Carlsmed, Inc 10-Q for FY2025 Q2
Carlsmed, Inc. (CARL)
About this 10-Q
Carlsmed, Inc filed this 10-Q on August 28, 2025, covering the quarter ended June 30, 2025 (FY2025 Q2).
Headline figures
Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $12.08M
- up 98.7% from $6.08M a year earlier
- Net loss
- $6.77M
- compared with a net loss of $6.28M a year earlier
- Diluted EPS
- -$1.47
- compared with -$1.55 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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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 ☐
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 August 25, 2025, the registrant had
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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Condensed Balance Sheets as of June 30, 2025 and December 31, 2024 |
1 |
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2 |
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3 |
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Condensed Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 |
4 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
31 |
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Item 4. |
31 |
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PART II. |
31 |
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Item 1. |
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Item 1A. |
31 |
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Item 2. |
32 |
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Item 3. |
32 |
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Item 4. |
32 |
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Item 5. |
32 |
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Item 6. |
33 |
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35 |
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 belief 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:
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.
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
ii
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.
CONDENSED BALANCE SHEETS
(in thousands, except for share and par value amounts)
(unaudited)
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June 30, 2025 |
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December 31, 2024 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net of allowances of $ |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities, Convertible Preferred Stock, and Stockholders’ Deficit |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Accrued compensation |
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Short-term operating lease liabilities |
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Total current liabilities |
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Long-term portion of term loan, net |
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Long-term operating lease liabilities |
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Warrant liabilities |
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Other long-term liabilities |
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Total liabilities |
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and contingencies (Note 9) |
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Series A convertible preferred stock, $ |
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Series B convertible preferred stock, $ |
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Series C convertible preferred stock, $ |
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Stockholders’ deficit: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders’ deficit |
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( |
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( |
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Total liabilities, convertible preferred stock, and stockholders’ deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
1
CARLSMED, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense): |
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Interest expense |
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( |
) |
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( |
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( |
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( |
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Interest income |
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Change in fair value of warrant liabilities |
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( |
) |
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( |
) |
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( |
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( |
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Total other income (expense), net |
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( |
) |
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( |
) |
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( |
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Net loss and comprehensive loss |
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( |
) |
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( |
) |
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( |
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( |
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Deemed dividend to preferred stockholders |
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( |
) |
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Net loss attributable to common stockholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net loss per share attributable to common stockholders, basic |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted-average number of common shares used to compute |
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The accompanying notes are an integral part of these condensed financial statements.
2
CARLSMED, INC.
CONDENSED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(in thousands, except for share amounts)
(unaudited)
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Series A Convertible |
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Series B Convertible |
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Series C Convertible |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Deficit |
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Balance as of December 31, 2023 |
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$ |
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$ |
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— |
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$ |
— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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Issuance of Series C convertible |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of vested stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
( |
) |
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( |
) |
Balance as of March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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||||||||
Exercise of vested stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of June 30, 2024 |
|
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$ |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Balance as of December 31, 2024 |
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$ |
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$ |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
||||||||
Issuance of Series C convertible |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Deemed dividend related to issuance |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
|
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— |
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( |
) |
Vesting of early exercised stock |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Exercise of vested stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of March 31, 2025 |
|
|
|
|
$ |
|
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|
$ |
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|
|
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$ |
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|
|
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|
$ |
— |
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|
$ |
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|
$ |
( |
) |
|
$ |
( |
) |
||||||||
Vesting of early exercised stock |
|
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Exercise of vested stock options |
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|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Net loss |
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— |
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— |
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— |
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— |
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|
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— |
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— |
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|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||||||
The accompanying notes are an integral part of these condensed financial statements.
3
CARLSMED, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Non-cash interest |
|
|
|
|
|
|
||
Loss on remeasurement of warrant liabilities |
|
|
|
|
|
|
||
Non-cash lease expense |
|
|
|
|
|
|
||
Provision for credit losses |
|
|
|
|
|
|
||
Provision for excess and obsolete inventory |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
( |
) |
Inventory |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
( |
) |
|
|
|
|
Accrued compensation |
|
|
( |
) |
|
|
( |
) |
Lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Capitalized internal use software costs |
|
|
( |
) |
|
|
— |
|
Payment of initial direct costs related to operating leases |
|
|
( |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs |
|
|
|
|
|
|
||
Proceeds from Customers Bank term loan, net of issuance costs |
|
|
— |
|
|
|
|
|
Proceeds from exercises of stock options |
|
|
|
|
|
|
||
Payments for deferred offering costs |
|
|
( |
) |
|
|
— |
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Increase (decrease) in cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents, and restricted cash at beginning of the period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash at end of the period |
|
$ |
|
|
$ |
|
||
4
CARLSMED, INC.
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
(in thousands)
(unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Supplemental Disclosure of Noncash Investing and Financing Activities: |
|
|
|
|
|
|
||
Right-of-use asset obtained in exchange for lease liability |
|
$ |
|
|
$ |
— |
|
|
Vesting of early exercised common stock options |
|
$ |
|
|
$ |
— |
|
|
Preferred stock warrants issued in connection with term loan modifications |
|
$ |
— |
|
|
$ |
|
|
Unpaid deferred offering and issuance costs |
|
$ |
|
|
$ |
|
||
Cash, Cash Equivalents, and Restricted Cash Information: |
|
|
|
|
|
|
||
Cash and cash equivalents, beginning of period |
|
$ |
|
|
$ |
|
||
Restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
|
|
|
|
|
||
Restricted cash, end of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed financial statements.
5
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 for the correction of adult lumbar spinal deformity through its 510(k) regulatory clearance pathway in December 2020. After FDA clearance, the Company commenced its limited clinical release, with its first U.S. patient implant in February 2021. In October 2021, the Company commenced its U.S. commercial launch of aprevo.
Reverse Stock Split
On July 10, 2025, the Company effectuated a -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 are entitled to receive cash payment in lieu of receiving fractional shares.
Initial Public Offering
Immediately prior to the closing of the Company’s initial public offering 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.
On July 24, 2025, the Company completed its initial public offering of
Liquidity and Capital Resources
The Company has raised aggregate gross equity proceeds of $
On July 24, 2025, the Company completed the IPO and received net proceeds of $
6
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.
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 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 six months ended June 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 condensed financial statements in conformity with GAAP requires management to make informed estimates that require assumptions that affect the reported amounts in the accompanying 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 June 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 $
7
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.
As of June 30, 2025, the Company had
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:
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.
8
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.
(in thousands) |
|
Total |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
As of June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (1) |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total financial liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (1) |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total financial liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
(1) Included as a component of “cash and cash equivalents” on the accompanying condensed Balance Sheets.
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:
(in thousands) |
|
As of June 30, 2025 |
|
|
As of December 31, 2024 |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
9
Warrant Liabilities
The Company has issued warrants to purchase convertible preferred stock in conjunction with the Customers Loan Agreement (see Note 4). The Company accounts for its issued convertible preferred stock warrants as liabilities in accordance with ASC 480. The liability-classified warrants are initially measured at fair value, resulting in an implied discount on the related financing arrangement that is deferred as an asset as it relates to tranches of the Customers Loan Agreement that have not yet been drawn as of the date of the issuance of the respective warrants. 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.
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. The fair values of the warrant liabilities are 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 include 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 is the fair value of the Company’s convertible preferred stock as of each remeasurement date.
A summary of the changes in the total fair value of the warrant liabilities for the six months ended June 30, 2025 and 2024, is as follows:
(in thousands) |
|
Warrant |
|
|
Fair value as of December 31, 2024 |
|
$ |
|
|
Change in fair value of warrant liabilities |
|
|
|
|
Fair value as of June 30, 2025 |
|
$ |
|
|
|
|
|
|
|
Fair value as of December 31, 2023 |
|
$ |
— |
|
Issuance of Series B preferred stock warrants |
|
|
|
|
Change in fair value of warrant liabilities |
|
|
|
|
Fair value as of June 30, 2024 |
|
$ |
|
|
In connection with the close of the 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.
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 June 30, 2025 and December 31, 2024, there were $
The Company closed 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 six months ended June 30, 2025 and 2024, the Company had
10
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.
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.
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 June 30, 2025 and December 31, 2024 are as follows:
(in thousands) |
|
As of June 30, 2025 |
|
|
As of December 31, 2024 |
|
||
Office equipment |
|
$ |
|
|
$ |
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
— |
|
|
Software |
|
|
|
|
|
— |
|
|
Total |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended June 30, 2025 and 2024 was $
Accrued Liabilities
The components of “accrued liabilities” as of June 30, 2025 and December 31, 2024 are as follows:
(in thousands) |
|
As of June 30, 2025 |
|
|
As of December 31, 2024 |
|
||
Accrued sales agent commissions |
|
$ |
|
|
$ |
|
||
Accrued clinical studies |
|
|
|
|
|
|
||
Liability associated with stock option exercises prior to vesting |
|
|
|
|
|
|
||
Accrued legal and patent fees |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
11
4. Debt
Customers Bank Credit Facility
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 that provided $
The Customers Loan Agreement bore interest at the greater of (a)
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 $
As part of the Third Amendment, the Success Fee was contractually eliminated and replaced with the issuance of a warrant exercisable for up to
In May 2024, the Company drew $
On December 30, 2024, the Company further amended the Customers Loan Agreement (the “Fourth Amendment”) to expand the credit facility from $
As part of the Fourth Amendment, the Company partially modified the aggregate
Additionally, as part of the Fourth Amendment, the Company issued a new warrant that is 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
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 June 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.
12
As of June 30, 2025, $
As of June 30, 2025, the Company was in compliance with all applicable Customers Loan Agreement covenants.
Interest expense on the Customers Loan Agreement was $
The following table summarizes contractual principal payments as of June 30, 2025:
Year ending December 31, |
|
(in thousands) |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Total future principal payments |
|
|
|
|
Unamortized issuance costs |
|
|
( |
) |
Total term loan, net |
|
$ |
|
|
5. Common Stock
In accordance with the Company’s Amended and Restated Certificate of Incorporation dated January 30, 2025, and subsequently amended on July 10, 2025 to reflect the reverse stock split (see Note 1), the Company is authorized to issue two classes of stock—common stock and convertible preferred stock. The Company shall have authority to issue
Holders of common stock are entitled to one vote for each share held on applicable corporate matters. Holders of preferred stock vote together with the holders of common stock as one single class, other than as provided in the Company’s Amended and Restated Certificate of Incorporation. Common stock does not carry redemption rights and upon liquidation, its holders are entitled to receive a pro rata share of the Company’s remaining assets available for distribution (pro rata with holders of preferred stock on an as-converted basis), after amounts are first paid to creditors and applicable liquidation preference proceeds are then distributed to holders of preferred stock.
Common stock reserved for future issuance as of June 30, 2025, consisted of the following:
|
|
As of June 30, 2025 |
|
|
Preferred stock, convertible into common stock |
|
|
|
|
Common stock options outstanding |
|
|
|
|
Restricted stock units outstanding |
|
|
|
|
Shares available for future issuance under the 2019 Plan |
|
|
|
|
Series B Warrant |
|
|
|
|
Series C Warrant |
|
|
|
|
Common Stock Warrant |
|
|
|
|
Total common stock reserved for future issuance |
|
|
|
|
13
Common Stock Warrant
In April 2021, in connection with its entry into a loan and security agreement (the “SVB Loan”) with Silicon Valley Bank (“SVB”), the Company issued a warrant to purchase up to an aggregate of
On August 14, 2025, the Company issued
6. Stock-Based Compensation
In September 2019, the Company adopted the Carlsmed, Inc. 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”). As of June 30, 2025, the Board of Directors may grant awards under the 2019 Plan for up to an aggregate of
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 have
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 June 30, 2025,
On July 10, 2025, the Board of Directors adopted, and the Company’s stockholders approved, the 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 allowed 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
14
Stock Options
The following summarizes stock option activity for the Company for the six months ended June 30, 2025:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and Exercisable at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The weighted average grant date fair value of options granted during the three months ended June 30, 2025 and 2024 was $
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 June 30, 2025 and 2024 was $
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 six months ended June 30, 2025 and 2024 were as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Expected stock price volatility (1) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Risk-free interest rate (2) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected annual dividend yield (3) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected term (years) (4) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(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.
15
Restricted Stock Units
During the six months ended June 30, 2025, the Company issued
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 will be recognized until the performance-based vesting condition is probable of being achieved. If the performance condition is met through an initial public offering, compensation expense will be recognized on the IPO date proportionally for the completed portion of the requisite service period up to the initial public offering date. 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. If the performance condition is met through a corporate transaction, compensation expense for the fair value of the award will be recognized in full on the corporate transaction date, as the market condition must also be achieved at the time of the corporate transaction for vesting to occur and therefore there is no remaining derived service period.
As of June 30, 2025, the performance-based vesting conditions were not probable of being achieved and therefore
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:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
General and administrative |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of June 30, 2025, there was $
7. Convertible Preferred Stock
In March 2024, the Company issued a total of
In September 2024, the Company issued a total of
The Company closed the IPO on July 24, 2025 and all of the outstanding shares of convertible preferred stock were converted into
16
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.
The following table presents the number of anti-dilutive shares excluded from the calculation of diluted net loss per share as of June 30, 2025 and 2024:
|
|
As of June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Stock options outstanding (1) |
|
|
|
|
|
|
||
Preferred stock (common stock equivalent) (2) |
|
|
|
|
|
|
||
Restricted stock units outstanding (3) |
|
|
|
|
|
— |
|
|
Series B Warrant (common stock equivalent) (4) |
|
|
|
|
|
|
||
Series C Warrant (common stock equivalent) (5) |
|
|
|
|
|
— |
|
|
Common Stock Warrant (6) |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
(1)
(2) Preferred stock converts to common stock on a 1:1 basis upon the holder’s election or upon a Deemed Liquidation Event.
(3) No restricted stock units are vested as of June 30, 2025.
(4) Series B Warrant exercisable into
(5) Series C Warrant exercisable into
(6) Common Stock Warrant exercisable into
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
Operating Lease
The first lease encompasses
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
17
Total lease expenses for the three months ended June 30, 2025 and 2024 were $
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:
|
|
As of June 30, 2025 |
|
|
As of December 31, 2024 |
|
||
Weighted-average remaining lease term |
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
% |
|
|
% |
||
The aggregate future minimum lease payments under this lease as of June 30, 2025, are as follows:
(in thousands) |
|
|
|
|
Year ending December 31, |
|
Payments |
|
|
Remainder of 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total undiscounted lease payments |
|
$ |
|
|
Less: imputed interest |
|
|
( |
) |
Present value of future lease payments |
|
$ |
|
|
Short-term operating lease liabilities |
|
|
|
|
Long-term operating lease liabilities |
|
|
|
|
Total operating lease liabilities |
|
$ |
|
|
The operating cash outflows included in the measurement of the operating lease liabilities was $
10. Segment Reporting
The following table provides the operating financial results of the Company’s single reportable segment.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketing expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product and software development costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Clinical, medical, and regulatory expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment expenses* |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value of warrant liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
* Other segment expenses primarily include corporate, compliance, and research and development support expenses.
18
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
There were
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 Company is currently evaluating the impact the new tax law will have on its financial condition and results of operations. The impact of the tax law changes from the OBBBA are expected to be included in the Company’s financial statements beginning in the three months ending September 30, 2025.
19
Item 2. Management’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. By providing personalized surgical plans and interbody implants for custom vertebral fit that are powered by AI-enabled, outcomes-based algorithms, the aprevo Technology Platform supports surgeons in achieving proper spinal alignment for patients with degenerative disc disease (“DDD”), which can improve clinical outcomes and reduce the likelihood of revision surgeries. We currently market the aprevo Technology Platform for lumbar spine fusion surgery, and we are further developing the aprevo Technology Platform for use in cervical spine fusion surgeries, which we expect to commercialize in 2026.
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 the rapid commercial adoption of the aprevo Technology Platform. For the three months ended June 30, 2025 and 2024, we recognized revenue of $12.1 million and $6.1 million, respectively, representing period-over-period growth of 98.7%. For the six months ended June 30, 2025 and 2024, we recognized revenue of $22.3 million and $11.2 million, respectively, representing period-over-period growth of 99.4%.
Our business model depends on our ability to timely deliver aprevo interbody implants in order to allow surgeons to maintain their surgical schedule. 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. Our aprevo interbody 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 aprevo interbody implants.
20
Regulatory and Reimbursement
In July 2020, the U.S. Food and Drug Administration (“FDA”) awarded us a Breakthrough Device Designation, indicating that aprevo interbody implants are likely to provide a more effective treatment than the current standard of care in lumbar fusion with 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 performed for correction of adult spinal deformity (“ASD”). After FDA clearance, we commenced the limited clinical release of the aprevo Technology Platform, with the first U.S. patient implant in February 2021. In October 2021, the Centers for Medicare and Medicaid Services (“CMS”) awarded our aprevo interbody implants the New Technology Add-On Payments (“NTAP”). This provided supplemental reimbursement to hospitals for each qualifying aprevo lumbar procedure through October 2024. In that same month, we commenced our U.S. commercial launch of the aprevo Technology Platform for lumbar spine fusion surgery. In August 2022, the FDA cleared the aprevo Technology Platform through its 510(k) regulatory clearance pathway for the treatment of patients with DDD of the lumbar spine.
As of October 2024, CMS adopted new Medicare Severity-Diagnosis Related Groups (“MS-DRGs”) that cover most lumbar spine fusion procedures involving a “custom-made anatomically designed” (“CMAD”) interbody fusion device, such as our aprevo interbody implants. These new MS-DRGs provide premium reimbursement rates for our hospital customers, relative to lumbar fusion procedures using stock implants. We believe this classification will support our customers' continued access to our technology.
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, CMS provided a NTAP for the aprevo interbody implant for this cervical indication that results in supplemental reimbursement to hospitals for each qualifying aprevo cervical procedure, effective October 1, 2025. In July 2025, the first aprevo cervical procedure was successfully completed at UC San Diego Health. Assuming we get the necessary remaining regulatory clearances, we expect to commercialize the aprevo Technology Platform for cervical fusion surgery in 2026.
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 payable by us.
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
Since the full commercial launch of the aprevo Technology Platform for lumbar spine fusion surgery in October 2021, the aprevo Technology Platform has been used to treat more than 1,500 patients. We estimate there are approximately 4,000 surgeons across the United States whose patients could benefit from using the aprevo Technology Platform (Moore et al., 2021). As of June 30, 2025, 199 surgeon users have completed one or more procedures using the aprevo Technology Platform, compared to 116 surgeon users as of June 30, 2024. Over time, we expect to not only grow the base of surgeons using the aprevo Technology Platform but to also increase the number of procedures using the aprevo Technology Platform that are performed by existing surgeons. 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 the aprevo Technology Platform versus stock implants. For example, our COMPASS Registry is generating real-world evidence of patient outcomes from lumbar spine surgery with the aprevo Technology Platform. We anticipate that this registry will support a robust cadence of publications.
21
Expansion of Our Product Portfolio and Investments in Research and Development
Our research and development initiatives are focused on introducing enhancements and new capabilities aimed at increasing the value provided by our aprevo Technology Platform to patients, surgeons, and payors. We have introduced multiple iterations of our algorithm and software platform to drive further improvements of our predictive analytics and diagnostics. We believe that these improvements will strengthen our ability to leverage the post-operative data we collect to build a clinical decision model to further help physicians make better decisions earlier on in the treatment process.
Additionally, we are at an advanced stage of development of our aprevo Technology Platform for cervical spine fusion surgery. In November 2024, we received FDA 510(k) clearance for our aprevo Technology Platform for cervical spine fusion surgery. In 2025, we plan to continue to build out our aprevo Technology Platform for cervical fusion procedures by pursuing additional clearances for advancements to our cervical software platform and our personalized plating solutions. There is, however, no guarantee that our cervical software platform and our personalized plating solutions will obtain FDA clearance on the expected timeline, or at all.
Assuming we obtain the necessary additional 510(k) clearances, we anticipate that we will fully commercialize the aprevo Technology Platform for cervical spine fusion surgeries in early 2026 and intend to drive adoption of the Platform for cervical fusion surgery among our existing base of surgeons who are actively using aprevo interbody implants for lumbar spine fusion surgeries. We also believe that our aprevo Technology Platform can be utilized across various indications and disease states within the spine that are beyond those that we are currently cleared for, such as cervical corpectomy and cervical disc arthroplasty.
Reimbursement
Procedures using our aprevo Technology Platform are covered by Medicare, Medicare Advantage, and commercial payors. For the three and six months ended June 30, 2025, we estimate that our hospital customers’ payor mix consisted of approximately 40% and 41% for commercial insurance, respectively, and 60% and 59% for Medicare and Medicare Advantage insurance, respectively. The MS-DRG codes to which procedures using the aprevo Technology Platform are assigned, provide premium reimbursement to hospitals for lumbar fusion procedures relative to those that use stock implants. This level of hospital reimbursement has a substantial impact on how widely our aprevo Technology Platform is accepted.
CMS has assigned new technology X-codes for use of our aprevo Technology Platform in cervical spine procedures. In July 2025, CMS announced X-codes for the use of CMAD interbody fusion devices for cervical spine fusion surgeries which will be critical to the commercial success of our cervical implants. Future changes in the level of reimbursement, however, could have a significant impact on our results of operations, either positively or negatively. The level at which reimbursement is set by payors for procedures using our aprevo Technology Platform, and any increase in reimbursement for procedures using our aprevo Technology Platform, depends substantially on our continued ability to generate clinical evidence, gain advocacy in the respective physician societies, and work with CMS and commercial payors.
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 manufacturing efficiencies.
22
Operating Expenses
Research and Development Expenses
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.
Sales and Marketing Expenses
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.
General and Administrative Expenses
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.
Interest Expense
Interest expense consists of interest coupon payments and non-cash amortization of debt issuance costs as part of the Customers Loan Agreement.
Interest Income
Interest income is attributable to bank interest on our cash and cash equivalents.
Change in Fair Value of Warrant Liabilities
We have 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 account for these liability-classified warrants, initially measured at fair value, in accordance with ASC Topic 480. Changes in fair value of warrant liabilities are recognized in the Statements of Operations and Comprehensive Loss.
23
Results of Operations
Comparison of the Three and Six Months Ended June 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.
|
|
Three Months Ended June 30, |
|
|
$ |
|
|
% |
|
|
|
Percentage of Revenue |
|
|
||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
Change |
|
|
|
2025 |
|
|
|
2024 |
|
|
|||||||||
(in thousands, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
|
12,083 |
|
|
$ |
|
6,081 |
|
|
$ |
|
6,002 |
|
|
|
98.7 |
|
% |
|
|
100.0 |
|
% |
|
|
100.0 |
|
% |
Cost of sales |
|
|
|
3,214 |
|
|
|
|
1,519 |
|
|
|
|
1,695 |
|
|
|
111.6 |
|
% |
|
|
26.6 |
|
|
|
|
25.0 |
|
|
Gross profit |
|
|
|
8,869 |
|
|
|
|
4,562 |
|
|
|
|
4,307 |
|
|
|
94.4 |
|
% |
|
|
73.4 |
|
|
|
|
75.0 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development |
|
|
|
4,160 |
|
|
|
|
3,998 |
|
|
|
|
162 |
|
|
|
4.1 |
|
% |
|
|
34.4 |
|
|
|
|
65.7 |
|
|
Sales and marketing |
|
|
|
7,869 |
|
|
|
|
4,873 |
|
|
|
|
2,996 |
|
|
|
61.5 |
|
% |
|
|
65.1 |
|
|
|
|
80.1 |
|
|
General and administrative |
|
|
|
3,342 |
|
|
|
|
2,010 |
|
|
|
|
1,332 |
|
|
|
66.3 |
|
% |
|
|
27.7 |
|
|
|
|
33.1 |
|
|
Total operating expenses |
|
|
|
15,371 |
|
|
|
|
10,881 |
|
|
|
|
4,490 |
|
|
|
41.3 |
|
% |
|
|
127.2 |
|
|
|
|
178.9 |
|
|
Loss from operations |
|
|
|
(6,502 |
) |
|
|
|
(6,319 |
) |
|
|
|
(183 |
) |
|
|
2.9 |
|
% |
|
|
(53.8 |
) |
|
|
|
(103.9 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
(363 |
) |
|
|
|
(325 |
) |
|
|
|
(38 |
) |
|
|
11.7 |
|
% |
|
|
(3.0 |
) |
|
|
|
(5.3 |
) |
|
Interest income |
|
|
|
336 |
|
|
|
|
428 |
|
|
|
|
(92 |
) |
|
|
(21.5 |
) |
% |
|
|
2.8 |
|
|
|
|
7.0 |
|
|
Change in fair value of warrant |
|
|
|
(237 |
) |
|
|
|
(61 |
) |
|
|
|
(176 |
) |
|
|
288.5 |
|
% |
|
|
(2.0 |
) |
|
|
|
(1.0 |
) |
|
Total other income (expense), net |
|
|
|
(264 |
) |
|
|
|
42 |
|
|
|
|
(306 |
) |
|
|
(728.6 |
) |
% |
|
|
(2.2 |
) |
|
|
|
0.7 |
|
|
Net loss and comprehensive loss |
|
$ |
|
(6,766 |
) |
|
$ |
|
(6,277 |
) |
|
$ |
|
(489 |
) |
|
|
7.8 |
|
% |
|
|
(56.0 |
) |
% |
|
|
(103.2 |
) |
% |
|
|
Six Months Ended June 30, |
|
|
$ |
|
|
% |
Percentage of Revenue |
|
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
Change |
|
|
2025 |
|
|
|
2024 |
|
|
|||||||||
(in thousands, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
|
22,272 |
|
|
$ |
|
11,167 |
|
|
$ |
|
11,105 |
|
|
|
99.4 |
|
% |
|
100.0 |
|
% |
|
|
100.0 |
|
% |
Cost of sales |
|
|
|
5,767 |
|
|
|
|
2,941 |
|
|
|
|
2,826 |
|
|
|
96.1 |
|
% |
|
25.9 |
|
|
|
|
26.3 |
|
|
Gross profit |
|
|
|
16,505 |
|
|
|
|
8,226 |
|
|
|
|
8,279 |
|
|
|
100.6 |
|
% |
|
74.1 |
|
|
|
|
73.7 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development |
|
|
|
7,310 |
|
|
|
|
7,254 |
|
|
|
|
56 |
|
|
|
0.8 |
|
% |
|
32.8 |
|
|
|
|
65.0 |
|
|
Sales and marketing |
|
|
|
14,608 |
|
|
|
|
8,470 |
|
|
|
|
6,138 |
|
|
|
72.5 |
|
% |
|
65.6 |
|
|
|
|
75.8 |
|
|
General and administrative |
|
|
|
6,808 |
|
|
|
|
4,150 |
|
|
|
|
2,658 |
|
|
|
64.0 |
|
% |
|
30.6 |
|
|
|
|
37.2 |
|
|
Total operating expenses |
|
|
|
28,726 |
|
|
|
|
19,874 |
|
|
|
|
8,852 |
|
|
|
44.5 |
|
% |
|
129.0 |
|
|
|
|
178.0 |
|
|
Loss from operations |
|
|
|
(12,221 |
) |
|
|
|
(11,648 |
) |
|
|
|
(573 |
) |
|
|
4.9 |
|
% |
|
(54.9 |
) |
|
|
|
(104.3 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
(720 |
) |
|
|
|
(541 |
) |
|
|
|
(179 |
) |
|
|
33.1 |
|
% |
|
(3.2 |
) |
|
|
|
(4.8 |
) |
|
Interest income |
|
|
|
716 |
|
|
|
|
526 |
|
|
|
|
190 |
|
|
|
36.1 |
|
% |
|
3.2 |
|
|
|
|
4.7 |
|
|
Change in fair value of warrant |
|
|
|
(270 |
) |
|
|
|
(61 |
) |
|
|
|
(209 |
) |
|
|
342.6 |
|
% |
|
(1.2 |
) |
|
|
|
(0.5 |
) |
|
Total other expense, net |
|
|
|
(274 |
) |
|
|
|
(76 |
) |
|
|
|
(198 |
) |
|
|
260.5 |
|
% |
|
(1.2 |
) |
|
|
|
(0.7 |
) |
|
Net loss and comprehensive loss |
|
$ |
|
(12,495 |
) |
|
$ |
|
(11,724 |
) |
|
$ |
|
(771 |
) |
|
|
6.6 |
|
% |
|
(56.1 |
) |
% |
|
|
(105.0 |
) |
% |
Revenue
Revenue was $12.1 million and $6.1 million for the three months ended June 30, 2025 and 2024, respectively. The increase of $6.0 million, or 98.7%, 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 flat between these periods.
Revenue was $22.3 million and $11.2 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $11.1 million, or 99.4%, was primarily driven by increased volume of surgical procedures with the aprevo Technology Platform in the current six month period, with our average revenue per procedure substantially flat between these periods.
24
Cost of Sales and Gross Margin
Cost of sales was $3.2 million and $1.5 million for three months ended June 30, 2025 and 2024, respectively. The increase of $1.7 million, or 111.6%, 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 June 30, 2025 with this sales volume, as compared to the three months ended June 30, 2024. Gross margin was 73.4% for the three months ended June 30, 2025, as compared to 75.0% for the three months ended June 30, 2024. This modest decrease was primarily driven by expedite production fees charged by our contract manufacturer in the current quarter to meet customer timing requirements and other material costs.
Cost of sales was $5.8 million and $2.9 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $2.8 million, or 96.1%, was primarily driven by increased sales of aprevo interbody implants in the current six month period and the associated increase in contract manufacturing materials and costs for the six months ended June 30, 2025 with this sales volume, as compared to the six months ended June 30, 2024. Gross margin was 74.1% for the six months ended June 30, 2025, as compared to 73.7% for the six months ended June 30, 2024 with the slight improvement due to material costs.
Research and Development Expenses
Research and development expenses were $4.2 million and $4.0 million for the three months ended June 30, 2025 and 2024, respectively. The increase of $0.2 million, or 4.1%, was primarily due to higher personnel costs to support product development and artificial intelligence initiatives, 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 remained consistent at $7.3 million for both the six months ended June 30, 2025 and 2024. Personnel-related costs increased by $1.1 million primarily due to headcount additions to support our product development initiatives and artificial intelligence initiatives, and were substantially 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.
Sales and Marketing Expenses
Sales and marketing expenses were $7.9 million and $4.9 million for the three months ended June 30, 2025 and 2024, respectively. The increase of $3.0 million, or 61.5%, was primarily driven by a $1.5 million increase in personnel-related costs primarily due to increased headcount and sales compensation for employees, a $1.3 million increase in commissions to independent sales agents, a $0.5 million increase in various marketing costs, and a $0.1 million increase in employee travel costs. These increases were partially offset by a decrease in professional service fees of $0.6 million.
Sales and marketing expenses were $14.6 million and $8.5 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $6.1 million, or 72.5%, was primarily driven by a $2.8 million increase in personnel-related costs primarily due to increased headcount and sales compensation for employees, a $2.4 million increase in commissions to independent sales agents, a $1.1 million increase in various marketing costs, and a $0.3 million increase in employee travel costs. These increases were partially offset by a decrease in professional service fees of $0.6 million.
General and Administrative Expenses
General and administrative expenses were $3.3 million and $2.0 million for the three months ended June 30, 2025 and 2024, respectively. The increase of $1.3 million, or 66.3%, was primarily driven by a $0.5 million increase in professional service and legal fees for corporate and intellectual property matters, a $0.5 million increase in costs for personnel additions to support business growth and public company readiness, and a $0.2 million increase in the provision for credit losses from accounts receivable.
General and administrative expenses were $6.8 million and $4.2 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $2.7 million, or 64.0%, was primarily driven by a $1.4 million increase in professional service and legal fees for corporate and intellectual property matters, a $0.7 million increase in costs for personnel additions to support business growth and public company readiness, and a $0.6 million increase in other administrative expenses.
Interest Expense
Interest expense was $0.4 million and $0.3 million for the three months ended June 30, 2025 and 2024, respectively. The increase of less than $0.1 million, or 11.7%, was primarily driven by an increased amount of borrowings outstanding under the Customers Loan Agreement.
Interest expense was $0.7 million and $0.5 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $0.2 million, or 33.1%, was primarily driven by an increased amount of borrowings outstanding under the Customers Loan Agreement.
25
Interest Income
Interest income was $0.3 million and $0.4 million for the three months ended June 30, 2025 and 2024, respectively. The decrease of $0.1 million, or 21.5%, was due to a decrease in bank interest on our lower daily average cash and cash equivalent balances.
Interest income was $0.7 million and $0.5 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $0.2 million, or 36.1%, was due to an increase in bank interest on our higher daily average cash and cash equivalent balances.
Change in Fair Value of Warrant Liabilities
The fair value of warrant liabilities increased by $0.2 million during both the three and six months ended June 30, 2025 compared to both the three and six months ended June 30, 2024.
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.
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:
|
|
Three Months Ended June 30, |
|
|
|
$ |
|
|
% |
|
|
|||||||||
|
|
|
2025 |
|
|
|
2024 |
|
|
|
Change |
|
|
Change |
|
|
||||
(in thousands, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
|
(6,766 |
) |
|
$ |
|
(6,277 |
) |
|
$ |
|
(489 |
) |
|
|
7.8 |
|
% |
Interest (income) expense |
|
|
|
27 |
|
|
|
|
(103 |
) |
|
|
|
130 |
|
|
|
(126.2 |
) |
% |
Income taxes |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
Depreciation and amortization |
|
|
|
61 |
|
|
|
|
35 |
|
|
|
|
26 |
|
|
|
74.3 |
|
% |
EBITDA |
|
|
|
(6,678 |
) |
|
|
|
(6,345 |
) |
|
|
|
(333 |
) |
|
|
5.2 |
|
% |
Stock-based compensation |
|
|
|
258 |
|
|
|
|
52 |
|
|
|
|
206 |
|
|
|
396.2 |
|
% |
Change in fair value of warrant liabilities |
|
|
|
237 |
|
|
|
|
61 |
|
|
|
|
176 |
|
|
|
288.5 |
|
% |
Adjusted EBITDA |
|
$ |
|
(6,183 |
) |
|
$ |
|
(6,232 |
) |
|
$ |
|
49 |
|
|
|
(0.8 |
) |
% |
26
|
|
Six Months Ended June 30, |
|
|
$ |
|
|
% |
||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
Change |
|
|
|||||||
(in thousands, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
|
(12,495 |
) |
|
$ |
|
(11,724 |
) |
|
$ |
|
(771 |
) |
|
|
6.6 |
|
% |
Interest (income) expense |
|
|
|
4 |
|
|
|
|
15 |
|
|
|
|
(11 |
) |
|
|
(73.3 |
) |
% |
Income taxes |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
Depreciation and amortization |
|
|
|
101 |
|
|
|
|
75 |
|
|
|
|
26 |
|
|
|
34.7 |
|
% |
EBITDA |
|
|
|
(12,390 |
) |
|
|
|
(11,634 |
) |
|
|
|
(756 |
) |
|
|
6.5 |
|
% |
Stock-based compensation |
|
|
|
433 |
|
|
|
|
87 |
|
|
|
|
346 |
|
|
|
397.7 |
|
% |
Change in fair value of warrant liabilities |
|
|
|
270 |
|
|
|
|
61 |
|
|
|
|
209 |
|
|
|
342.6 |
|
% |
Adjusted EBITDA |
|
$ |
|
(11,687 |
) |
|
$ |
|
(11,486 |
) |
|
$ |
|
(201 |
) |
|
|
1.7 |
|
% |
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. Since inception through June 30, 2025, we had raised aggregate gross equity proceeds of $105.1 million primarily from the issuance of convertible preferred stock. As of June 30, 2025, we had $33.5 million of cash and cash equivalents, $15.6 million of principal outstanding under the Customers Loan Agreement, and an accumulated deficit of $83.7 million. As of June 30, 2025, an aggregate principal amount of $7.5 million was available for future borrowings under the Customers Loan Agreement with an additional $4.4 million available upon future achievement of a requisite revenue milestone.
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 payable by us.
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 to support being a publicly traded company.
Customers Loan Agreement
In December 2022, we entered the Customers Loan Agreement. The Customers Loan Agreement had an initial maturity date of December 2026 and provided up to $12.5 million in principal funding, and in October 2023, we drew $3.1 million under the Customers Loan Agreement.
On March 7, 2024, we executed a Third Amendment to the Customers Loan Agreement (the “Third Amendment”), increasing the credit facility size from $12.5 million to $18.8 million and extending the maturity date to December 31, 2027, then subject to achievement of certain revenue and other milestones, and in May 2024, we drew $6.3 million under the Customers Loan Agreement.
On December 30, 2024, we entered into a Fourth Amendment to the Customers Loan Agreement (the “Fourth Amendment”), expanding the facility to $27.5 million through the addition of two tranches, one of which is a revenue milestone-based tranche. The Fourth Amendment also extended the maturity date to October 31, 2029. The Fourth Amendment provides for an interest-only period through July 31, 2026, followed by principal repayment over 39 months thereafter. Upon achievement of certain revenue milestones, the interest-only period may be extended through July 31, 2027, followed by principal repayment over 27 months thereafter. As of June 30, 2025, the requisite revenue milestones for this extension were not yet met.
The applicable interest rate on the Customers Loan Agreement, as of June 30, 2025, was 7.75%, reflecting the greater of (a) the WSJ Prime Rate + 0.25% or (b) 5.25%, and the Customers Loan Agreement contains an interest-only period, with repayment terms that may adjust based on meeting additional milestones as discussed above.
27
In connection with each of the Third Amendment and the Fourth Amendment, we issued the Series B Warrant to Customers Bank to purchase up to 58,420 shares of our Series B convertible preferred stock at an exercise price of $6.93 and issued the Series C Warrant to Customers Bank to purchase up to 20,375 shares of our Series C convertible preferred stock with an exercise price of $10.74 per share. See Note 4—Debt in the notes to our unaudited condensed financial for additional information regarding our Series B Warrant and Series C Warrant.
As of June 30, 2025, we were in compliance with all covenants contained in the Customers Loan Agreement. See Note 4—Debt in the notes to our unaudited condensed financial statements for additional information regarding the Customers Loan Agreement.
Future Funding Requirements
Based on our current operating plan, we believe the net proceeds from the IPO, together with 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:
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.
28
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:
|
|
Six Months Ended June 30, |
|
|||||||
|
|
2025 |
|
|
2024 |
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
||
Net cash flows used in operating activities |
|
$ |
|
(15,197 |
) |
|
$ |
|
(13,683 |
) |
Net cash used in investing activities |
|
$ |
|
(910 |
) |
|
$ |
|
(67 |
) |
Net cash flows provided by financing activities |
|
$ |
|
9,454 |
|
|
$ |
|
44,626 |
|
Operating activities
For the six months ended June 30, 2025, net cash used in operating activities was $15.2 million. Cash payments to vendors during the six months ended June 30, 2025 totaled $21.2 million and payroll-related cash payments totaled $13.0 million. We received $19.0 million from our customers for sales of aprevo interbody implants in the six months ended June 30, 2025, though we recognized $22.3 million of revenue based on the timing of aprevo interbody implants use in surgical procedures in this period.
For the six months ended June 30, 2024, net cash used in operating activities was $13.7 million. Cash payments to vendors during the six months ended June 30, 2024 totaled $14.3 million, and payroll-related cash payments totaled $8.3 million. We received $8.9 million from our customers for sales of aprevo interbody implants in the six months ended June 30, 2024, though we recognized $11.2 million of revenue based on the timing of aprevo interbody implants use in surgical procedures in this period.
Investing activities
For the six months ended June 30, 2025, net cash used in investing activities was $0.9 million and consisted primarily of purchases of property and equipment of $0.4 million, capitalized internal use software costs of $0.4 million, and payment of initial direct costs of $0.1 million for the new operating lease entered into in May 2025.
For the six months ended June 30, 2024, net cash used in investing activities was $0.1 million and consisted primarily of purchases of property and equipment.
Financing activities
For the six months ended June 30, 2025, net cash provided by financing activities was $9.5 million, consisted primarily of 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 $2.6 million in connection with the IPO.
For the six months ended June 30, 2024, net cash provided by financing activities was $44.6 million, consisted primarily of net proceeds from the issuance of Series C convertible preferred stock of $38.4 million and borrowings under the Customers Loan Agreement of $6.2 million.
Contractual Obligations and Other Material Cash Commitments
Our contractual obligations as of June 30, 2025, include:
Debt
Total principal amount outstanding as of June 30, 2025, was $15.6 million. The Customers Loan Agreement matures on October 31, 2029, with an interest-only period through July 31, 2026, followed by principal repayment over 39 months thereafter. Upon achievement of certain revenue milestones, the interest-only period may be extended through July 31, 2027, and principal repayment over 27 months thereafter. As of June 30, 2025, the requisite revenue milestones for this extension were not yet met.
29
Operating leases
As of June 30, 2025, contractual obligations for operating lease payments (substantially related to our Carlsbad, California office leases with lease terms to July 1, 2028), that totaled $2.6 million and are due over 36 months after June 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:
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.
30
We are also a “smaller reporting company,” because the market value of our shares held by non-affiliates plus the proposed aggregate amount of gross proceeds to us 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 June 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 consolidated 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.
31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
During the quarter ended June 30, 2025, we issued an aggregate of 446,617 shares of our common stock upon the exercise of stock options under our 2019 Plan at a weighted average exercise price of $0.41 per share, for aggregate proceeds of $0.2 million.
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 $88.3 million, after deducting underwriting discounts and commissions and estimated 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 $24.7 million to support our increased sales and marketing efforts, approximately $45.9 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 June 30, 2025, none of our directors or officers
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Item 6. Exhibits.
Exhibit Number |
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Description |
3.1 |
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3.2 |
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4.1 |
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4.2 |
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4.3 |
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4.4 |
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4.5 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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10.6* |
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10.7* |
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10.8 |
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10.9 |
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10.10 |
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10.11 |
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10.12 |
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10.13 |
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10.14 |
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10.15 |
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10.16 |
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33
10.17 |
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10.18 |
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10.19 |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS* |
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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.
34
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.
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CARLSMED, INC. |
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Date: August 28, 2025 |
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By: |
/s/Michael Cordonnier |
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Michael Cordonnier |
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Chief Executive Officer and President |
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(Principal Executive Officer) |
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Date: August 28, 2025 |
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By: |
/s/ Leonard Greenstein |
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Leonard Greenstein |
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Chief Financial Officer |
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(Principal Financial Officer) |
35
Exhibit 10.6
Carlsmed, Inc.
2025 Equity Incentive Plan
Adopted by the Board of Directors: July 10, 2025
Approved by the Stockholders: July 10, 2025
IPO Date: July 22, 2025
2
Each Option and SAR will have such terms and conditions as determined by the Board. Each Option will be designated in writing as an Incentive Stock Option or Nonstatutory Stock Option at the time of grant; provided, however, that if an Option is not so designated or if an Option designated as an Incentive Stock Option fails to qualify as an Incentive Stock Option, then such Option will be a Nonstatutory Stock Option, and the shares purchased upon exercise of each type of Option will be separately accounted for. Each SAR will be denominated in shares of Common Stock equivalents. The terms and conditions of separate Options and SARs need not be identical; provided, however, that each Option Agreement and SAR Agreement will conform (through incorporation of provisions hereof by reference in the Award Agreement or otherwise) to the substance of each of the following provisions:
3
4
5
Following the date of such termination, to the extent the Participant does not exercise such Award within the applicable Post-Termination Exercise Period (or, if earlier, prior to the expiration of the maximum term of such Award), such unexercised portion of the Award will terminate, and the Participant will have no further right, title or interest in the terminated Award, the shares of Common Stock subject to the terminated Award, or any consideration in respect of the terminated Award.
6
7
8
9
10
11
12
13
14
15
The Company will seek to obtain from each regulatory commission or agency, as may be deemed to be necessary, having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise or vesting of the Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary or advisable for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise or vesting of such Awards unless and until such authority is obtained. A Participant is not eligible for the grant of an Award or the subsequent issuance of Common Stock pursuant to the Award if such grant or issuance would be in violation of any Applicable Law.
16
If all or any part of the Plan or any Award Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of the Plan or such Award Agreement not declared to be unlawful or invalid. Any Section of the Plan or any Award Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
The Board may suspend or terminate the Plan at any time. No Incentive Stock Options may be granted after the tenth anniversary of the earlier of: (a) the Adoption Date, or (b) the date the Plan is approved by the Company’s stockholders. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
As used in the Plan, the following definitions apply to the capitalized terms indicated below:
17
18
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (i), (ii) or (iii) of this Section 12(k) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
The Plan Administrator shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
19
20
21
22
23
24
25
26
Exhibit 10.7
Carlsmed, Inc.
2025 Employee Stock Purchase Plan
Adopted by the Board of Directors: July 10, 2025
Approved by the Stockholders: July 10, 2025
IPO Date: July 22, 2025
(a) The Plan provides a means by which Eligible Employees of the Company and certain Designated Companies may be given an opportunity to purchase shares of Common Stock. The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Stock Purchase Plan. In addition, the Plan permits the Company to grant a series of Purchase Rights to Eligible Employees that do not meet the requirements of an Employee Stock Purchase Plan.
(b) The Plan includes two components: a 423 Component and a Non-423 Component. The Company intends (but makes no undertaking or representation to maintain) the 423 Component to qualify as an Employee Stock Purchase Plan. The provisions of the 423 Component, accordingly, will be construed in a manner that is consistent with the requirements of Section 423 of the Code. In addition, this Plan authorizes grants of Purchase Rights under the Non-423 Component that do not meet the requirements of an Employee Stock Purchase Plan. Except as otherwise provided in the Plan or determined by the Board, the Non-423 Component will operate and be administered in the same manner as the 423 Component. In addition, the Company may make separate Offerings which vary in terms (provided that such terms are not inconsistent with the provisions of the Plan or the requirements of an Employee Stock Purchase Plan to the extent the Offering is made under the 423 Component), and the Company will designate which Designated Company is participating in each separate Offering.
(c) The Company, by means of the Plan, seeks to retain the services of Eligible Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.
(a) The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c). References herein to the Board shall be deemed to refer to the Committee except where context dictates otherwise.
(b) The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(c) The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan and any applicable Offering Document to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Further, to the extent not prohibited by Applicable Law, the Board or Committee may, from time to time, delegate some or all of its authority under the Plan to one or more Officers or other persons or groups of persons as it deems necessary, appropriate or advisable under conditions or limitations that it may set at or after the time of the delegation. The Board may retain the authority to concurrently administer the Plan with the Committee (or its delegate) and may, at any time, revest in the Board some or all of the powers previously delegated. Whether or not the Board has delegated administration of the Plan to a Committee (or a delegate of the Committee), the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.
(d) All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
2
(a) Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of shares of Common Stock that may be issued under the Plan will not exceed 398,749 shares of Common Stock, plus the number of shares of Common Stock that are automatically added on January 1st of each year for a period of up to ten years, commencing on January 1, 2026 and ending on (and including) January 1, 2035 in an amount equal to one percent (1%) of the total number of shares of Capital Stock outstanding on December 31st of the preceding calendar year. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year to provide that there will be no January 1st increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence. For the avoidance of doubt, up to the maximum number of shares of Common Stock reserved under this Section 3(a) may be used to satisfy purchases of Common Stock under the 423 Component and any remaining portion of such maximum number of shares may be used to satisfy purchases of Common Stock under the Non-423 Component.
(b) If any Purchase Right granted under the Plan terminates without having been exercised in full, the shares of Common Stock not purchased under such Purchase Right will again become available for issuance under the Plan.
(c) The stock purchasable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.
(a) The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees under an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board. Each Offering will be in such form and will contain such terms and conditions as the Board will deem appropriate, and with respect to the 423 Component, will comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges. The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.
(b) If a Participant has more than one Purchase Right outstanding under the Plan, unless such Participant otherwise indicates in forms delivered to the Company or a third party designated by the Company (each, a “Company Designee”): (i) each form will apply to all of such Participant’s Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) will be exercised.
(c) The Board will have the discretion to structure an Offering so that if the Fair Market Value of a share of Common Stock on the first Trading Day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then (i) that Offering will terminate immediately as of that first Trading Day, and (ii) the Participants in such terminated Offering will be automatically enrolled in a new Offering beginning on the first Trading Day of such new Purchase Period.
3
(a) Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with Section 2(b), to Employees of a Related Corporation or an Affiliate. Except as provided in Section 5(b) or as required by Applicable Law, an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee has been in the employ of the Company, the Related Corporation or the Affiliate, as the case may be, for such continuous period preceding such Offering Date as the Board may (unless prohibited by Applicable Law) require, but in no event will the required period of continuous employment be equal to or greater than two years. In addition, the Board may provide (unless prohibited by Applicable Law) that no Employee will be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company, the Related Corporation or the Affiliate is more than 20 hours per week and more than five months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code with respect to the 423 Component. The Board may also exclude (unless prohibited by Applicable Law) from participation in the Plan or any Offering Employees who are “highly compensated employees” (within the meaning of Section 423(b)(4)(D) of the Code) of the Company, a Related Corporation or an Affiliate, or a subset of such highly compensated employees. The Board may also exclude from participation in the 423 Component (unless prohibited by Applicable Law) any Employee who is a citizen or resident of a non-U.S. jurisdiction (without regard to whether they are also a citizen of the United States or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) if either (i) the grant of the option under the Plan is prohibited under the laws of the jurisdiction governing such Employee, or (ii) compliance with the laws of the non-U.S. jurisdiction would cause the Section 423 Component, any Offering thereunder or an option granted thereunder to violate the requirements of Section 423 of the Code. Any exclusion in the immediately preceding sentence shall be applied in an identical manner under each Offering to all Employees of the Company and all Designated Companies, in accordance with Treas. Reg. § 1.423-2(e).
(b) The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right will thereafter be deemed to be a part of that Offering. Such Purchase Right will have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:
(c) No Employee will be eligible for the grant of any Purchase Rights under the 423 Component if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation. For purposes of this Section 5(c), the rules of Section 424(d) of the Code will apply in determining the stock ownership of any Employee, and stock which such Employee may
4
purchase under all outstanding Purchase Rights and options will be treated as stock owned by such Employee.
(d) As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights under the 423 Component only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s rights to purchase stock of the Company or any Related Corporation to accrue at a rate which, when aggregated, exceeds $25,000 of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.
(e) Officers of the Company and any Designated Company, if they are otherwise Eligible Employees, will be eligible to participate in Offerings under the Plan. Notwithstanding the foregoing, the Board may (unless prohibited by Applicable Law) provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code will not be eligible to participate.
(f) Notwithstanding anything in this Section 5 to the contrary, in the case of an Offering under the Non-423 Component, an Eligible Employee (or group of Eligible Employees) may be excluded from participation in the Plan or an Offering if the Board has determined, in its sole discretion, that participation of such Eligible Employee(s) is not advisable or practical for any reason.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, will be granted a Purchase Right to purchase up to that number of shares of Common Stock purchasable either with a percentage of earnings (as defined by the Board in each Offering) or with a maximum dollar amount, as designated by the Board, but in either case not exceeding 15% of such Employee’s earnings (as defined by the Board in each Offering), during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering.
(b) The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that Offering will be exercised and shares of Common Stock will be purchased in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may specify (i) a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering and/or (iii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering. If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each Participant’s accumulated Contributions) allocation of the shares of Common Stock (rounded down to the nearest whole share) available will be made in as nearly a uniform manner as will be practicable and equitable.
5
(d) The purchase price of shares of Common Stock acquired pursuant to Purchase Rights will be no less than the lesser of:
(a) An Eligible Employee may elect to participate in an Offering and authorize payroll deductions as the means of making Contributions by completing and delivering to the Company or a Company Designee, within the time specified in the Offering, an enrollment form provided by the Company or a Company Designee. The enrollment form will specify the amount of Contributions not to exceed the maximum amount specified by the Board. Each Participant’s Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the Company except where Applicable Law requires that Contributions be deposited with a third party. If permitted in the Offering, a Participant may begin such Contributions with the first payroll occurring on or after the Offering Date (or, in the case of a payroll date that occurs after the end of the prior Offering but before the Offering Date of the next new Offering, Contributions from such payroll will be included in the new Offering). If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase such Participant’s Contributions. If required under Applicable Law or if specifically provided in the Offering and to the extent permitted by Section 423 of the Code with respect to the 423 Component, in addition to or instead of making Contributions by payroll deductions, a Participant may make Contributions through the payment by cash, check or wire transfer prior to a Purchase Date.
(b) During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company or a Company Designee a withdrawal form provided by the Company. The Company may impose a deadline before a Purchase Date for withdrawing. Upon such withdrawal, such Participant’s Purchase Right in that Offering will immediately terminate and the Company will distribute as soon as practicable to such Participant all of such Participant’s accumulated but unused Contributions and such Participant’s Purchase Right in that Offering shall thereupon terminate. A Participant’s withdrawal from that Offering will have no effect upon such Participant’s eligibility to participate in any other Offerings under the Plan, but such Participant will be required to deliver a new enrollment form to participate in subsequent Offerings.
(c) Unless otherwise required by Applicable Law, Purchase Rights granted pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Employee for any reason or for no reason (subject to any post-employment participation period required by Applicable Law) or (ii) is otherwise no longer eligible to participate. The Company will distribute as soon as practicable to such individual all of such individual’s accumulated but unused Contributions.
(d) Unless otherwise determined by the Board, a Participant whose employment transfers or whose employment terminates with an immediate rehire (with no break in service) by or between the Company and a Designated Company or between Designated Companies will not be treated as having terminated employment for purposes of participating in the Plan or an Offering; however, if a Participant transfers from an Offering under the 423 Component to an Offering under the Non-423 Component, the exercise of the Participant’s Purchase Right will be qualified under the 423 Component only to the extent such exercise complies with Section 423 of the Code. If a Participant transfers from an Offering under the Non-423 Component to an Offering under the 423 Component, the exercise of the Purchase Right will
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remain non-qualified under the Non-423 Component. The Board may establish different and additional rules governing transfers between separate Offerings within the 423 Component and between Offerings under the 423 Component and Offerings under the Non-423 Component.
(e) During a Participant’s lifetime, Purchase Rights will be exercisable only by such Participant. Purchase Rights are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company, by a beneficiary designation as described in Section 10.
(f) Unless otherwise specified in the Offering or required by Applicable Law, the Company will have no obligation to pay interest on Contributions.
(a) On each Purchase Date, each Participant’s accumulated Contributions will be applied to the purchase of shares of Common Stock, up to the maximum number of shares of Common Stock permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares will be issued unless specifically provided for in the Offering.
(b) Unless otherwise provided in the Offering, if any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock and such remaining amount is less than the amount required to purchase one share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will be held in such Participant’s account for the purchase of shares of Common Stock under the next Offering under the Plan, unless such Participant withdraws from or is not eligible to participate in such next Offering, in which case such amount will be distributed to such Participant after the final Purchase Date without interest (unless the payment of interest is otherwise required by Applicable Law). If the amount of Contributions remaining in a Participant’s account after the purchase of shares of Common Stock is at least equal to the amount required to purchase one (1) whole share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will be distributed in full to such Participant after the final Purchase Date of such Offering without interest (unless otherwise required by Applicable Law).
(c) No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable U.S. and non-U.S. federal, state and other securities, exchange control and other laws applicable to the Plan. If on a Purchase Date the shares of Common Stock are not so registered or the Plan is not in such compliance, no Purchase Rights will be exercised on such Purchase Date, and, subject to Section 423 of the Code with respect to the 423 Component, the Purchase Date will be delayed until the shares of Common Stock are subject to such an effective registration statement and the Plan is in material compliance, except that the Purchase Date will in no event be more than 27 months from the Offering Date. If, on the Purchase Date, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in material compliance with all Applicable Laws, as determined by the Company in its sole discretion, no Purchase Rights will be exercised and all accumulated but unused Contributions will be distributed to the Participants without interest (unless the payment of interest is otherwise required by Applicable Law).
The Company will seek to obtain from each U.S. and non-U.S. federal, state or other regulatory commission, agency or other Governmental Body having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder unless the Company determines, in its sole discretion, that doing so is not practical or would cause the Company to
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incur costs that are unreasonable. If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.
(a) The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will receive any shares of Common Stock and/or Contributions from the Participant’s account under the Plan if the Participant dies before such shares and/or Contributions are delivered to the Participant. The Company may, but is not obligated to, permit the Participant to change such designation of beneficiary. Any such designation and/or change must be on a form approved by the Company.
(b) If a Participant dies, and in the absence of a valid beneficiary designation, the Company will deliver any shares of Common Stock and/or Contributions to the executor or administrator of the estate of the Participant. If no executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares of Common Stock and/or Contributions, without interest (unless the payment of interest is otherwise required by Applicable Law), to the Participant’s spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
(a) In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the purchase limits under each ongoing Offering. The Board will make these adjustments, and its determination will be final, binding and conclusive.
(b) In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants’ accumulated Contributions will be used to purchase shares of Common Stock (rounded down to the nearest whole share) within ten business days (or such other period specified by the Board) prior to the Corporate Transaction under the outstanding Purchase Rights, and the Purchase Rights will terminate immediately after such purchase.
(a) The Board may amend the Plan at any time in any respect the Board deems necessary or advisable. However, except as provided in Section 11(a) relating to Capitalization Adjustments, stockholder approval will be required for any amendment of the Plan for which stockholder approval is required by Applicable Law.
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(b) The Board may suspend or terminate the Plan at any time. No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.
(c) Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to facilitate compliance with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment. To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code with respect to the 423 Component or with respect to other Applicable Laws. Notwithstanding anything in the Plan or any Offering Document to the contrary, the Board will be entitled to: (i) establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars; (ii) permit Contributions in excess of the amount designated by a Participant in order to adjust for mistakes in the Company’s processing of properly completed Contribution elections; (iii) establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Contributions; (iv) amend any outstanding Purchase Rights or clarify any ambiguities regarding the terms of any Offering to enable the Purchase Rights to qualify under and/or comply with Section 423 of the Code with respect to the 423 Component; and (v) establish other limitations or procedures as the Board determines in its sole discretion advisable that are consistent with the Plan. The actions of the Board pursuant to this paragraph will not be considered to alter or impair any Purchase Rights granted under an Offering as they are part of the initial terms of each Offering and the Purchase Rights granted under each Offering.
(a) Although the Company may endeavor to (i) qualify a Purchase Right for special tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment, the Company makes no representation to that effect and expressly disavows any covenant to maintain special or to avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan. The Company will be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants.
(b) Each Participant will make arrangements, satisfactory to the Company and any applicable Related Corporation, to enable the Company or the Related Corporation to fulfill any withholding obligation for Tax-Related Items. Without limitation to the foregoing, in the Company’s sole discretion and subject to Applicable Law, such withholding obligation may be satisfied in whole or in part by (i) withholding from the Participant’s salary or any other cash payment due to the Participant from the Company or a Related Corporation; (ii) withholding from the proceeds of the sale of shares of Common Stock acquired under the Plan, either through a voluntary sale or a mandatory sale arranged by the Company; or (iii) any other method deemed acceptable by the Board. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
(c) The 423 Component is exempt from the application of Section 409A of the Code, and any ambiguities herein shall be interpreted to so be exempt from Section 409A of the Code. The Non-423 Component is intended to be exempt from the application of Section 409A of the Code under the
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short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Committee determines that an option granted under the Plan may be subject to Section 409A of the Code or that any provision in the Plan would cause an option under the Plan to be subject to Section 409A, the Committee may amend the terms of the Plan and/or of an outstanding option granted under the Plan, or take such other action the Committee determines is necessary or appropriate, in each case, without the Participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Section 409A of the Code, but only to the extent any such amendments or action by the Committee would not violate Section 409A of the Code. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option under the Plan that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.
The Plan will become effective immediately prior to and contingent upon the IPO Date. No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.
(a) Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights will constitute general funds of the Company.
(b) A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).
(c) The Plan and Offering do not constitute an employment contract. Nothing in the Plan or in the Offering will in any way alter the at will nature of a Participant’s employment or amend a Participant’s employment contract, if applicable, or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company or a Related Corporation or an Affiliate, or on the part of the Company, a Related Corporation or an Affiliate to continue the employment of a Participant.
(d) The provisions of the Plan will be governed by the laws of the State of Delaware without resort to that state’s conflict of laws rules.
(e) If any particular provision of the Plan is found to be invalid or otherwise unenforceable, such provision will not affect the other provisions of the Plan, but the Plan will be construed in all respects as if such invalid provision were omitted.
(f) If any provision of the Plan does not comply with Applicable Law, such provision shall be construed in such a manner as to comply with Applicable Law.
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As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a) “423 Component” means the part of the Plan, which excludes the Non-423 Component, pursuant to which Purchase Rights that satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees.
(b) “Affiliate” means any entity, other than a Related Corporation, whether now or subsequently established, which is at the time of determination, a “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board may determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
(c) “Applicable Law” means the Code and any applicable U.S. and non-U.S. securities, exchange control, tax, federal, state, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, listing rule, regulation, judicial decision, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body (or under the authority of the New York Stock Exchange, Nasdaq Stock Market or the Financial Industry Regulatory Authority).
(d) “Board” means the Board of Directors of the Company.
(e) “Capital Stock” means each and every class of common stock of the Company, regardless of the number of votes per share.
(f) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the date the Plan is adopted by the Board without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
(g) “Code” means the U.S. Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(h) “Committee” means a committee of one or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).
(i) “Common Stock” means, as of the IPO Date the common stock of the Company.
(j) “Company” means Carlsmed, Inc., a Delaware corporation.
(k) “Contributions” means the payroll deductions and other additional payments specifically provided for in the Offering that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account if specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions and, with respect to the 423 Component, to the extent permitted by Section 423.
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(l) “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(m) “Designated 423 Company” means any Related Corporation selected by the Board as participating in the 423 Component.
(n) “Designated Company” means any Designated Non-423 Company or Designated 423 Company, provided, however, that at any given time, a Related Corporation participating in the 423 Component shall not be a Related Corporation participating in the Non-423 Component.
(o) “Designated Non-423 Company” means any Related Corporation or Affiliate selected by the Board as participating in the Non-423 Component.
(p) “Director” means a member of the Board.
(q) “Eligible Employee” means an Employee who meets the requirements set forth in the document(s) governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.
(r) “Employee” means any person, including an Officer or Director, who is “employed” for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation or solely with respect to the Non-423 Component, an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
(s) “Employee Stock Purchase Plan” means a plan that grants Purchase Rights intended to be options issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code.
(t) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
(u) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
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(v) “Governmental Body” means any: (i) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) U.S. or non-U.S. federal, state, local, municipal or other government; (iii) governmental or regulatory body, or quasi-governmental body of any nature (including any governmental division, department, administrative agency or bureau, commission, authority, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or entity and any court or other tribunal, and for the avoidance of doubt, any tax authority) or other body exercising similar powers or authority; or (iv) self-regulatory organization (including the New York Stock Exchange, the Nasdaq Stock Market and the Financial Industry Regulatory Authority).
(w) “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.
(x) “Non-423 Component” means the part of the Plan, which excludes the 423 Component, pursuant to which Purchase Rights that are not intended to satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees.
(y) “Offering” means the grant to Eligible Employees of Purchase Rights, with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the “Offering Document” approved by the Board for that Offering.
(z) “Offering Date” means a date selected by the Board for an Offering to commence.
(aa) “Officer” means a person who is an officer of the Company or a Related Corporation within the meaning of Section 16 of the Exchange Act.
(bb) “Participant” means an Eligible Employee who holds an outstanding Purchase Right.
(cc) “Plan” means this Carlsmed, Inc. 2025 Employee Stock Purchase Plan, as amended from time to time, including both the 423 Component and the Non-423 Component.
(dd) “Purchase Date” means one or more dates during an Offering selected by the Board on which Purchase Rights will be exercised and on which purchases of shares of Common Stock will be carried out in accordance with such Offering.
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(ee) “Purchase Period” means a period of time specified within an Offering, generally beginning on the Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date. An Offering may consist of one or more Purchase Periods.
(ff) “Purchase Right” means an option to purchase shares of Common Stock granted pursuant to the Plan.
(gg) “Related Corporation” means any “parent corporation” or “subsidiary corporation” of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
(hh) “Securities Act” means the U.S. Securities Act of 1933, as amended.
(ii) “Tax-Related Items” means any income tax, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items arising out of or in relation to a Participant’s participation in the Plan, including, but not limited to, the exercise of a Purchase Right and the receipt of shares of Common Stock or the sale or other disposition of shares of Common Stock acquired under the Plan.
(jj) “Trading Day” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including but not limited to the New York Stock Exchange, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or any successors thereto, is open for trading.
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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:
Date: August 28, 2025 |
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By: |
/s/ Michael Cordonnier |
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Michael Cordonnier |
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Chief Executive Officer and President (Principal Executive Officer) |
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:
Date: August 28, 2025 |
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By: |
/s/ Leonard Greenstein |
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Leonard Greenstein |
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Chief Financial Officer (Principal Financial Officer) |
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 June 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:
Date: August 28, 2025 |
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By: |
/s/ Michael Cordonnier |
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Michael Cordonnier |
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Chief Executive Officer and President (Principal Executive Officer) |
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 June 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:
Date: August 28, 2025 |
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By: |
/s/ Leonard Greenstein |
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Leonard Greenstein |
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Chief Financial Officer (Principal Financial Officer) |