Carlsmed, Inc.: Form 10-Q for the period ended Jun 30, 2026

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 Condensed 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, 2025 included in our Annual Report on Form 10-K. 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 Annual Report on Form 10-K. 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 medical technology company pioneering AI-enabled personalized spine surgery solutions with a mission to improve outcomes and decrease the cost of healthcare for spine surgery and beyond.

Our technology is powered by AI-enabled technologies and outcome-based algorithms that provide personalized surgical plans for spine fusion. The surgical kit delivered to customers includes aprevo interbody implants for a custom vertebral fit and personalized alignment to address each patient’s unique needs, and single-use surgical instruments. The aprevo Technology Platform supports surgeons in achieving proper spinal alignment as they seek to improve surgical outcomes for patients with degenerative disc disease (“DDD”), including spinal deformity conditions.

We market the aprevo Technology Platform to surgeons, hospitals and ambulatory surgical centers in the United States through a combination of our sales team and independent sales agents. Our sales team consists of Area Vice Presidents, Sales Directors, Account Managers, and Strategic and National Account leadership, who are primarily responsible for promoting our platform to surgeons, supporting digital file exchange and other connectivity between our Company and hospitals, and working with hospitals to secure required approvals for our products. Our sales team is also responsible for recruiting independent sales agents who cover each aprevo surgery in the operating room.

Since we began commercializing the aprevo Technology Platform in 2021, we have experienced sequential quarterly and annual revenue growth from its rapid commercial adoption. For the three months ended June 30, 2026 and 2025, we recognized revenue of $18.9 million and $12.1 million, respectively, representing period-over-period growth of 57%. For the six months ended June 30, 2026 and 2025, we recognized revenue of $35.1 million and $22.3 million, respectively, representing period-over-period growth of 57%.

Our business model depends on our ability to timely deliver the aprevo Technology Platform to allow surgeons to maintain surgical schedules for their patients. Our digital production system (“DPS”) enables a short manufacturing lead time of six business days from surgeon approval of the digital surgical plan to aprevo kit delivery to the hospital. We believe that this lead time typically fits well within our customers’ requirements. Our medical devices are manufactured to our specifications by CMOs who meet our manufacturer qualification standards.

Initial Public Offering

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

Regulatory Overview

aprevo Lumbar

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

aprevo Cervical

In September 2023, the FDA granted us a Breakthrough Device Designation for aprevo in cervical spine fusion. In November 2024, we received FDA 510(k) clearance for our aprevo Technology Platform for cervical spine fusion surgery. In July 2025, the first aprevo cervical procedure was successfully completed at UC San Diego Health and we commercially launched aprevo Cervical in December 2025.

corra Cervical Plating System

In December 2025, we received FDA 510(k) clearance for our corra Cervical Plating System, the first personalized cervical plating system to receive FDA 510(k) clearance. In February 2026, the first procedure using corra was successfully completed at UC San Diego Health, and we expect to commercially launch corra in December 2026.

Key Factors Affecting Our Results of Operations and Performance

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

Market Adoption and Clinical Evidence

Since its full commercial launch in October 2021, the aprevo Technology Platform for spine fusion surgery has been used to treat more than 4,400 patients through June 30, 2026. We estimate there are approximately 4,000 spine surgeons across the United States whose patients could benefit from using our platform. As of June 30, 2026, we had an increase of over 67% of trained surgeon users on the aprevo Technology Platform who have completed one or more aprevo procedures as compared to June 30, 2025.

Over time, we expect to meaningfully grow the base of surgeons using the aprevo Technology Platform and its penetration with existing surgeon users. To achieve this, we plan to grow our commercial infrastructure and expand various sales and marketing initiatives, including supporting medical education programs, surgeon fellowships, 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 for DDD and ASD lumbar fusions and anterior cervical discectomy and fusion ("ACDF") cervical fusions. Clinical data publications are important tools for surgeon education and patient awareness of the potential significant benefits of our personalized solution as compared to stock implants.

Our COMPASS Registry is generating ongoing real-world evidence of patient outcomes from lumbar spine surgery with the aprevo Technology Platform. For example, a study on 90 COMPASS patients with DDD published at the 2025 Congress of Neurological Surgeons meeting demonstrated that aprevo significantly improved restoration of distal lumbar lordosis with zero revision surgeries for adjacent segment disease at 20-month median follow-up.

In December 2025, the Global Spine Journal published peer-reviewed two-year follow-up data on a retrospective cohort of ASD patients treated with aprevo, demonstrating a 74% reduced rate of mechanical complication–related reoperations compared to patients who had been treated using stock implants.

In addition, COMPASS data on 207 aprevo patients (100 adult spinal deformity patients and 107 patients with degenerative conditions) having 14-45 month follow-up was presented at the 2026 meeting of the American Association of the Neurological Surgeons/Congress of Neurological Surgeons Section on Disorders of the Spine and Peripheral Nerves. Post-operative alignment, reoperations and Oswestry Disability Index (ODI) scores were reported. Among the 100 deformity patients there were 3 (3%) reoperations between Post-Operative Day 1 (POD1) and 12 months with 2 (2%) additional reoperations between 12-24 months postoperative. Among the 107 patients with degenerative conditions there was 1 revision (0.9%) for adjacent segment disease at 2 months postoperative. ODI improvement was similar for both groups, with 64% achieving minimum clinically important difference. The data demonstrated that aprevo personalized interbody devices designed from an anatomical 3D virtual correction plan provided favorable disability improvement and favorably low reoperation rates during the 14-45 month postoperative period.

Expansion of Our Product Portfolio and Investments in Research and Development

Our research and development initiatives are focused on introducing new products, enhancements and capabilities aimed at increasing the value provided by our aprevo Technology Platform to patients, surgeons, and payors. We are developing new iterations of our algorithm and software platform to drive further improvements in surgical planning and in turn help surgeons to make more informed decisions to best treat their patients.

aprevo Cervical Platform

In November 2024, we received FDA 510(k) clearance for our aprevo interbody implants for cervical spine fusion surgery as part of the FDA-cleared aprevo Technology Platform and commenced commercialization in December 2025. Also in December 2025, we received FDA 510(k) clearance for our accompanying personalized cervical plating solutions as part of the aprevo cervical platform. In February 2026, we completed the first personalized plating procedure using the corra Cervical Plating System at the University of California San Francisco and are planning for its full commercial launch by December 2026. We expect to drive adoption of the aprevo cervical indication with our existing base of surgeons who are actively using the aprevo Technology Platform for lumbar spine fusion surgeries.

aprevo Lumbar Platform

In February 2026, as part of a limited market evaluation, we announced the successful completion of the first aprevo bi-lateral posterior lumbar spine surgery procedure at the University of Colorado Hospital in Denver, Colorado. The addition of aprevo bi-lateral expands our lumbar offering across multiple spinal fusion techniques and integrates seamlessly with our broader aprevo platform technology. The full commercial launch of aprevo bi-lateral is planned for the fourth quarter of 2026.

Future Potential Indications

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

Hospital Inpatient and Outpatient Reimbursement

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

aprevo Lumbar

Procedures using our aprevo Technology Platform are eligible for reimbursement by Medicare, Medicare Advantage, and commercial payors. For the three and six months ended June 30, 2026, we estimate that our hospital customers’ payor mix consisted of approximately 44% commercial insurance and 56% for both Medicare and Medicare Advantage insurance, combined. We believe the clinical benefit of aprevo, which has been shown to significantly reduce long-term reoperations due to mechanical complications, will continue to support demand for our technology in lumbar spine fusion surgeries.

Effective October 2024, aprevo Lumbar's New Technology Add-on Payment (NTAP) expired, and CMS updated its lumbar fusion MS-DRG structure. Inpatient surgical procedures coded to MS-DRGs 427, 448, or 451 that use "custom-made anatomically designed (CMAD) interbody fusion devices" (such as our aprevo Technology Platform) were reassigned to an elevated Major Complication or Comorbidity (MCC)-level MS-DRG payment that results in our hospital customers receiving additional reimbursement compared to lumbar fusion procedures that use stock interbody devices.

The CMS Fiscal Year 2027 Inpatient Prospective Payment System (FY27 IPPS) Final Rule was released on July 31, 2026, and will be effective October 1, 2026. This final FY27 IPPS rule will replace the current MS-DRG payment framework for inpatient lumbar spine fusions. Effective October 1, 2026, all inpatient lumbar spine fusion procedures utilizing aprevo will be assigned to one of the three new MS-DRG codes: 523, 524, or 525 (Extensive or Complex Spinal Fusion Procedures Except Cervical with MCC, with Complication or Comorbidity (CC), and without CC/MCC, respectively) and will no longer be assigned to the MS-DRG 400 series. CMS removed references to CMAD interbody fusion devices from MS-DRGs 426, 447, and 450 descriptions, clarifying that qualifying personalized lumbar fusion surgeries will only be assigned to new MS-DRGs 523, 524, and 525.

We believe this updated framework has the potential to support broader aprevo lumbar adoption by (i) reducing hospitals' uncertainty regarding which aprevo procedures will qualify for payment elevation, as this new MS-DRG structure comprehensively includes all aprevo lumbar procedures, and (ii) providing hospitals with more appropriate reimbursement amounts that better reflect their incremental costs to perform personalized lumbar fusion procedures compared to stock interbody device procedures.

In June 2026, the CMS ICD-10 Coordination and Maintenance Committee published 24 new permanent ICD-10-PCS procedure codes that also will become effective on October 1, 2026. These new permanent codes will replace the ICD-10-PCS "X-series" codes that temporarily described aprevo procedures associated with NTAP. These new ICD-10-PCS codes describe “Interbody Fusion Device, Custom-Made Anatomically and Virtually Designed" (CMAVD) procedures and are used to assign procedures to MS-DRG codes 523, 524, and 525 as part of the FY27 IPPS final rule.

The addition of the word “virtually” in the ICD-10-PCS procedure codes is consistent with our aprevo Technology Platform’s ability to render an interactive 3D virtual model to realign the spinal anatomy and enhance the preoperative surgical correction planning process. We believe the creation of these permanent procedure codes represents an important milestone, formally recognizing CMAVD attributes within the standard ICD-10-PCS coding system for select procedures, such as those that utilize the aprevo Technology Platform.

aprevo Cervical

Inpatient Procedures

We believe Medicare-aged patients receiving multi-level ACDF surgeries are uniquely addressed by aprevo cervical. Based on our internal data, a majority of these procedures are performed in an inpatient setting. Effective October 1, 2025, qualifying cervical fusion procedures utilizing aprevo personalized interbody implants for traditional Medicare beneficiaries are eligible for NTAP from CMS. The NTAP program provides additional reimbursement to hospitals that use designated new medical technologies in the first few years of market introduction. These new technologies must demonstrate significant clinical improvement in the diagnosis or treatment of Medicare beneficiaries compared to existing alternatives or be designated by the FDA as Breakthrough technology. CMS created unique ICD-10-PCS codes to identify cervical fusion procedures using “custom made anatomically designed interbody fusion devices” such as our aprevo Technology Platform. Reimbursement claims submitted with these unique ICD-10-PCS procedure codes may qualify hospitals for up to an additional $21,125 in NTAP reimbursement for eligible inpatient procedures.

Outpatient Procedures

aprevo cervical currently has the same payor reimbursement methodology as stock interbody implants for hospital outpatient departments and ambulatory surgery centers. Our requested Transitional Pass-Through (“TPT”) payment for aprevo cervical in outpatient settings was not approved by CMS in its November 2025 Outpatient Prospective Payment System (OPPS) Final Rule, despite our analysis and documentation for its qualification. We continue to explore opportunities with CMS for various pathways including TPT and New Technology Ambulatory Payment Classification (NT-APC) to appropriately reimburse our customers' costs of providing the aprevo Technology Platform in outpatient cervical fusion procedures.

Key Components of Our Results of Operations

Revenue

We sell our aprevo interbody implants and accompanying inserter instruments to customers under standard pricing schedules. We typically 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, provision for excess and obsolete inventory, 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, software costs, and provisions for excess and obsolete inventory. We expect our gross margin to remain relatively constant over the short term and to modestly increase over the medium and long term with economies of production scale, increased leverage of our AI technologies, and other planned manufacturing efficiencies.

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 and testing, 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, shipping costs, 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 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, corporate information technology and human resources roles. Other significant costs include legal fees relating to intellectual property and corporate matters, consultant and professional fees, insurance, expected credit losses on customer accounts , 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, facility, 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, interest earned on our short-term investments in certificates of deposit, and interest earned on our marketable securities, including available for sale debt securities.

Change in Fair Value of Warrant Liabilities

Prior to the closing of the IPO on July 24, 2025, we had issued warrants for the purchase of our convertible preferred stock in conjunction with the loan and security agreement with Customers Bank (the “Customers Loan Agreement”). On the closing of the IPO, all warrants issued to Customers Bank under the Customers Loan Agreement became exercisable into common stock, with certain warrants continuing to be classified as liabilities. Upon the execution of the Fifth Amendment to the Customers Loan Agreement on October 29, 2025, there were no warrants that remained classified as liabilities as a result of the cancellation of 15,831 shares of common stock that were exercisable contingent on loan draw milestones.

We accounted for these liability-classified warrants, initially measured at fair value, in accordance with ASC Topic 480. Changes in fair value of warrant liabilities have been recognized in the Condensed Statements of Operations and Comprehensive Loss. During the six months ended June 30, 2026, Customers Bank exercised the warrants on a cashless basis, resulting in the issuance of 30,366 shares of common stock. As a result of the exercise, the warrants are no longer outstanding. See Note 2—Summary of Significant Accounting Policies in the notes to our unaudited Condensed Financial Statements for information regarding the Series B Warrant and the Series C Warrant in connection with the Customers Loan Agreement.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

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.

(in thousands, except percentages)

(in thousands, except percentages)

30

Revenue

Revenue was $18.9 million and $12.1 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $6.9 million, or 56.7%, was primarily driven by increased volume of aprevo Technology Platform lumbar and cervical surgical procedures in the current quarter, with our average revenue per procedure substantially constant between these periods.

Revenue was $35.1 million and $22.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $12.8 million, or 57.4%, was primarily driven by increased volume of aprevo Technology Platform lumbar and cervical surgical procedures in the current six-month period, with our average revenue per procedure substantially constant between these periods.

Cost of Sales and Gross Margin

Cost of sales was $4.4 million and $3.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $1.2 million, or 36.8%, was primarily driven by increased unit sales of the aprevo Technology Platform for both lumbar and cervical procedures, for the three months ended June 30, 2026 , as compared to the three months ended June 30, 2025.

Gross margin was 76.8% for the three months ended June 30, 2026, as compared to 73.4% for the three months ended June 30, 2025 with cost improvements primarily from lower per unit production fees charged by our contract manufacturer in the current period and other efficiencies in our digital production system.

Cost of sales was $8.1 million and $5.8 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $2.3 million, or 40.3%, was primarily driven by increased unit sales of the aprevo Technology Platform for both lumbar and cervical procedures, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025.

Gross margin was 76.9% for the six months ended June 30, 2026, as compared to 74.1% for the six months ended June 30, 2025 with cost improvements primarily from lower per unit production fees charged by our contract manufacturer in the current period and other efficiencies in our digital production system.

Research and Development Expenses

Research and development expenses were $6.0 million and $4.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $1.9 million, or 45.2%, was primarily due to higher personnel costs to support product development and surgical planning AI initiatives.

Research and development expenses were $11.2 million and $7.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $3.9 million, or 53.5%, was primarily due to higher personnel costs to support product development and surgical planning AI initiatives.

Sales and Marketing Expenses

Sales and marketing expenses were $11.9 million and $7.9 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $4.1 million, or 51.5%, was primarily driven by a $1.5 million increase in personnel-related costs (including increased headcount, sales compensation and bonuses, and stock-based compensation), a $0.9 million increase in commissions to independent sales agents and $0.8 million increase in generic surgical instruments provided to independent sales representatives to support increased case volumes, and a $0.9 million increase in various marketing costs.

Sales and marketing expenses were $22.2 million and $14.6 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $7.6 million, or 52.1%, was primarily driven by a $2.9 million increase in personnel-related costs (including increased headcount, sales compensation and bonuses, and stock-based compensation), a $1.8 million increase in commissions to independent sales agents and $1.2 million increase in generic surgical instruments to support increased sales activity, and a $1.7 million increase in various marketing costs.

General and Administrative Expenses

General and administrative expenses were $7.6 million and $3.3 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $4.3 million, or 127.9%, was primarily driven by a $1.8 million increase in personnel-related costs to support business growth and compliance and operational requirements as a public company, a $1.4 million increase in professional service and legal fees to support corporate operations, compliance programs, and intellectual property and other ordinary course legal matters, and a $0.5 million increase in the provision for estimated uncollectible customer accounts.

General and administrative expenses were $13.8 million and $6.8 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $7.0 million, or 103.3%, was primarily driven by a $3.4 million increase in personnel-related costs to support business growth and compliance and operational requirements as a public company, a $1.6 million increase in professional service and legal fees to support corporate operations, compliance programs, and intellectual property and other ordinary course legal matters, and a $0.8 million increase in the provision for estimated uncollectible customer accounts.

Interest Expense

Interest expense was $0.3 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively, as part of our credit facility with $15.6 million principal outstanding at each date. Interest expense was $0.6 million and $0.7 million for the six months ended June 30, 2026 and 2025, respectively.

Interest Income

Interest income was $0.8 million and $0.3 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $0.5 million, or 149.7%, was due to an increase in bank interest earned on our higher daily average cash and cash equivalent balances resulting from the proceeds from our IPO in July 2025, and from increased yields from purchases of short-term investments and marketable securities in the current period.

Interest income was $1.7 million and $0.7 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $1.0 million, or 141.6%, was due to an increase in bank interest earned on our higher daily average cash and cash equivalent balances and increased yields from short-term investments and marketable securities in the current period.

Change in Fair Value of Warrant Liabilities

There was no change in fair value of warrant liabilities during the three months ended June 30, 2026 compared to a $0.2 million increase during the three months ended June 30, 2025, as the Company had no warrant liabilities outstanding during the current period.

There was no change in fair value of warrant liabilities during the six months ended June 30, 2026 compared to a $0.3 million increase during the six months ended June 30, 2025, as the Company had no warrant liabilities outstanding during the current period.

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, (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:

(in thousands, except percentages)

**Change not meaningful

(in thousands, except percentages)

**Change not meaningful

Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception. We have historically financed operations primarily through the net proceeds that we have received from the sale of shares of our convertible preferred stock, borrowings under our debt facilities, and cash generated from the sales of aprevo interbody implants. On July 24, 2025, we completed our IPO and received $93.5 million in net proceeds, after deducting underwriting discounts and commissions and before additional offering expenses of $5.4 million paid by us. As of June 30, 2026, we had $89.3 million of cash, cash equivalents, restricted cash, short-term investments and marketable securities, $15.6 million of principal outstanding under our credit facility, and an accumulated deficit of $120.0 million.

Our losses have resulted from aggregate revenues that have not yet exceeded our aggregate cost of sales and operating expenses. We may continue to incur losses and expend significant amounts of cash in the foreseeable future as we continue to scale our business, invest in research and development activities, increase sales and marketing expenses to support commercial expansion, and increase general and administrative expenses associated with operating as a publicly traded company.

Customers Loan Agreement

In December 2022, we entered into a loan and security agreement with Signature Bank, which was subsequently succeeded by Customers Bank (the “Customers Loan Agreement”). The Customers Loan Agreement, as amended, provides a credit facility to include (i) a term loan in the principal amount of up to $50.0 million (the “Term Loan”), $17.5 million of which is contingent upon the achievement of requisite revenue milestones, and (ii) a $10.0 million non-formula revolving line of credit (the “Non-Formula Revolving Line”), provided that the aggregate borrowings under the Term Loan and the Non-Formula Revolving Line may not exceed $50.0 million.

The maturity date of the Term Loan, as amended, is October 15, 2030, with an interest-only period through October 15, 2027, followed by principal repayment over 36 months thereafter. Upon achievement of a certain revenue milestone in June 2026, the interest-only period and repayment terms of the Term Loan were extended through April 15, 2028 followed by principal repayment over 30 months. Upon achievement of an additional revenue milestone, the interest-only period and repayment terms of the Term Loan may be further extended through October 15, 2028, followed by principal repayment over 24 months thereafter. The Non-Formula Revolving Line will mature on October 15, 2028. The applicable per annum interest rate is the greater of (a) WSJ Prime Rate + 0.25% or (b) 5.25%, which resulted in its 7.0% interest rate as of June 30, 2026.

As of June 30, 2026, $15.6 million of principal was outstanding under the Term Loan that will mature on October 15, 2030 and there were no borrowings outstanding under the Non-Formula Revolving Line. As of June 30, 2026, an aggregate $34.4 million is available for additional borrowing between the Term Loan and Non-Formula Revolving Line (with our achievement of requisite revenue milestone as of June 30, 2026). See Note 4—Debt in the accompanying notes to our unaudited Condensed Financial Statements for additional information regarding this credit facility.

On May 29, 2026, we entered into a letter agreement with Customers Bank that clarified the treatment of certain cash deposits for ongoing compliance with the Customers Loan Agreement and increased permitted credit card indebtedness and related cash collateral.

Future Funding Requirements

Based on our current operating plan, we believe our existing cash, cash equivalents, short-term investments, and marketable securities, and the expected cash generated from sales of our aprevo Technology Platform, 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:

• market acceptance of the aprevo Technology Platform and other products and solutions we may develop in the future;
• our ability to obtain marketing approval for the aprevo Technology Platform in relevant markets or for other products and solutions we may develop in the future, and the timing and scope of any such approvals we may receive;
• the availability of reimbursement for aprevo Technology Platform at acceptable reimbursement rates;
• the cost of manufacturing of aprevo Technology Platform, which may vary depending on the quantity of production and the terms of our agreements with manufacturers and other vendors;
• our ability to attract, hire, train, and retain qualified personnel;
• the amount and timing of costs and expenses related to the maintenance and expansion of our business and operations;
• changes in our product pricing policies or those of our competitors;
• the level of demand for the aprevo Technology Platform;
• general economic, industry, and market conditions or extraordinary external events, such as a recession;
• changes in our regulatory environment;
• expenses associated with unforeseen product quality issues;
• the timing and success or failure of studies or trials for the aprevo Technology Platform or competing product candidates;
• any other change in the competitive landscape of our industry, including consolidation amongst our competitors or partners;
• litigation or other claims against us for intellectual property infringement or otherwise;
• expenses associated with indemnification obligations to third parties that are subject to litigation or claims, including in relation to intellectual property infringement, or that incur other losses as a result of their use of our products;
• our ability to obtain additional financing as necessary; and
• advances and trends in new technologies and industry standards.

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

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

Cash Flows

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

(in thousands)

Operating activities

For the six months ended June 30, 2026, net cash used in operating activities was $20.4 million. We received $31.5 million from our customers for sales of the aprevo interbody implants in the six months ended June 30, 2026 and recognized $35.1 million of revenue, based on the period of performed surgical procedures with our devices. Cash payments to vendors during the six months ended June 30, 2026 totaled $30.6 million and payroll-related cash payments totaled $21.3 million.

For the six months ended June 30, 2025, net cash used in operating activities was $15.2 million. We received $19.0 million from our customers for sales of the aprevo interbody implants in the six months ended June 30, 2025, and recognized $22.3 million of revenue based on the period of performed surgical procedures with our devices. 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.

Investing activities

For the six months ended June 30, 2026, net cash used in investing activities was $19.9 million, consisting primarily of purchases of marketable securities of $18.9 million, purchases of short-term investments of $12.0 million, and purchases of property and equipment and capitalized internal use software costs of $1.0 million. This was partially offset by the maturity and sale of short-term investments of $12.0 million.

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 our new office operating lease entered into in May 2025.

Financing activities

For the six months ended June 30, 2026, net cash provided by financing activities was $0.7 million, consisting primarily of proceeds from the exercise of stock options of $0.5 million and proceeds from issuance of common stock under the employee stock purchase plan of $0.2 million.

For the six months ended June 30, 2025, net cash provided by financing activities was $9.5 million, consisting 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 professional services related to Series C convertible preferred stock and IPO offering costs of $2.6 million.

Contractual Obligations and Other Material Cash Commitments

Our contractual obligations as of June 30, 2026, include:

Debt

Total principal outstanding under the Customers Loan Agreement as of June 30, 2026, was $15.6 million under the Term Loan. The applicable per annum interest rate is the greater of (a) WSJ Prime Rate + 0.25% or (b) 5.25%. The Term Loan matures on October 15, 2030 and has an interest-only period that is presently through April 15, 2028, followed by principal repayment over 30 months thereafter. Upon achievement of a certain revenue milestone, the interest-only period may be extended through October 15, 2028 with principal repayment over 24 months to October 15, 2030 maturity.

Operating leases

As of June 30, 2026, contractual obligations for operating lease payments (substantially related to our Carlsbad, California office leases with lease terms to June 30, 2031) totaled $8.0 million and are due over 60 months after June 30, 2026.

Critical Accounting Policies and Significant Judgments and Estimates

In our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section within our Annual Report on Form 10-K, 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 Annual Report on Form 10-K.

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 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:

• being permitted to present only two years of audited financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
• reduced disclosure about our executive compensation arrangements;
• not being required to hold advisory votes on executive compensation or to obtain stockholder approval of any golden parachute arrangements not previously approved;
• an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”); and
• an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the Financial Statements.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our 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. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. In addition, the JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have chosen to “opt out” of this provision, and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period is irrevocable.

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

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 disclosure controls were effective at a reasonable assurance level as of June 30, 2026.

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.

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 Annual Report. 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 Annual Report. 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.