into common stock. As a result, the warrants to purchase convertible preferred stock are now exercisable into common stock. As of September 30, 2025, the Series B and Series C Warrants are exercisable for 52,776 and 10,188 shares of the common stock, respectively. Refer to *Note 2* for additional information regarding the reclassification of certain warrants from liability classified to equity classified during the three months ended September 30, 2025.

Each of the Third Amendment and Fourth Amendment were accounted for as debt modifications with no gain or loss recognized. The carrying value of amounts outstanding under the Customers Loan Agreement approximates its fair value as of September 30, 2025. The fair value of the term loan is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.

Interest expense on the Customers Loan Agreement was $0.4 million for the three months ended September 30, 2025 and 2024. Of these amounts, $0.1 million was related to amortization of the debt discount and issuance costs for the three months ended September 30, 2025 and 2024. Interest expense on the Customers Loan Agreement was $1.1 million and $0.9 million for the nine months ended September 30, 2025 and 2024, respectively. Of these amounts, $0.2 million was related to amortization of the debt discount and issuance costs for the nine months ended September 30, 2025 and 2024. The effective interest rate was 7.81% as of September 30, 2025.

On October, 29, 2025, the Company amended the Customers Loan Agreement (the "Fifth Amendment") to provide for a credit facility consisting of (i) a term loan in the principal amount of up to $50.0 million (the "Term Loan"), $17.5 million of which is contingent upon the achievement of requisite revenue milestones, and (ii) a $10.0 million non-formula revolving line of credit (the "Non-Formula Revolving Line"), provided that at no time shall the aggregate amount advanced under the Term Loan and the Non-Formula Revolving Line exceed $50.0 million. With the execution of the Fifth Amendment, the current maximum availability of the Term Loan and Non-Formula Revolving Line aggregates to $42.5 million.

The maturity date of the Term Loan was extended to October 15, 2030, with an interest-only period through October 15, 2027, followed by principal repayment over 36 months thereafter. Upon achievement of certain revenue milestones, the interest-only period and repayment terms of the Term Loan may be extended through April 15, 2025 followed by principal repayment over 30 months, and upon achievement of an additional milestone, may be further extended through October 15, 2028, followed by principal repayment over 24 months thereafter. The Non-Formula Revolving Line will mature on October 15, 2028. The applicable per annum interest rate did not change as a result of the Fifth Amendment and remains as the greater of (a) WSJ Prime Rate + 0.25% or (b) 5.25%.

In connection with the Fifth Amendment, the Company partially amended the Series B Warrant, reducing the number of shares of common stock exercisable subject to future draws under the Customers Loan Agreement as of the date of the Fifth Amendment from 58,420 to 52,776 (the "Amended Series B Warrant"). In addition, the Company partially amended the Series C Warrant, reducing the number of shares of common stock exercisable subject to future draws under the Customers Loan Agreement as of the date of the Fifth Amendment from 20,375 to 10,188 (the "Amended Series C Warrant" and, together with the Amended Series B Warrant, the "Amended Warrants"). As a result of the Amended Warrants, Customers Bank's contingent rights to exercise the Warrants for an aggregate of 15,831 shares of common stock were canceled.

------

The following table summarizes contractual principal payments as of September 30, 2025:

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| | |
|:---|:---|
| **Year ending December 31,** | ***(in thousands)*** |
| Remainder of 2025 | $— |
| 2026 |  |
| 2027 | 5208 |
| 2028 | 5682 |
| 2029 | 4735 |
| Total future principal payments | 15625 |
| Unamortized issuance costs | (185) |
| **Total term loan, net** | $**15440** |

---

5. Common Stock

In accordance with the Company's Amended and Restated Certificate of Incorporation dated July 24, 2025, the Company is authorized to issue two classes of stock—common stock and preferred stock. The Company shall have authority to issue 600,000,000 shares of common stock with par value of $0.00001 per share and 10,000,000 shares of preferred stock with par value of $0.00001 per share. As of September 30, 2025, the Company does not have any issued or outstanding shares of preferred stock.

Common stock reserved for future issuance as of September 30, 2025, consisted of the following:

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| | |
|:---|:---|
|  | **As of September 30, 2025** |
| Common stock options outstanding | 3127913 |
| Restricted stock units outstanding | 181810 |
| Shares available for future issuance under the 2025 Plan | 2608836 |
| Series B Warrant <sup>(1)</sup> | 58420 |
| Series C Warrant <sup>(1)</sup> | 20375 |
| **Total common stock reserved for future issuance** | **5997354** |

---

------

(1) The Series B Warrant and Series C Warrant are exercisable into common stock (see *Note 2*).

***SVB Common Stock Warrant***

In April 2021, in connection with its entry into a loan and security agreement (the "SVB Loan Agreement") with Silicon Valley Bank ("SVB"), the Company issued a warrant to purchase up to an aggregate of 10,338 shares of common stock at an exercise price of $0.34 per share (the "SVB Common Stock Warrant"). In July 2021, pursuant to the terms of the SVB Common Stock Warrant, the SVB Common Stock Warrant became exercisable for an additional 10,349 shares of common stock at an exercise price of $0.34 per share in connection with a principal draw. In February 2022, the Company amended the SVB Loan Agreement to draw additional principal and the SVB Common Stock Warrant became exercisable for an additional 5,176 shares of common stock at an exercise price of $0.40 per share. In December 2022, the Company terminated and repaid in full all amounts outstanding under the SVB Loan Agreement. On August 14, 2025, the Company issued 25,184 shares of common stock in conjunction with a net cashless exercise of the SVB Common Stock Warrant. As a result of the exercise, the SVB Common Stock Warrant is no longer outstanding.

6. Stock-Based Compensation

In September 2019, the Company adopted the Carlsmed, Inc. 2019 Stock Incentive Plan, which was subsequently amended, most recently in January 2025 (the "2019 Plan"). The 2019 Plan is administered by the Company's board of directors (the "Board of Directors"). On July 10, 2025, the Board of Directors adopted, and the Company's stockholders approved, the Carlsmed, Inc. 2025 Equity Incentive Plan (the "2025 Plan"), which became effective on July 21, 2025. The 2025 Plan replaced the 2019 Plan, as the Board of Directors determined to not make additional grants under the 2019 Plan following the closing of the IPO. However, the 2019 Plan will continue to govern outstanding equity awards granted under the 2019 Plan. The 2025 Plan allows the Company to grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other awards. The number of shares initially available for issuance under awards granted pursuant to the 2025 Plan is 3,595,177. As of September 30, 2025, there were 2,608,836 shares available for issuance pursuant to the 2025 Plan.

------

The exercise price of a share subject to a stock option may not be less than the fair market value of a share of the Company's common stock at the grant date. Stock options granted to employees typically vest over four years, with 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter, subject to continued employment, and a contractual term of 10 years; related expense is recognized in the accompanying Statements of Operations and Comprehensive Loss on a straight-line basis over each award's vesting period.

The Company also grants stock option awards to non-employees, including members of the Board of Directors. Options granted under the 2019 Plan may be subject to vesting acceleration in connection with a "Corporate Transaction," as defined in the 2019 Plan.

The 2019 Plan allows for the exercise of certain stock option grants prior to vesting ("early exercise"), with such grants approved by the Board of Directors. For these awards, in the event of employee termination, the Company has the right, but not the obligation, to repurchase the portion of unvested stock at the *lower of* the exercise price or the then-current fair value. A liability is recorded within "accrued liabilities" on the accompanying condensed Balance Sheets that is equal to the cash received for these early exercises, and this liability is reduced as vesting occurs. Unvested shares that have been early exercised are reflected in "common shares issued" but excluded from "common shares outstanding" on the accompanying Condensed Financial Statements. As of September 30, 2025, 68,698 shares of early exercised stock options were outstanding, representing an early exercise liability of $0.1 million. As of December 31, 2024, 95,579 shares of early exercised stock options were outstanding, representing an early exercise liability of $0.1 million.

RSUs granted typically have three-year vesting schedules and the related expense is recognized in the accompanying Statements of Operations and Comprehensive Loss on a straight-line basis over each award's vesting period.

In the nine months ended September 30, 2025, the Company granted RSUs to an employee that have a contractual term of four years and vest upon the satisfaction of performance, market, and service conditions. The performance conditions require either (1) the completion of an initial public offering where the Company's stock is listed on an established stock exchange or (2) the occurrence of a corporate transaction, such as a merger, acquisition, or similar liquidity event. The market condition is based on the achievement of share price targets following the completion of an initial public offering or on the date of a corporate transaction. The service condition requires the employee to provide continued service through the achievement of both the performance and market conditions. The grant date fair value of such RSUs is determined using a Monte Carlo simulation methodology, which takes into consideration the probability of achievement of the market conditions.

Expense for the RSUs begins on the grant date and is recognized over the derived requisite service period of the award. However, no compensation expense was recognized until the performance-based vesting condition was probable of being achieved. On July 24, 2025, the Company completed its IPO, satisfying the performance condition of the RSUs. Consequently, compensation expense has been recognized proportionally for the completed portion of the requisite service period up to the IPO. The remaining unrecognized expense will be amortized over the remaining derived requisite service period associated with the market condition, regardless of whether the market condition is ultimately satisfied.

***Stock Options***

The following summarizes stock option activity for the Company for the nine months ended September 30, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number of<br>Options** | **Weighted<br>Average<br>Exercise<br>Price** | **Weighted<br>Average <br>Remaining<br>Contractual<br>Term<br>(in Years)** | **Aggregate<br>Intrinsic<br>Value<br>(in thousands)** |
| **Outstanding at December 31, 2024** | 1785633 | $1.01 | 7.5 | $5938 |
| Granted | 1798030 | 9.76 |  |  |
| Exercised | (447063) | 0.41 |  |  |
| Forfeited | (8687) | 2.27 |  |  |
| **Outstanding at September 30, 2025** | 3127913 | $6.12 | 8.6 | $23998 |
| Vested and Exercisable at September 30, 2025 | 825189 | $0.81 | 6.3 | $11710 |

---

------

The weighted average grant date fair value of options granted during the three months ended September 30, 2025 and 2024 was $7.69 and $0.50 per share, respectively. The weighted average grant date fair value of options granted during the nine months ended September 30, 2025 and 2024 was $4.72 and $0.40 per share, respectively. The total fair value of options that vested during the three months ended September 30, 2025 and 2024 was $0.2 million and $0.1 million, respectively, based on the grant date fair value. For the nine months ended September 30, 2025 and 2024, the total fair value of options that vested was $0.4 million and $0.2 million, respectively, based on the grant date fair value.

The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company's common stock price and the exercise price of the stock options. The aggregate intrinsic value of stock options exercised during both the three months ended September 30, 2025 and 2024 was less than $0.1 million. For the nine months ended September 30, 2025 and 2024, the aggregate intrinsic value of stock options exercised was $1.8 million and $0.2 million, respectively.

The Company recorded stock-based compensation expense for stock options of $0.5 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively. The Company recorded stock-based compensation expense for stock options of $0.9 million and $0.2 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, there was $8.9 million of unrecognized compensation for unvested stock options and the weighted-average period over which this remaining compensation cost will be recognized is 3.0 years.

The grant date fair value of the options is determined using an option pricing model. The assumptions that were used in estimating the grant date fair value of stock options under the option pricing method for the three and nine months ended September 30, 2025 and 2024 were as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Expected stock price volatility <sup>(1)</sup> | 44.0% | 45.4% | 43.9% | 45.2% |
| Risk-free interest rate <sup>(2)</sup> | 3.97% | 3.69% | 4.17% | 4.30% |
| Expected annual dividend yield <sup>(3)</sup> | 0.0% | 0.0% | 0.0% | 0.0% |
| Expected term (years) <sup>(4)</sup> | 6.05 | 6.03 | 6.02 | 5.93 |

---

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(1) Based on the median stock price volatility for peer public companies over a historic timeframe similar to the expected term, with adjustments for differences in size and capital structure.

(2) Based on the U.S. Treasury yield curve in effect as of the valuation date.

(3) The Company has not paid and does not currently anticipate paying a cash dividend on its common stock.

(4) The expected term of stock options granted to employees represents the weighted average period the stock options are expected to be outstanding. The Company uses the simplified method for estimating the expected term, which calculates the expected term as the average time-to-vesting and the contractual life of the options for stock options issued to employees and non-employees.

***Restricted Stock Units*** 

The Company did not have any RSUs granted or outstanding during the nine months ended September 30, 2024.

The following summarizes RSU activity for the Company for the nine months ended September 30, 2025:

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| | | |
|:---|:---|:---|
|  | **Number of<br>Shares** | **Weighted Average Grant Date Fair Value** |
| Non-vested - December 31, 2024 |  | $— |
| &nbsp;&nbsp;Granted | 181810 | 7.66 |
| &nbsp;&nbsp;Vested |  |  |
| &nbsp;&nbsp;Forfeited |  |  |
| Non-vested - September 30, 2025 | 181810 | $7.66 |

---

The Company recorded stock-based compensation expense for RSUs of $0.2 million for the three and nine months ended September 30, 2025. As of September 30, 2025, there was $1.2 million of unrecognized compensation for unvested RSUs and the weighted-average period over which this remaining compensation cost will be recognized is 1.9 years.

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***Stock-based Compensation Cost***

The compensation cost that has been included in the Company's condensed Statements of Operations and Comprehensive Loss for all stock-based compensation arrangements is detailed as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
| ***(in thousands)*** | **2025** | **2024** | **2025** | **2024** |
| General and administrative | $355 | $31 | $522 | $77 |
| Research and development | 211 | 21 | 366 | 42 |
| Sales and marketing | 138 | 14 | 249 | 34 |
| **Total** | $704 | $66 | $1137 | $153 |

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7. Convertible Preferred Stock

In March 2024, the Company issued a total of 3,586,091 shares of Series C convertible preferred stock at a price of $10.74 per share for gross cash proceeds of $38.5 million.

In September 2024, the Company issued a total of 1,304,032 shares of Series C convertible preferred stock at a price of $10.74 per share for gross cash proceeds of $14.0 million. In January 2025, the Company issued a total of 1,117,743 shares of Series C convertible preferred stock at a price of $10.74 per share for gross cash proceeds of $12.0 million. The September 2024 and January 2025 issuances of Series C convertible preferred stock were completed below the fair value of the shares as of each respective issuance date. The Company recorded the excess of fair value over the issuance price as a "deemed dividend" within additional paid-in-capital ("APIC") in the amount of $0.6 million as of both issuance dates. The deemed dividends reflect the distribution of value from common stockholders to preferred stockholders due to the implicit discount on these shares issued in September 2024 and January 2025. Since the Company remained in an accumulated deficit position at each respective issuance date, this deemed dividends were recorded directly to APIC rather than retained earnings.

The Company closed the IPO on July 24, 2025 and all of the outstanding shares of convertible preferred stock were converted into 15,245,731 shares of common stock.

8. Net Loss Per Share

Basic net loss per share is calculated by *dividing* net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding, net of the weighted-average unvested restricted stock subject to repurchase by the Company, if any, during the period. Diluted loss per share is calculated by *dividing* the net loss attributable to common stockholders by the weighted-average number of common shares outstanding, adjusted for the effects of potentially dilutive common stock, which are comprised of stock options and stock warrants, using the "treasury-stock method," and convertible preferred stock, using the "if-converted method."

Because the Company reported net losses for the period presented, all potentially dilutive common stock is antidilutive for this period and therefore basic and diluted net loss per common share are the same. The convertible preferred stock are considered participating securities; however, they were excluded from the computation of basic loss per share in the periods of net loss as there is no contractual obligation for the holders to share in the losses of the Company.

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The following table presents the number of anti-dilutive shares excluded from the calculation of diluted net loss per share as of September 30, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **As of September 30,** | **As of September 30,** |
|  | **2025** | **2024** |
| Common stock options outstanding <sup>(1)</sup> | 3127913 | 1502367 |
| Convertible preferred stock (common stock equivalent) <sup>(2)</sup> |  | 14127988 |
| Restricted stock units outstanding <sup>(3)</sup> | 181810 |  |
| Series B Warrant <sup>(4)</sup> | 58420 | 58420 |
| Series C Warrant <sup>(5)</sup> | 20375 |  |
| SVB Common Stock Warrant <sup>(6)</sup> |  | 25863 |
| **Total** | 3388518 | 15714638 |

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(1) 825,189 stock options vested and exercisable as of September 30, 2025.

(2) Convertible preferred stock was eligible to convert to common stock on a 1:1 basis upon the holder's election or upon a Deemed Liquidation Event. Convertible preferred stock was converted into common stock on the IPO (see *Note 7*).

(3) No restricted stock units are vested as of September 30, 2025.

(4) Series B Warrant exercisable into 52,776 shares of common stock as of September 30, 2025.

(5) Series C Warrant exercisable into 10,188 shares of common stock as of September 30, 2025.

(6) On August 14, 2025, the SVB Common Stock Warrant was exercised (see *Note 5*).

9. Commitment and Contingencies

*Legal Matters*

The Company from time to time is involved in legal matters incidental to the conduct of its business. In the opinion of management, there are no claims outstanding that would have a material adverse effect on the Company's financial position, results of operations, or cash flows.

*Operating Lease*

In the ordinary course of business, the Company enters into lease agreements with unaffiliated third parties for its facilities and office equipment. As of September 30, 2025, the Company had two active operating leases for a combined 23,000 square feet of administrative, engineering, and research and development space located in Carlsbad, California.

The first lease encompasses 16,000 square feet and commenced on May 1, 2021, and was originally set to expire on April 30, 2024. On December 4, 2023, the Company entered into a first amendment to the original lease agreement which resulted in the lease term extending to July 1, 2028. The Company used its incremental borrowing rate at the lease modification date of 9.08% in determining the discount rate utilized to present value the future minimum lease payments since an implicit interest rate in the lease agreement was not determinable.

On May 15, 2025, the Company entered into a second amendment to its original lease agreement, which modified the lease terms to lease an additional suite comprising an additional 7,000 square feet of space. The lease modification was accounted for as a separate contract. This new lease is set to expire on July 1, 2028. The Company used its incremental borrowing rate at the lease modification date of 7.62% in determining the discount rate utilized to present value the future minimum lease payments since an implicit interest rate in the lease agreement was not determinable.

Total lease expenses for the three months ended September 30, 2025 and 2024 were $0.2 million and $0.1 million, respectively. Total lease expenses for the nine months ended September 30, 2025 and 2024 were $0.5 million and $0.4 million, respectively.

The Company's real estate taxes, insurance costs, and common area maintenance, are included in monthly rent and not separately itemized. Rent expense is allocated to cost of sales, research and development, sales and marketing, and general and administrative expenses in the accompanying condensed Statements of Operations and Comprehensive Loss.

The weighted-average lease terms and discount rates are as follows:

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| | | |
|:---|:---|:---|
|  | **As of September 30, 2025** | **As of December 31, 2024** |
| Weighted-average remaining lease term | 2.75 | 3.50 |
| Weighted-average discount rate | 8.65% | 9.08% |

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The aggregate future minimum lease payments under this lease as of September 30, 2025, are as follows:

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| | |
|:---|:---|
| ***(in thousands)*** |  |
| **Year ending December 31,** | **Payments** |
| Remainder of 2025 | $151 |
| 2026 | 895 |
| 2027 | 926 |
| 2028 | 472 |
| Total undiscounted lease payments | $2444 |
| Less: imputed interest | (270) |
| Present value of future lease payments | $2174 |
| Short-term operating lease liabilities | 661 |
| Long-term operating lease liabilities | 1513 |
| Total operating lease liabilities | $2174 |

---

The operating cash outflows included in the measurement of the operating lease liabilities was $0.4 million for both the nine months ended September 30, 2025 and 2024.

10. Segment Reporting

The following table provides the operating financial results of the Company's single reportable segment. It includes the significant expense categories regularly provided to the Company's Chief Operating Decision Maker, its Chief Executive Officer, computed under GAAP and reconciled to the Company's total "net loss" as presented in the condensed Statements of Operations and Comprehensive Loss:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
| ***(in thousands)*** | **2025** | **2024** | **2025** | **2024** |
| Revenue | $13074 | $6590 | $35346 | $17757 |
| Less: |  |  |  |  |
| Cost of sales | 3147 | 1792 | 8914 | 4733 |
| Selling expenses | 7005 | 4294 | 18047 | 10490 |
| Marketing expenses | 1431 | 1950 | 3203 | 3578 |
| Product and software development costs | 2196 | 1971 | 5847 | 5339 |
| Clinical, medical, and regulatory expenses | 1230 | 1045 | 3418 | 3304 |
| Other segment expenses\* | 7100 | 3315 | 17173 | 9738 |
| Interest expense | 380 | 402 | 1100 | 943 |
| Interest income | (954) | (394) | (1670) | (920) |
| Change in fair value of warrant liabilities | 65 | 28 | 335 | 89 |
| Net loss | $(8526) | $(7813) | $(21021) | $(19537) |

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\* Other segment expenses primarily include corporate, compliance, and research and development support expenses.

11. Income Taxes

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date income (loss), adjusted for discrete items, if any, that are taken into account in the relevant period. The Company's annual estimated effective tax rate differs from the statutory rate primarily as a result of state taxes and changes in the Company's valuation allowance.

The Company did not record income tax expense for the three and nine months ended September 30, 2025 and 2024. The Company maintains a full valuation allowance on its net deferred tax assets, as it is more likely-than-not that it will not be monetized through offsetting future taxable income.

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There were no material changes to the Company's unrecognized tax benefits in the three and nine months ended September 30, 2025 and 2024, and the Company does not expect to have significant changes to unrecognized tax benefits through the end of the fiscal year. The Company did not have any interest or penalties related to its uncertain tax positions for the three and nine months ended September 30, 2025 and 2024.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law, which enacts significant changes to U.S. tax and related laws. Some of the provisions of the new tax law affecting corporations include, but are not limited to, expensing of domestic research expenses, increasing the limit of the deduction of interest expense deduction to thirty percent of EBITDA, and one hundred percent bonus depreciation on eligible property acquired after January 19, 2025. The provisions of the OBBBA became effective for the Company during the three months ended September 30, 2025.

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# Item 2. Manage ment's Discussion and Analysis of Financial Condition and Results of Operations.
*The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations and financial condition. You should read this discussion and analysis in conjunction with our unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2024 included in the IPO Prospectus. Unless the context otherwise requires, references to "Carlsmed,*" *the "Company,*" *"we,*" *"us,*" *and "our*" *refer to Carlsmed, Inc., a Delaware corporation. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions, and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the "Risk Factors" section of the IPO Prospectus. See the section titled "Special Note Regarding Forward-Looking Statements." Our historical results are not necessarily indicative of the results that may be expected for any period in the future.*

## Overview

## *Company Summary* 
We are a commercial-stage medical technology company pioneering artificial intelligence ("AI")-enabled personalized spine surgery solutions with a mission to improve outcomes and decrease the cost of healthcare for spine surgery and beyond. We are focused on becoming the standard of care for spine fusion surgery. The aprevo Technology Platform consists of AI-enabled software solutions, and interbody implants that we custom design for each patient's unique pathology and vertebral bone topography, and single-use surgical instruments. The aprevo Technology Platform was designed to address the limitations of traditional spine fusion surgery and aims to optimize patient outcomes and reduce the need for revision surgeries.

We market and sell the aprevo Technology Platform to hospitals in the United States through a combination of our direct sales team and independent sales agents. Our direct sales team consists of Area Business Directors, Regional Sales Directors, Account Managers, and Strategic and National Account leadership, who are primarily responsible for selling the aprevo Technology Platform to surgeons and working with hospitals to secure product approval. They are also responsible for recruiting indirect sales agents that cover each surgery, generating leads, and training clinics. Our direct sales team is supported by a team of independent sales agents, who are responsible for generating leads, providing surgical instruments, and covering cases. While our current commercial focus is on the United States, in the future we plan to engage in market access initiatives to evaluate strategic international regions.

Since we began commercializing the aprevo Technology Platform in 2021, we have experienced sequential quarterly and annual revenue growth from its rapid commercial adoption. For the three months ended September 30, 2025 and 2024, we recognized revenue of $13.1 million and $6.6 million, respectively, representing period-over-period growth of 98.4%. For the nine months ended September 30, 2025 and 2024, we recognized revenue of $35.3 million and $17.8 million, respectively, representing period-over-period growth of 99.1%.

Our business model depends on our ability to timely deliver aprevo interbody implants in order to allow surgeons to maintain surgical schedules for their patients. In November 2024, we launched our digital production system ("DPS"), which we developed to enable us to deliver our aprevo interbody implants to hospitals within 10 business days of surgical plan approval. Starting in October 2025, this lead time has been further reduced to eight business days. Our implants are manufactured to our specifications by contract manufacturing organizations ("CMOs") who meet our manufacturer qualification standards. Our streamlined DPS manages both the upstream and downstream processes involved in producing our implants.

***Initial Public Offering***

On July 24, 2025, we completed our initial public offering of 6,700,000 shares of our common stock, at a price to the public of $15.00 per share (the "IPO"). We received net proceeds of $93.5 million from the IPO, after deducting underwriting discounts and commissions and before additional offering expenses of $5.4 million paid by us.

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***Regulatory Overview***

***aprevo Lumbar*** 

In July 2020, the U.S. Food and Drug Administration ("FDA") awarded us a Breakthrough Device Designation, indicating that aprevo lumbar interbody implants are likely to provide a more effective treatment than the use of stock implants. In December 2020, the FDA cleared our aprevo interbody implants through its 510(k) regulatory clearance pathway for lumbar fusions to correct adult spinal deformity ("ASD"). After FDA clearance, we commenced the limited clinical release of the aprevo Technology Platform, with the first U.S. aprevo patient procedure completed in February 2021. In August 2022, the FDA cleared the aprevo Technology Platform through its 510(k) regulatory clearance pathway for the treatment of patients with several degenerative conditions of the lumbar spine.

***aprevo Cervical***

In September 2023, the FDA granted us our second Breakthrough Device Designation for aprevo in cervical spine fusion. In November 2024, we received FDA 510(k) clearance for our aprevo Technology Platform for cervical spine fusion surgery. In July 2025, the first aprevo cervical procedure was successfully completed at UC San Diego Health. Through October 31, 2025, over 50 aprevo cervical procedures have been successfully completed by over a dozen spine surgeons as part of our clinical evaluation program. We expect to commercialize the aprevo Technology Platform for cervical fusion surgery by early 2026.

## Key Factors Affecting Our Results of Operations and Performance
Our financial performance has been driven by the following key factors that we believe will persist for the foreseeable future. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address the factors below is subject to various risks and uncertainties.

***Market Adoption and Clinical Evidence*** 

Since its full commercial launch in October 2021, the aprevo Technology Platform for lumbar spine fusion surgery has been used to treat more than 2,600 patients through September 31, 2025. We estimate there are approximately 4,000 surgeons across the United States whose patients could benefit from using our platform.

Over time, we expect to meaningfully grow the base of surgeons using the aprevo Technology Platform and its penetration with existing surgeon users. To achieve this, we plan to grow our commercial infrastructure and expand various market access initiatives, including utilizing medical education programs and surgeon training at top academic institutions.

We are also committed to building upon our strong foundation of clinical evidence demonstrating the efficacy of our aprevo Technology Platform. Clinical data publications are important tools for surgeon education and patient awareness of the benefits of our personalized solution as compared to stock implants.

Our COMPASS Registry is generating ongoing real-world evidence of patient outcomes from lumbar spine surgery with the aprevo Technology Platform. For instance, data presented for 115 aprevo-treated ASD patients at the Scoliosis Research Society (SRS) Annual Meeting in September 2025 demonstrated a 75% reduction in spine fusion revision surgery at two years compared to a patient-matched cohort treated with stock interbody devices.

***Expansion of Our Product Portfolio and Investments in Research and Development***

Our research and development initiatives are focused on introducing new products, enhancements and capabilities aimed at increasing the value provided by our aprevo Technology Platform to patients, surgeons, and payors. We are developing new iterations of our algorithm and software platform to drive further improvements in surgical planning. We believe that these improvements will strengthen our ability to leverage post-operative data to build predictive analytic models and further enable surgeons to make more informed decisions to best treat their patients.

In November 2024, we received FDA 510(k) clearance for our aprevo interbodies for cervical spine fusion surgery as part of the FDA-cleared aprevo Technology Platform. We expect to receive FDA clearance for our accompanying personalized plating solutions and plan to commercialize the aprevo Technology Platform for cervical spine fusion surgeries by early 2026. We intend to drive initial adoption of this new indication among our existing base of surgeons who are actively using the aprevo Technology Platform for lumbar spine fusion surgeries.

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We also believe that our technology platform has the potential to be utilized across various spinal indications and disease states such as cervical corpectomy and cervical disc arthroplasty. Additional FDA clearances would be required for these or any other new indications.

***Hospital and Outpatient Reimbursement***

Future changes in the level of reimbursement that hospitals and outpatient facilities receive from payors for lumbar and cervical fusion surgical procedures could have a significant impact on our results of operations. The level of payors' reimbursement for procedures using our aprevo Technology Platform depends substantially on our continued ability to generate clinical evidence, support from key opinion leaders, and gain advocacy for patient access to our technology with CMS and commercial payors.

***aprevo****®* ***Lumbar*** 

Procedures using our aprevo Technology Platform are covered by Medicare, Medicare Advantage, and commercial payors. For the three and nine months ended September 30, 2025, we estimate that our hospital customers' payor mix consisted of approximately 44% and 42% for commercial insurance, respectively, and 56% and 58% for Medicare and Medicare Advantage insurance, respectively. Effective October 2024, CMS adopted a new MS-DRG coding system which reassigns MS-DRG codes for certain lumbar spine fusion procedures when "custom-made anatomically designed interbody fusion devices" (such as our aprevo Technology Platform) are utilized. This provides premium reimbursement for our hospital customers, relative to the use of stock implants. We believe this, among other factors, will support our customers' continued demand for our technology.

***aprevo****®* ***Cervical***

Effective October 1, 2025, cervical fusion procedures utilizing aprevo personalized interbody implants for traditional Medicare beneficiaries are eligible for New Technology Add-on Payments (NTAPs) from CMS. The NTAP program provides additional reimbursement to hospitals that use designated new medical technologies in the first few years of market introduction. These new technologies must demonstrate significant clinical improvement in the diagnosis or treatment of Medicare beneficiaries compared to existing alternatives or be designated by the FDA as breakthrough technology. CMS created unique ICD-10-PCS codes to identify cervical fusion procedures using "custom made anatomically designed interbody fusion devices" such as our aprevo Technology Platform. Reimbursement claims submitted with these unique ICD-10-PCS procedure codes may qualify hospitals for up to an additional $21,125 in NTAP reimbursement for eligible inpatient procedures.

For hospital outpatient departments (HOPDs) and ambulatory surgery centers (ASC), where many cervical procedures are performed, an applicable Transitional Pass-Through ("TPT") payment was included in the CMS Outpatient Prospective Payment System (OPPS) Proposed Rule. TPT payments help ensure timely access for Medicare beneficiaries to new and innovative medical technologies prior to CMS having sufficient cost data to permanently assign those items to an Ambulatory Payment Classification (APC). We anticipate that the applicable TPT payment will go into effect in early 2026 and that it will cover the differential of the facilities' cost of purchasing aprevo interbody implants in cervical fusions.

## Key Components of Our Results of Operations
***Revenue***

We sell our aprevo interbody implants and accompanying inserter instruments to hospitals in the United States under standard pricing schedules. We recognize revenue in the period of its use within a spine fusion surgical procedure.

***Cost of Sales*** 

Cost of sales includes the costs of creating patient-specific digital surgical plans and the manufacturing costs of our aprevo interbody implants and the accompanying inserter instruments. These costs of sales include allocations for personnel, software, contract manufacturing and other third-party services, packaging, shipping, and overhead cost allocations. We expect that our cost of sales will continue to increase in proportion to recognized revenue.

***Gross Profit and Gross Margin***

Gross profit (i.e., revenue *less* cost of sales) and gross margin (i.e., gross profit as a *percentage of* revenue) have been, and will continue to be, affected by various factors. These include potential changes to our average revenue per procedure, sales volumes, third-party manufacturing costs, direct labor costs, and software costs. We expect our gross margin to remain relatively constant over the short term and to modestly increase over the medium and long term with economies of production scale, increased leverage of our AI technologies, and other planned manufacturing efficiencies.

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***Operating Expenses***

*<u>Research and Development Expenses</u>*

Research and development expenses include personnel costs (i.e., salaries, bonuses, stock-based compensation expense, and benefits), allocated facility costs, product prototype materials, clinical studies aimed at potential new products, allocated software license amortization expenses, and consulting and other service fees. We recognize research and development expenses in the periods in which they are incurred. We expect our research and development expenses to increase as we continue to accelerate product and software innovation, develop additional clinical data, and expand manufacturing capabilities.

*<u>Sales and Marketing Expenses</u>*

Sales and marketing expenses consist primarily of personnel costs (i.e., salaries, commissions, bonuses, stock-based compensation expense, benefits, and travel), independent sales agent commissions, costs associated with generic surgical instruments we may provide to our independent sales agents, various digital and print initiatives to increase market awareness of our product and technology, conference and trade show fees, consulting fees, and medical education expenses.

We expect our sales and marketing expenses to increase in the foreseeable future as we continue to increase the size of our sales organization and scope of our marketing efforts in the United States and into other geographies, expand the indications for our aprevo Technology Platform, and seek to establish international sales channels. While we expect sales and marketing expenses to continue to increase in absolute value, we expect that these costs will decrease as a percentage of revenue over time.

*<u>General and Administrative Expenses</u>*

General and administrative expenses consist primarily of personnel costs (i.e., salaries, bonuses, stock-based compensation expense, and benefits) for executive, legal, finance, and human resources roles. Other significant costs include legal fees relating to intellectual property and corporate matters, consultant and professional fees, insurance, and facility-related costs. We recognize general and administrative expenses in the periods in which they are incurred. We anticipate that our general and administrative expenses will increase in the future to support our anticipated business growth as a publicly traded company. These increased costs include accounting, audit, legal, regulatory, tax, insurance, investor relations, and compliance with exchange listing and SEC requirements. While we expect general and administrative expenses to continue to increase in absolute value, we expect that these costs will decrease as a percentage of revenue over time.

*<u>Interest Expense</u>*

Interest expense consists of interest coupon payments and non-cash amortization of debt issuance costs as part of the Customers Loan Agreement.

*<u>Interest Income</u>*

Interest income is attributable to bank interest on our cash and cash equivalents.

*<u>Change in Fair Value of Warrant Liabilities</u>* 

Prior to the closing of the IPO on July 24, 2025, we had issued warrants for the purchase of our convertible preferred stock in conjunction with the loan and security agreement with Customers Bank (the "Customers Loan Agreement"). We accounted for these liability-classified warrants, initially measured at fair value, in accordance with *ASC Topic 480*. Changes in fair value of warrant liabilities have been recognized in the Statements of Operations and Comprehensive Loss. See *Note 2—Summary of Significant Accounting Policies* in the notes to our unaudited Condensed Financial Statements for information regarding the Series B Warrant and the Series C Warrant in connection with the Customers Loan Agreement.

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## Results of Operations
*Comparison of the Three and Nine Months Ended September 30, 2025 and 2024*

The following tables set forth our results of operations, variances versus the prior period, and percentage of revenue for each presented caption. The period-to-period comparison is not necessarily indicative of financial results to be achieved in future periods.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **%** | **Percentage of Revenue** | **Percentage of Revenue** |
|  | **2025** | **2024** | **Change** | **2025** | **2024** |
| **(in thousands, except percentages)** |  |  |  |  |  |
| **Revenue** | $13074 | $6590 | 98.4% | 100.0% | 100.0% |
| **Cost of sales** | 3147 | 1792 | 75.6% | 24.1 | 27.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Gross profit** | 9927 | 4798 | 106.9% | 75.9 | 72.8 |
| Operating expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 4445 | 4035 | 10.2% | 34.0 | 61.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 9610 | 6622 | 45.1% | 73.5 | 100.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 4907 | 1918 | 155.8% | 37.5 | 29.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total operating expenses** | 18962 | 12575 | 50.8% | 145.0 | 190.8 |
| **Loss from operations** | (9035) | (7777) | 16.2% | (69.1) | (118.0) |
| Other income (expense): |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (380) | (402) | (5.5)% | (2.9) | (6.1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | 954 | 394 | 142.1% | 7.3 | 6.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant<br> liabilities | (65) | (28) | 132.1% | (0.5) | (0.5) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense), net | 509 | (36) | \*\* | 3.9 | (0.6) |
| **Net loss and comprehensive loss** | $(8526) | $(7813) | 9.1% | (65.2)% | (118.6)% |

---

\*\* Change not meaningful

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **%** | **Percentage of Revenue** | **Percentage of Revenue** |
|  | **2025** | **2024** | **Change** | **2025** | **2024** |
| **(in thousands, except percentages)** |  |  |  |  |  |
| **Revenue** | $35346 | $17757 | 99.1% | 100.0% | 100.0% |
| **Cost of sales** | 8914 | 4733 | 88.3% | 25.2 | 26.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Gross profit** | 26432 | 13024 | 102.9% | 74.8 | 73.3 |
| Operating expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 11755 | 11289 | 4.1% | 33.3 | 63.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing | 24218 | 15092 | 60.5% | 68.5 | 85.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 11715 | 6068 | 93.1% | 33.1 | 34.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total operating expenses** | 47688 | 32449 | 47.0% | 134.9 | 182.8 |
| **Loss from operations** | (21256) | (19425) | 9.4% | (60.1) | (109.5) |
| Other income (expense): |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (1100) | (943) | 16.6% | (3.1) | (5.3) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | 1670 | 920 | 81.5% | 4.7 | 5.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant<br> liabilities | (335) | (89) | 276.4% | (1.0) | (0.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense), net | 235 | (112) | (309.8)% | 0.6 | (0.5) |
| **Net loss and comprehensive loss** | $(21021) | $(19537) | 7.6% | (59.5)% | (110.0)% |

---

<u>Revenue</u>

Revenue was $13.1 million and $6.6 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $6.5 million, or 98.4%, was primarily driven by increased volume of surgical procedures with the aprevo Technology Platform in the current quarter, with our average revenue per procedure substantially constant between these periods.

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Revenue was $35.3 million and $17.8 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $17.6 million, or 99.1%, was primarily driven by increased volume of surgical procedures with the aprevo Technology Platform in the current nine month period, with our average revenue per procedure substantially constant between these periods.

<u>Cost of Sales and Gross Margin</u>

Cost of sales was $3.1 million and $1.8 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $1.4 million, or 75.6%, was primarily driven by increased sales of aprevo interbody implants in the current quarter and the associated increase in contract manufacturing materials and costs for the three months ended September 30, 2025 with this sales volume, as compared to the three months ended September 30, 2024.

Gross margin was 75.9% for the three months ended September 30, 2025, as compared to 72.8% for the three months ended September 30, 2024 with the improvement primarily due to a reduction in the per unit production fees charged by our contract manufacturer and decreased inventory reserve expenses.

Cost of sales was $8.9 million and $4.7 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $4.2 million, or 88.3%, was primarily driven by increased sales of aprevo interbody implants in the current nine month period and the associated increase in contract manufacturing materials and costs for the nine months ended September 30, 2025 with this sales volume, as compared to the nine months ended September 30, 2024.

Gross margin was 74.8% for the nine months ended September 30, 2025, as compared to 73.3% for the nine months ended September 30, 2024 with the improvement primarily driven by a reduction in per unit production fees charged by our contract manufacturer and decreased inventory reserve expenses.

<u>Research and Development Expenses</u>

Research and development expenses were $4.4 million and $4.0 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $0.4 million, or 10.2%, was primarily due to higher personnel costs to support product development and AI initiatives; this was partially offset by decreased prototype and materials costs and reduced COMPASS registry costs following enrollment completion in the second half of 2024.

Research and development expenses were $11.8 million and $11.3 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $0.5 million, or 4.1% was primarily due to higher personnel costs to support product development and AI initiatives; this was partially offset by decreased costs for external services and prototype parts and materials and reduced COMPASS registry costs following enrollment completion in second half of 2024.

<u>Sales and Marketing Expenses</u>

Sales and marketing expenses were $9.6 million and $6.6 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $3.0 million, or 45.1%, was primarily driven by a $1.6 million increase in personnel-related costs (including increased headcount, sales compensation for employees, employee bonuses, and stock-based compensation), a $1.3 million increase in commissions to independent sales agents, a $0.7 million increase in various marketing costs, and a $0.3 million increase in other costs. These increases were partially offset by a decrease in professional service fees of $0.9 million.

Sales and marketing expenses were $24.2 million and $15.1 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $9.1 million, or 60.5%, was primarily driven by a $4.3 million increase in personnel-related costs (including increased headcount, sales compensation for employees, employee bonuses and stock-based compensation), a $3.7 million increase in commissions to independent sales agents, a $1.7 million increase in various marketing costs, a $0.3 million increase in employee travel costs, and a $0.6 million increase in other costs. These increases were partially offset by a decrease in professional service fees of $1.5 million.

<u>General and Administrative Expenses</u>

General and administrative expenses were $4.9 million and $1.9 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $3.0 million, or 155.8%, was primarily driven by a $1.6 million increase in professional service and legal fees for corporate and intellectual property matters, a $1.1 million increase in costs for personnel additions to support business growth and compliance and operational requirements as a public company, and a $0.3 million increase in other administrative costs.

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General and administrative expenses were $11.7 million and $6.1 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $5.6 million, or 93.1%, was primarily driven by a $3.0 million increase in professional service and legal fees for corporate and intellectual property matters, a $1.8 million increase in costs for personnel additions to support business growth, compliance and operational requirements as a public company, and a $0.8 million increase in other administrative costs.

<u>Interest Expense</u>

Interest expense remained consistent at $0.4 million for both the three months ended September 30, 2025 and 2024 due to consistent borrowings outstanding under the Customers Loan Agreement during both periods.

Interest expense was $1.1 million and $0.9 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $0.2 million, or 16.6%, was primarily driven by an increased amount of borrowings outstanding under the Customers Loan Agreement.

<u>Interest Income</u>

Interest income was $1.0 million and $0.4 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $0.6 million, or 142.1%, was due to an increase in bank interest on our higher daily average cash and cash equivalent balances resulting from the proceeds from our IPO in July 2025.

Interest income was $1.7 million and $0.9 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $0.8 million, or 81.5%, was due to an increase in bank interest on our higher daily average cash and cash equivalent balances resulting from the proceeds from our IPO in July 2025.

<u>Change in Fair Value of Warrant Liabilities</u>

The fair value of warrant liabilities increased by less than $0.1 million and $0.2 million during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively.

## Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we utilize and present financial measures that are not calculated and presented in accordance with GAAP. Our non-GAAP financial measures include EBITDA and Adjusted EBITDA, each of which is described below. We use our non-GAAP financial measures in evaluating our operating performance and for internal planning purposes. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We believe that the presentation of our GAAP and non-GAAP financial measures, in combination, is helpful to investors in assessing our trending business performance in the currently reported period and versus prior periods. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

***EBITDA and Adjusted EBITDA***

EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management as a supplemental measure in evaluating our operating performance. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net loss or any other measure as determined in accordance with GAAP. Our computation of EBITDA and Adjusted EBITDA may not be comparable to EBITDA and Adjusted EBITDA of other companies.

We define "EBITDA" as net income (loss), adjusted to exclude: (i) net interest (income) expense, (ii) income tax expense (benefit), (iii) depreciation expense from property and equipment, and (iv) amortization expense from long-lived assets. We define "Adjusted EBITDA" as EBITDA adjusted to exclude stock-based compensation expense and change in fair value of warrant liabilities.

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The following tables present a reconciliation of EBITDA and Adjusted EBITDA to the GAAP financial measure of net loss for each of the periods indicated:

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| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **%** |
|  | **2025** | **2024** | **Change** |
| **(in thousands, except percentages)** |  |  |  |
| **Net loss** | (8526) | (7813) | 9.1% |
| Interest (income) expense | (574) | 8) | \*\* |
| Income taxes |  |  |  |
| Depreciation and amortization | 82 | 33 | 148.5% |
| **EBITDA** | (9018) | (7772) | 16.0% |
| Stock-based compensation | 704 | 66 | 966.7% |
| Change in fair value of warrant liabilities | 65 | 28 | 132.1% |
| **Adjusted EBITDA** | $(8249) | $(7678) | 7.4% |

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\*\*Change not meaningful

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| | | | |
|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **%** |
|  | **2025** | **2024** | **Change** |
| **(in thousands, except percentages)** |  |  |  |
| **Net loss** | $(21021) | $(19537) | 7.6% |
| Interest (income) expense | (570) | 23) | \*\* |
| Income taxes |  |  |  |
| Depreciation and amortization | 183 | 108 | 69.4% |
| **EBITDA** | (21408) | (19406) | 10.3% |
| Stock-based compensation | 1137 | 153 | 643.1% |
| Change in fair value of warrant liabilities | 335 | 89 | 276.4% |
| **Adjusted EBITDA** | $(19936) | $(19164) | 4.0% |

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\*\*Change not meaningful

## Liquidity and Capital Resources
We have incurred net losses and negative cash flows from operations since our inception. We have historically financed operations primarily through the net proceeds that we have received from the sale of shares of our convertible preferred stock, borrowings under our debt facilities, and cash generated from the sales of aprevo interbody implants. On July 24, 2025, we completed our IPO and received $93.5 million in net proceeds, after deducting underwriting discounts and commissions and before additional offering expenses of $5.4 million paid by us. As of September 30, 2025, we had $115.4 million of cash and cash equivalents, $15.6 million of principal outstanding under the Customers Loan Agreement, and an accumulated deficit of $92.2 million.

Our losses primarily resulted from the costs incurred in the development and sales and marketing of our products and providing general and administrative support for our operations. We may continue to incur losses and expend significant amounts of cash in the foreseeable future as we continue to scale our business, invest in research and development activities, increase sales and marketing expenses to support commercial expansion, and increase general and administrative expenses associated with operating as a publicly traded company.

*<u>Customers Loan Agreement</u>*

As of September 30, 2025, $15.6 million of principal was outstanding under the Customers Loan Agreement that matures on October 31, 2029. As of September 30, 2025, an aggregate $11.9 million was available to draw. The Customers Loan Agreement was amended in October 2025, as discussed below and in *Note 4* in the accompanying notes to our unaudited Condensed Financial Statements, to increase borrowing capacity and achieve other related objectives.

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On October 29, 2025, we amended the Customers Loan Agreement (the "Fifth Amendment") to expand this credit facility which currently consists of (i) a term loan in the principal amount of up to $50.0 million (the "Term Loan"), $17.5 million of which is contingent upon the achievement of requisite revenue milestones, and (ii) a $10.0 million non-formula revolving line of credit (the "Non-Formula Revolving Line"). The maximum availability for draw under the Term Loan and Non-Formula Revolving Line now aggregates to $42.5 million.

The maturity date of the Term Loan was extended to October 15, 2030, with an interest-only period through October 15, 2027, followed by principal repayment over 36 months thereafter. Upon achievement of certain revenue milestones, the interest-only period and repayment terms of the Term Loan may be extended through April 15, 2028 followed by principal repayment over 30 months, and upon achievement of an additional milestone, may be further extended through October 15, 2028, followed by principal repayment over 24 months thereafter. The Non-Formula Revolving Line will mature on October 15, 2028. The applicable per annum interest rate did not change as a result of the Fifth Amendment and remains as the *greater of* (a) WSJ Prime Rate + 0.25% or (b) 5.25%.

***Future Funding Requirements***

Based on our current operating plan, we believe our existing cash and cash equivalents, the expected cash generated from sales of our aprevo interbody implants, and amounts currently available for future borrowings under our Customers Loan Agreement will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Our quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly and annual results may decrease the value of our common stock.

Our future capital requirements will depend on many factors, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪market acceptance of the aprevo Technology Platform and other products and solutions we may develop in the future;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪our ability to obtain marketing approval for the aprevo Technology Platform in international markets that we enter in the future or for other products and solutions we may develop in the future, and the timing and scope of any such approvals we may receive;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪the availability of reimbursement for aprevo interbody implants at acceptable reimbursement rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪the cost of manufacturing of aprevo interbody implants, which may vary depending on the quantity of production and the terms of our agreements with manufacturers and other vendors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪our ability to attract, hire, train, and retain qualified personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪the amount and timing of costs and expenses related to the maintenance and expansion of our business and operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪changes in our future pricing policies or those of our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪the level of demand for aprevo interbody implants that receive necessary marketing and other regulatory approvals, which may vary significantly;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪general economic, industry, and market conditions or extraordinary external events, such as a recession;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪changes in our regulatory environment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪expenses associated with unforeseen product quality issues;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪the timing and success or failure of clinical trials or post-approval studies for the aprevo Technology Platform or competing product candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪any other change in the competitive landscape of our industry, including consolidation amongst our competitors or partners;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪litigation or other claims against us for intellectual property infringement or otherwise;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪expenses associated with indemnification obligations to third parties that are subject to litigation or claims, including in relation to intellectual property infringement, or that incur other losses as a result of their use of our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪our ability to obtain additional financing as necessary; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪advances and trends in new technologies and industry standards.

If these sources of cash are insufficient to satisfy our liquidity requirements, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity or convertible debt securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. In addition, the incurrence of indebtedness would increase our fixed obligations and include covenants or other restrictions that would impede our ability to manage our operations.

------

Our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions and the disruptions to and volatility in the credit and financial markets in the United States and fluctuations in interest rates. If additional financing is needed, we may not be able to obtain additional financing on terms favorable to us, or at all. Our inability to obtain adequate financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue supporting our business growth and responding to business challenges and opportunities.

***Cash Flows***

The following table summarizes our cash flows for each of the periods presented:

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** |
| **(in thousands)** |  |  |
| Net cash provided by (used in): |  |  |
| Net cash flows used in operating activities | $(23656) | $(21263) |
| Net cash used in investing activities | $(1253) | $(119) |
| Net cash flows provided by financing activities | $100157 | $58550 |

---

***Operating activities***

For the nine months ended September 30, 2025, net cash used in operating activities was $23.7 million. Cash payments to vendors during the nine months ended September 30, 2025 totaled $34.4 million and payroll-related cash payments totaled $19.8 million. We received $30.5 million from our customers for sales of aprevo interbody implants in the nine months ended September 30, 2025 and recognized $35.3 million of revenue, based on the timing of aprevo interbody implants use in surgical procedures in this period.

For the nine months ended September 30, 2024, net cash used in operating activities was $21.3 million. Cash payments to vendors during the nine months ended September 30, 2024 totaled $24.2 million and payroll-related cash payments totaled $12.5 million. We received $15.4 million from our customers for sales of aprevo interbody implants in the nine months ended September 30, 2024 and recognized $17.8 million of revenue based on the timing of aprevo interbody implants use in surgical procedures in this period.

***Investing activities***

For the nine months ended September 30, 2025, net cash used in investing activities was $1.3 million and consisted primarily of purchases of property and equipment of $0.6 million, capitalized internal use software costs of $0.6 million, and payment of initial direct costs of $0.1 million for a new operating lease entered into in May 2025.

For the nine months ended September 30, 2024, net cash used in investing activities was $0.1 million and consisted of purchases of property and equipment.

***Financing activities***

For the nine months ended September 30, 2025, net cash provided by financing activities was $100.2 million, consisting primarily of proceeds from its initial public offering of $93.5 million, net of underwriting discounts and commissions, net proceeds from the issuance of Series C convertible preferred stock of $11.9 million and proceeds from the exercise of stock options of $0.2 million. This was partially offset by payments for deferred offering costs of $5.4 million in connection with our IPO.

For the nine months ended September 30, 2024, net cash provided by financing activities was $58.5 million, consisting primarily of net proceeds from the issuance of Series C convertible preferred stock of $52.3 million and borrowings under the Customers Loan Agreement of $6.2 million.

------

## Contractual Obligations and Other Material Cash Commitments
Our contractual obligations as of September 30, 2025, include:

*Debt*

Total principal amount outstanding under the Customers Loan Agreement as of September 30, 2025, was $15.6 million. As of September 30, 2025, this debt matured on October 31, 2029, with an interest-only period through January 31, 2027, followed by principal repayment over 33 months thereafter.

As discussed further above, on October, 29, 2025, we amended this arrangement and this maturity date was extended to October 15, 2030, with an interest-only period through October 15, 2027, followed by principal repayment over 36 months thereafter. Upon achievement of certain revenue milestones, the interest-only period and repayment terms may be further extended to an interest-only period through October 15, 2028, followed by principal repayment over 24 months thereafter. The applicable per annum interest rate did not change as a result of the Fifth Amendment and remains as the *greater of* (a) WSJ Prime Rate + 0.25% or (b) 5.25%.

*Operating leases*

As of September 30, 2025, contractual obligations for operating lease payments (substantially related to our Carlsbad, California office leases with lease terms to July 1, 2028) totaled $2.4 million and are due over 33 months after September 30, 2025.

## Critical Accounting Policies and Significant Judgments and Estimates
In our "*Management's Discussion and Analysis of Financial Condition and Results of Operations*" section within the IPO Prospectus, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our financial statements. There have been no material changes to our critical accounting policies from those previously disclosed in the IPO Prospectus.

## Recently Issued and Adopted Accounting Pronouncements
See "Note 2 – Summary of Significant Accounting Policies" in the accompanying notes to our unaudited Condensed Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for information about recent accounting pronouncements, the timing of their adoption, and our assessment, if any, of their potential impact on our financial condition and results of operations.

## Emerging Growth Company and Smaller Reporting Company Status
We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪being permitted to present only two years of audited financial statements with correspondingly reduced "*Management's Discussion and Analysis of Financial Condition and Results of Operations*" disclosure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪reduced disclosure about our executive compensation arrangements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪not being required to hold advisory votes on executive compensation or to obtain stockholder approval of any golden parachute arrangements not previously approved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor's report on the financial statements.

------

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of the IPO; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this Quarterly Report on Form 10-Q. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. In addition, the JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have chosen to "opt out" of this provision, and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period is irrevocable.

We are also a "smaller reporting company," because the market value of our shares held by non-affiliates is less than $700.0 million, and our annual revenue was less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250.0 million or (ii) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time that we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K, and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

**Item 3. Quantitative and Qualitative Disclosures About Market Risk.**

Not applicable.

**Item 4. Controls and Procedures.**

***Evaluation of Disclosure Controls and Procedures*** 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosures controls were effective at a reasonable assurance level as of September 30, 2025.

***Changes in Internal Control***

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are likely to materially affect, our internal control over financial reporting.

***Limitations on Effectiveness of Controls and Procedures***

Our management team, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal controls over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, the effectiveness of any internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to completely eliminate all potential for misconduct. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in any cost-effective control system, misstatements due to error or fraud may occur and not be detected.

------

**PART II—OTHER INFORMATION**

**Item 1. Legal Proceedings.**

For discussion regarding legal proceedings, please refer to "Note 9 – Commitments and Contingencies" in the accompanying notes to our Condensed Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

**Item 1A. Risk Factors.**

Our business is subject to a variety of risks and uncertainties that are difficult to predict and many of which are outside of our control. For a detailed discussion of the risks that affect our business, refer to the section entitled "Risk Factors" included in the IPO Prospectus. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors previously described in the IPO Prospectus. The matters specifically identified are not the only risks and uncertainties facing our company, and risks and uncertainties not known to us or not specifically identified also may impair our business operations. If any of these risks and uncertainties occur, our business, financial condition, results of operations and cash flows could be negatively affected, which could negatively impact the value of an investment in our company.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

**Unregistered Sales of Equity Securities**

None.

**Use of Proceeds**

On July 24, 2025, we completed our IPO, in which we issued and sold 6,700,000 shares of our common stock, at a price to the public of $15.00 per share. The net proceeds to the Company from the IPO were approximately $88.1 million, after deducting underwriting fees and offering costs.

The net proceeds from our IPO have been used and will be used, together with our existing cash and cash equivalents: (i) to support the commercialization of the aprevo Technology Platform and expand and improve our product offerings, including approximately $25 million to support our increased sales and marketing efforts and approximately $46 million to fund our research and development activities to advance the aprevo Technology Platform, including the continued development of the aprevo Technology Platform for use in cervical spine fusion surgeries, and (ii) the remainder for working capital and general corporate purposes.

There has been no material change in the intended use of proceeds from our IPO as described in our IPO Prospectus.

**Item 3. Defaults Upon Senior Securities.**

None.

**Item 4. Mine Safety Disclosures.**

Not applicable.

**Item 5. Other Information.**

***Rule 10b5-1 Trading Arrangements***

During the fiscal quarter ended September 30, 2025, none of our directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (in each case, as defined in Item 408 of Regulation S-K).

------

**Item 6. Exhibits.**

---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description** |
| 3.1 | [<u>Amended and Restated Certificate of Incorporation of Carlsmed, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated July 24, 2025 (File No. 001-42756)).</u>](https://www.sec.gov/Archives/edgar/data/1794546/000095017025098327/carl-ex3_1.htm) |
| 3.2 | [<u>Amended and Restated Bylaws of Carlsmed, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K dated July 24, 2025 (File No. 001-42756)).</u>](https://www.sec.gov/Archives/edgar/data/1794546/000095017025098327/carl-ex3_2.htm) |
| 10.1 | [<u>2025 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed on August 28, 2025 (File No. 001-42756).</u>](https://www.sec.gov/Archives/edgar/data/1794546/000095017025111953/carl-ex10_6.htm) |
| 10.2 | [<u>2025 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q filed on August 28, 2025 (File No. 001-42756).</u>](https://www.sec.gov/Archives/edgar/data/1794546/000095017025111953/carl-ex10_7.htm) |
| 10.3 | [<u>Form of Option Award Agreement under the 2025 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1/A dated July 15, 2025 (File No. 333-288339)).</u>](https://www.sec.gov/Archives/edgar/data/1794546/000095017025095710/carl-ex10_8.htm) |
| 10.4 | [<u>Form of RSU Award Agreement under the 2025 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1/A dated July 15, 2025 (File No. 333-288339)).</u>](https://www.sec.gov/Archives/edgar/data/1794546/000095017025095710/carl-ex10_9.htm) |
| 31.1\* | [<u>Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](carl-ex31_1.htm) |
| 31.2\* | [<u>Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](carl-ex31_2.htm) |
| 32.1\*\* | [<u>Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</u>](carl-ex32_1.htm) |
| 32.2\*\* | [<u>Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</u>](carl-ex32_2.htm) |
| 101.INS\* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
| 104\* | Cover page formatted as Inline XBRL and contained in Exhibit 101 |

---

------

\* Filed herewith.

\*\* Furnished herewith.

------

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **CARLSMED, INC.** | **CARLSMED, INC.** |
| Date: November 6, 2025 | By: | /s/Michael Cordonnier |
|  |  | Michael Cordonnier |
|  |  | Chief Executive Officer and President |
|  |  | (Principal Executive Officer) |
| Date: November 6, 2025 | By: | /s/ Leonard Greenstein |
|  |  | Leonard Greenstein |
|  |  | Chief Financial Officer |
|  |  | (Principal Financial Officer) |

---

------

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION PURSUANT TO**

**RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Michael Cordonnier, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Carlsmed, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)[Omitted];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: November 6, 2025 | By: | /s/ Michael Cordonnier |
|  |  | **Michael Cordonnier** |
|  |  | **Chief Executive Officer and President**<br>**(Principal Executive Officer)** |

---

------

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION PURSUANT TO**

**RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Leonard Greenstein, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Carlsmed, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)[Omitted];

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: November 6, 2025 | By: | /s/ Leonard Greenstein |
|  |  | **Leonard Greenstein** |
|  |  | **Chief Financial Officer**<br>**(Principal Financial Officer)** |

---

------

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Carlsmed, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

---

| | | |
|:---|:---|:---|
| Date: November 6, 2025 | By: | /s/ Michael Cordonnier |
|  |  | **Michael Cordonnier** |
|  |  | **Chief Executive Officer and President**<br>**(Principal Executive Officer)** |

---

------

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Carlsmed, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

---

| | | |
|:---|:---|:---|
| Date: November 6, 2025 | By: | /s/ Leonard Greenstein |
|  |  | **Leonard Greenstein** |
|  |  | **Chief Financial Officer**<br>**(Principal Financial Officer)** |

---

------