CARLSMED, INC. Debt Disclosure

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 December 2026 that provided $12.5 million of available principal. The Customers Loan Agreement required the Company to pay a tiered cash-based “Success Fee” upon a defined Liquidity Event that was eliminated in March 2024 in connection with the Third Amendment, as discussed below.

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

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

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

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

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

As part of the Fourth Amendment, the Company partially modified the aggregate 58,420 Series B Warrant issued with the Third Amendment, reducing the number of shares exercisable subject to remaining future draws of the credit facility as of the date of the Fourth Amendment from 11,289 shares to 5,644, with the remaining 5,644 shares becoming exercisable ratably with subsequent debt draws. Additionally, the expiration date for the Series B Warrant was extended to December 30, 2034. The modification of the Series B Warrant upon the Fourth Amendment resulted in an immaterial increase in the warrant liability.

Additionally, as part of the Fourth Amendment, the Company issued a new warrant that was exercisable into the Company’s Series C convertible preferred stock (“Series C Warrant”), subject to certain revenue and debt draw milestones. The Series C Warrant was exercisable for up to 20,375 shares at an exercise price of $10.74 per share and expires on December 30, 2034. Upon issuance, the Series C Warrant was immediately exercisable into 5,093 shares with the remaining 15,282 additional shares becoming exercisable upon the required achievement of certain revenue milestones and/or draws of this expanded credit facility. During the year ended December 31, 2025, the Company achieved the revenue milestone, causing the Series C Warrant to be exercisable into an additional 5,095 shares.

In connection with the close of the Company's IPO on July 24, 2025, all of the outstanding shares of convertible preferred stock were converted into common stock. As a result, the warrants to purchase convertible preferred stock are now exercisable into common stock. Refer to Note 2 for additional information regarding the reclassification of certain warrants from liability classified to equity classified during the year ended December 31, 2025.

On October, 29, 2025, the Company amended the Customers Loan Agreement (the “Fifth Amendment”) to expand their 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 at no time shall the aggregate amount advanced under the Term Loan and the Non-Formula Revolving Line exceed $50.0 million.

The maturity date of the Term Loan was extended to October 15, 2030, with an interest-only period through October 15, 2027, followed by principal repayment over 36 months thereafter. Upon achievement of a certain revenue milestone, the interest-only period and repayment terms of the Term Loan may be extended through April 15, 2028 followed by principal repayment over 30 months, and upon achievement of an additional milestone, may be further extended through October 15, 2028, followed by principal repayment over 24 months thereafter. The Non-Formula Revolving Line will mature on October 15, 2028. The applicable per annum interest rate did not change as a result of the Fifth Amendment and remains as the greater of (a) WSJ Prime Rate + 0.25% or (b) 5.25%, and was 7.00% as of December 31, 2025.

In connection with the Fifth Amendment, the Company partially amended the Series B Warrant, reducing the number of shares of common stock exercisable subject to future draws under the Customers Loan Agreement as of the date of the Fifth Amendment from 58,420 to 52,776 (the “Amended Series B Warrant”). In addition, the Company partially amended the Series C Warrant, reducing the number of shares of common stock exercisable subject to future draws under the Customers Loan Agreement as of the date of the Fifth Amendment from 20,375 to 10,188 (the “Amended Series C Warrant” and, together with the Amended Series B Warrant, the “Amended Warrants”). As a result of the Amended Warrants, Customers Bank's contingent rights to exercise the Warrants for an aggregate of 15,831 shares of common stock were canceled. As of December 31, 2025, the Series B and Series C Warrants are exercisable for 52,776 and 10,188 shares of the common stock, respectively.

On December 23, 2025, the Company amended the Customers Loan Agreement (the “Sixth Amendment”) to permit the Company to maintain certain limited deposit accounts outside of Customers Bank. No other terms of the Customers Loan Agreement were affected by the Sixth Amendment.

Each of the Third, Fourth, Fifth, and Sixth Amendments 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 December 31, 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.

As of December 31, 2025, $15.6 million of principal was outstanding under the Term Loan that is set to mature on October 15, 2030 and there were no borrowings outstanding under the Non-Formula Revolving Line. As of December 31, 2025, an aggregate $26.9 million remained available for borrowing under the Term Loan and the Non-Formula Revolving Line, net of amounts outstanding of $15.6 million . The Company was in compliance with all applicable Customers Loan Agreement covenants.

Interest expense on the Customers Loan Agreement was $1.4 million and $1.3 million for the years ended December 31, 2025 and 2024, respectively. Of these amounts, $0.2 million was related to amortization of the debt discount and issuance costs for both the years ended December 31, 2025 and 2024. The effective interest rate was 7.60% as of December 31, 2025.