6. Stock-Based Compensation

Overview of Stock Plans and Award Terms

On July 10, 2025, the Board of Directors adopted, and the Company’s stockholders approved, the Carlsmed, Inc. 2025 Equity Incentive Plan (the “2025 Plan”), which became effective on July 21, 2025. The 2025 Plan replaced the Carlsmed, Inc. 2019 Equity Incentive Plan (the "2019 Plan"). The Board of Directors determined to not make any further equity award grants under the 2019 Plan following the closing of the IPO, though the 2019 Plan will continue to govern outstanding awards granted under it.

The 2025 Plan allows the Company to grant mstock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other awards. As of June 30, 2026, there were 2,135,449 remaining shares available for issuance under the 2025 Plan.

The exercise price of a share subject to a stock option may not be less than the fair market value of a share of the Company’s common stock at the grant date. Stock options granted to employees typically vest over four years, with 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a monthly or quarterly basis thereafter. The vesting of stock option awards are subject to continued employment and have a maximum term of 10 years. Expense is recognized in the accompanying Condensed Statements of Operations and Comprehensive Loss on a straight-line basis over each award’s vesting period. Stock option awards may be subject to vesting acceleration in connection with a “Change in Control” or “Corporate Transaction,” as defined in the respective 2025 and 2019 Plans.

Certain stock options granted under the 2019 Plan allowed for their exercise prior to vesting (“early exercise”). 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, 2026, 41,816 shares of early exercised stock options were outstanding, representing an immaterial early exercise liability. As of December 31, 2025, 59,738 shares of early exercised stock options were outstanding, representing an early exercise liability of $0.1 million.

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

PSUs are RSUs in form and vest based on the achievement of performance and/or market conditions, subject to continuous service through the applicable vesting date. Related expense is recognized in the accompanying

Condensed Statements of Operations and Comprehensive Loss. For awards with performance conditions, applicable compensation cost is recognized over the requisite service period to the extent the achievement of each performance condition is considered probable. For awards with market conditions, compensation cost is recognized over the service period, regardless of whether the market condition is ultimately achieved.

Stock Options

The Company did not grant any stock options during the three months ended June 30, 2026. The weighted average grant date fair value of options granted during the three months ended June 30, 2025 was $2.90 per share. The weighted average grant date fair value of options granted during the six months ended June 30, 2026 and 2025 was $6.23 and $2.19 per share, respectively. The total fair value of options that vested during the three months ended June 30, 2026 and 2025 was $0.6 million and $0.1 million, respectively, based on the grant date fair value. For the six months ended June 30, 2026 and 2025, the total fair value of options that vested was $1.2 million and $0.1 million, respectively, based on the grant date fair value.

The aggregate intrinsic values in the above table is calculated as the difference between the fair value of the Company’s common stock and the exercise price of the stock options. The aggregate intrinsic value of stock options exercised during the three months ended June 30, 2026 and 2025 was $0.1 million and $0.1 million, respectively. For the six months ended June 30, 2026 and 2025, the aggregate intrinsic value of stock options exercised was $6.5 million and $1.8 million, respectively, based on the grant date fair value.

The Company recorded stock-based compensation expense for stock options of $0.6 million and $0.3 million for the three months ended June 30, 2026 and 2025, respectively. The Company recorded stock-based compensation expense for stock options of $1.2 million and $0.4 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, there was $6.9 million of unrecognized compensation for unvested stock options and the weighted-average period over which this remaining compensation cost will be recognized is 2.6 years.

Restricted Stock Units

The Company did not have any RSUs granted or outstanding during the six months ended June 30, 2025.

The Company recorded stock-based compensation expense for RSUs of $1.1 million and $1.8 million for the three and six months ended June 30, 2026, respectively. As of June 30, 2026, there was $11.3 million of unrecognized compensation for unvested RSUs, and the weighted-average period over which this remaining compensation cost will be recognized is 2.5 years.

Performance Stock Units (RSUs with performance and/or market conditions)

During the six months ended June 30, 2025, the Company granted 112,478 PSUs to an employee that have a contractual term of four years and vest upon the satisfaction of performance, market, and service conditions. The performance conditions required either (1) the completion of an initial public offering where the Company’s stock is listed on an established stock exchange or (2) the occurrence of a corporate transaction, such as a merger, acquisition, or similar liquidity event. The market condition is based on the achievement of share price targets following the completion of an initial public offering or on the date of a corporate transaction. The service condition requires the employee to provide continued service through the achievement of both the performance and market conditions. The grant date fair value of such PSUs was determined using a Monte Carlo simulation methodology, which takes into consideration the probability of achievement of the market conditions.

Expense for the PSUs began on the grant date and is recognized over the derived requisite service period of the award. However, no compensation expense was recognized until the performance-based vesting condition was probable of being achieved. Accordingly, no compensation expense was recognized during the six months ended June 30, 2025 as the performance condition was not probable of being achieved. On July 24, 2025, the Company completed its IPO, satisfying the performance condition of the PSUs. Consequently, compensation expense has been recognized proportionally for the completed portion of the requisite service period up to the IPO. The remaining unrecognized expense will be amortized over the remaining derived requisite service period associated with the market condition, regardless of whether the market condition is ultimately satisfied.

During the six months ended June 30, 2026, the Company awarded PSUs under the 2025 Plan that vest based on the achievement of performance or market conditions, subject to continued service through the applicable vesting date. The PSUs are comprised of (i) Revenue-Based PSUs, which vest based on the achievement of specified annual revenue targets over stated performance periods and continued service, and (ii) TSR-Based PSUs, which vest based on the Company’s total shareholder return relative to the S&P Healthcare Equipment Select Industry Index over a three-year performance period ending December 31, 2028, with continued service required through January 1, 2029. Payouts for both the Revenue-Based PSUs and TSR-Based PSUs range from 0% to 200% of target depending on achievement of the applicable vesting conditions. The Revenue-Based PSUs are comprised of two equal tranches.

The first tranche of the Revenue-Based PSUs (“Tranche 1 Revenue-Based PSUs”) contains a performance condition based on specified revenue targets evaluated over a one year performance period from January 1, 2026 through December 31, 2026 and continued service through January 1, 2028. The second tranche of Revenue-Based PSUs (“Tranche 2 Revenue-Based PSUs”) contains a performance condition based on specified revenue targets evaluated over a one year performance period from January 1, 2027 through December 31, 2027 and continued service through January 1, 2029. Although the Tranche 2 Revenue-Based PSUs have been legally awarded, the performance measures have not yet been established and therefore are not considered granted from an accounting perspective. Accordingly, no compensation cost is recorded for the Tranche 2 Revenue-Based PSUs until such time the performance measures are established and the awards are considered granted from an accounting perspective.

The grant-date fair value of the Tranche 1 Revenue-Based PSUs is based on the underlying stock price on the grant date. The grant-date fair value of the TSR-Based PSUs was determined using a Monte Carlo simulation and was determined based on significant inputs not observable in the market, which represents a “Level 3” measurement within the fair value hierarchy. The significant inputs are listed below:

The Company recorded stock-based compensation expense for PSUs of $0.5 million and $0.8 million for the three and six months ended June 30, 2026, respectively. As of June 30, 2026, there was $3.7 million of unrecognized compensation for unvested PSUs, and the weighted-average period over which this remaining compensation cost will be recognized is 2.1 years.

Employee Stock Purchase Plan

In July 2025, the Company’s Board of Directors adopted, and its stockholders approved, the 2025 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to, and contingent upon, the effectiveness of the Company's initial public offering (“IPO”) on July 22, 2025. The ESPP enables eligible employees to purchase shares of the Company's common stock at a discount through accumulated payroll deductions.

A total of 398,749 shares of common stock were initially reserved for issuance under the ESPP. The number of shares reserved for issuance will increase automatically on January 1 of each year, for a period of up to ten years, with such period having commenced on January 1, 2026 and ending on (and including) January 1, 2035, by a number of shares equal to 1% of the total number of shares of capital stock outstanding on December 31 of the immediately preceding calendar year, unless the Board of Directors acts prior to the first day of a given calendar year to provide that there will be no increase, or a lesser increase, for such year. Pursuant to this provision, the number of shares reserved for issuance under the ESPP increased by 266,642 shares on January 1, 2026.

Under the ESPP, eligible employees may elect to contribute up to 15% of their eligible earnings to purchase shares of common stock during each offering period. The purchase price per share is equal to 85% of the lesser of the fair market value of the Company's common stock on the first trading day of the offering period and the fair market value on the applicable purchase date.

The Company's first offering period under the ESPP was a three‑month period that commenced on April 1, 2026 and ended on June 30, 2026, with a single purchase date on June 30, 2026.

The Company accounts for the ESPP as a compensatory plan under ASC 718, Compensation — Stock Compensation. The fair value of the purchase rights granted under the ESPP is estimated on the offering date using the Black‑Scholes option‑pricing model, and the related stock‑based compensation expense is recognized on a straight‑line basis over the offering period. The following weighted‑average assumptions were used to estimate the fair value of purchase rights granted during the offering period that commenced on April 1, 2026:

During the three and six months ended June 30, 2026, the Company recognized stock‑based compensation expense related to the ESPP of $0.1 million. On June 30, 2026, 25,278 shares of common stock were purchased and issued under the ESPP at a weighted‑average purchase price of $8.19 per share. Accumulated employee payroll contributions of $0.2 million were applied to the purchase of these shares and reclassified to additional paid‑in capital upon issuance; accordingly, no material ESPP‑related payroll deduction liability remained outstanding as of June 30, 2026. As of June 30, 2026, 640,113 shares remained available for issuance under the ESPP. Because the offering period ended on the June 30, 2026 purchase date, there was no unrecognized ESPP‑related stock‑based compensation expense as of that date.