6. Stock-Based Compensation

In September 2019, the Company adopted the Carlsmed, Inc. 2019 Stock Incentive Plan, which was subsequently amended, most recently in January 2025 (the “2019 Plan”). The 2019 Plan is administered by the Company’s board of directors (the “Board of Directors”). On July 10, 2025, the Board of Directors adopted, and the Company’s stockholders approved, the Carlsmed, Inc. 2025 Equity Incentive Plan (the “2025 Plan”), which became effective on July 21, 2025. The 2025 Plan replaced the 2019 Plan, as the Board of Directors determined to not make additional grants under the 2019 Plan following the closing of the IPO. However, the 2019 Plan will continue to govern outstanding equity awards granted under the 2019 Plan. The 2025 Plan allows the Company to grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other awards. The number of shares initially available for issuance under awards granted pursuant to the 2025 Plan was 3,595,177. As of December 31, 2025, there were 2,573,538 shares available for issuance pursuant to the 2025 Plan.

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

The Company also grants stock option awards to non-employees, including members of the Board of Directors. Options granted under the 2025 Plan and the 2019 Plan may be subject to vesting acceleration in connection with a “Change in Control” or “Corporate Transaction,” as defined in the respective plans.

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 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 Financial Statements. As of December 31, 2025, 59,738 shares of early exercised stock options were outstanding, representing an early exercise liability of $0.1 million. As of December 31, 2024, 95,579 shares of early exercised stock options were outstanding, representing an early exercise liability of $0.1 million.

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

Stock Options

The following summarizes stock option activity for the Company for the year ended December 31, 2025:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2024		1,785,633		$	1.01		7.5	$	5,938
Granted		1,840,346			9.88
Exercised		(458,530	)		0.44
Forfeited		(15,662	)		4.49
Outstanding at December 31, 2025		3,151,787		$	6.26		8.3	$	21,526
Vested and Exercisable at December 31, 2025		1,184,224		$	2.04		6.5	$	11,676

The weighted average grant date fair value of options granted during the years ended December 31, 2025 and 2024 was $4.77 and $2.57 per share, respectively. The total fair value of options that vested during the years ended December 31, 2025 and 2024 was $1.3 million and $0.2 million, respectively, based on the grant date fair value.

The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company’s common stock price and the exercise price of the stock options. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2025 and 2024 was $1.9 million and $0.2 million, respectively.

The Company recorded stock-based compensation expense for stock options of $1.6 million and $0.3 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, there was $8.5 million of unrecognized compensation for unvested stock options and the weighted-average period over which this remaining compensation cost will be recognized is 3.0 years.

The grant date fair value of the options is determined using an option pricing model. The assumptions that were used in estimating the grant date fair value of stock options under the option pricing method for the years ended December 31, 2025 and 2024 were as follows:


	Year Ended December 31,
	2025			2024
Expected stock price volatility (1)		44.0	%		45.4	%
Risk-free interest rate (2)		4.16	%		4.32	%
Expected annual dividend yield (3)		0.0	%		0.0	%
Expected term (years) (4)		6.01			5.97

(1)

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

(2)

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

(3)

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

(4)

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

Restricted Stock Units

The Company did not have any RSUs granted or outstanding during the year ended December 31, 2024.

The following summarizes RSU activity, excluding PSUs (defined below), for the Company for the year ended December 31, 2025:


	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested - December 31, 2024		—	$	—
Granted		69,332		15.00
Vested		—
Forfeited		—
Non-vested - December 31, 2025		69,332	$	15.00

The Company recorded stock-based compensation expense for RSUs, excluding PSUs, of $0.2 million for the year ended December 31, 2025. As of December 31, 2025, there was $0.9 million of unrecognized compensation for unvested RSUs, excluding PSUs, and the weighted-average period over which this remaining compensation cost will be recognized is 2.6 years.

Performance Restricted Stock Units

During the year ended December 31, 2025, the Company granted 112,478 RSUs to an employee that have a contractual term of four years and vest upon the satisfaction of performance, market, and service conditions (“PSUs”). The performance conditions require either (1) the completion of an initial public offering where the Company’s stock is listed on an established stock exchange or (2) the occurrence of a corporate transaction, such as a merger, acquisition, or similar liquidity event. The market condition is based on the achievement of share price targets following the completion of an initial public offering or on the date of a corporate transaction. The service condition requires the employee to provide continued service through the achievement of both the performance and market conditions. The grant date fair value of such PSUs of $3.14 per PSU 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. 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.

The Company recorded stock-based compensation expense for PSUs of $0.1 million for the year ended December 31, 2025. As of December 31, 2025, there was $0.2 million of unrecognized compensation for unvested PSUs and the weighted-average period over which this remaining compensation cost will be recognized is 1.5 years.

Stock-based Compensation Cost

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


	Year Ended December 31,
(in thousands)	2025		2024
General and administrative	$	904	$	126
Research and development		616		68
Sales and marketing		407		59
Total	$	1,927	$	253

CARLSMED, INC. 10-K