si-20260630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026


o			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 001-42771

_________________________

Shoulder Innovations, Inc.

(Exact name of registrant as specified in its charter)

_________________________


Delaware			27-0538764
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1535 Steele Avenue SW, Suite B Grand Rapids, Michigan			49507
(Address of Principal Executive Offices)			(Zip Code)

(616) 294-1026

Registrant’s telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SI	The New York Stock Exchange

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 x No o

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).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 Act).

Yes o No x

As of July 30, 2026, there were 20,818,957 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

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			Page

Special Note Regarding Forward-Looking Statements			3

Part I - Financial Information
Item 1. Financial Statements (unaudited)			5
Condensed Balance Sheets			5
Condensed Statements of Operations and Comprehensive Loss			6
Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)			7
Condensed Statements of Cash Flows			8
Notes to the Unaudited Condensed Financial Statements			9
Item 2. Management ’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			28
Item 4. Controls and Procedures			28

Part II - Other Information
Item 1. Legal Proceedings			30
Item 1A. Risk Factors			30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			30
Item 3. Defaults Upon Senior Securities			30
Item 4. Mine Safety Disclosures			30
Item 5. Other Information			31
Item 6. Exhibits			31
Signatures			33

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (this “Quarterly Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including but not limited to statements regarding our future results of operations and financial condition, our business plans and strategy, the potential market size, market trends and growth opportunities for our products, macroeconomic and geopolitical conditions, and the sufficiency of our cash balances, working capital and cash generated from our operations, investing and financing activities for future liquidity and capital resource needs, may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important 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 the forward-looking statements, including, but not limited to, the important factors discussed in Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K dated December 31, 2025, filed with the SEC on March 10, 2026 (the “2025 Annual Report”). The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.

As used in this Quarterly Report, unless otherwise stated or the context requires otherwise, the terms “Shoulder Innovations,” the “Company,” “we,” “us,” and “our” refer to Shoulder Innovations, Inc. “Shoulder Innovations,” the Shoulder Innovations logos, and other trade names, trademarks, or service marks of Shoulder Innovations appearing in this Quarterly Report are the property of Shoulder Innovations. Other trade names, trademarks, or service marks appearing in this Quarterly Report are the property of their respective holders. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us, by these other companies. Solely for convenience, trade names, trademarks, and service marks referred to in this Quarterly Report appear without the ®, ™, and SM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trade names, trademarks, and service marks.

We routinely post important information for investors in the “Investors” section of our website, shoulderinnovations.com. We may use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the “Investors” section of our website, in addition to following our press releases, filings with the SEC, public conference calls,

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presentations, and webcasts. The information contained on, or that may be accessed through, our website, is not incorporated by reference into, and is not a part of, this Quarterly Report.

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Shoulder Innovations, Inc.

Condensed Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

Part I. Financial Information

Item 1. Financial Statements


	June 30, 2026		December 31, 2025

Assets
Current assets
Cash and cash equivalents	$	24,460	$	26,871
Marketable securities	74,533		97,434
Trade accounts receivable, net of allowance for credit losses	10,873		8,268
Inventories, net	22,920		21,591
Prepaid expenses	2,329		1,518
Other current assets	2,292		1,483
Total current assets	137,407		157,165
Property and equipment, net	14,498		12,532
Operating lease right-of-use asset	69		110
Other assets	33		—
Intangible assets, net	—		100
Total assets	$	152,007	$	169,907
Liabilities, convertible preferred stock, and stockholders’ equity
Current liabilities
Accounts payable ($1,378 and $1,220 to related parties, respectively)	$	5,931	$	8,874
Current operating lease obligations	37		62
Accrued liabilities ($0 and $575 to related parties, respectively)	6,864		5,259
Total current liabilities	12,832		14,195
Long-term liabilities

Long-term debt	14,813		14,911
Other long-term liabilities	34		51
Total long-term liabilities	14,847		14,962
Total liabilities	$	27,679	$	29,157
Commitments and contingencies (note 8)
Stockholders’ equity
Common stock, $0.001 par value, 730,000,000 shares authorized and 20,822,472 and 20,623,457 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively	$	21	$	21
Preferred stock, $0.001 par value, 20,000,000 shares authorized and no shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively	—		—
Additional paid-in capital	240,343		238,012
Accumulated deficit	(115,932)		(97,400)
Accumulated other comprehensive income (loss)	(104)		117
Total stockholders’ equity	124,328		140,750
Total liabilities, convertible preferred stock, and stockholders’ equity	$	152,007	$	169,907

See accompanying notes to unaudited condensed financial statements.

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Shoulder Innovations, Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended				Six Months Ended
	June 30, 2026		June 30, 2025		June 30, 2026		June 30, 2025
Net revenue	$	17,175	$	11,013	$	33,883	$	21,145
Cost of goods sold	3,734		2,620		7,456		4,961
Gross profit	13,441		8,393		26,427		16,184
Selling, general and administrative expenses (includes $862, $887, $2,101 and $1,736 to related parties, respectively)	20,086		12,849		38,294		23,351
Research and development expenses (includes $2,645, $1,060, $5,710 and $2,295 to related parties, respectively)	3,391		1,406		7,145		2,989
Operating loss	(10,036)		(5,862)		(19,012)		(10,156)
Other (income) expense
Interest (income) expense, net	(673)		216		(1,109)		583

Change in fair value of Series E purchase option	—		11,719		—		11,719
Loss on extinguishment of debt	589		—		589		—
Other expense, net	201		1,399		40		1,400
Total other (income) expense	117		13,334		(480)		13,702
Loss before income tax expense	(10,153)		(19,196)		(18,532)		(23,858)
Income tax expense	—		—		—		—
Net loss	$	(10,153)	$	(19,196)	$	(18,532)	$	(23,858)

Other comprehensive loss, net
Unrealized gain (loss) on marketable securities	(40)		1		(221)		(115)
Total other comprehensive gain (loss), net	(40)		1		(221)		(115)
Comprehensive loss	$	(10,193)	$	(19,195)	$	(18,753)	$	(23,973)

Net loss per share attributed to common stock – basic and diluted:
Net loss per share	$	(0.49)	$	(165.53)	$	(0.90)	$	(232.13)
Weighted average shares outstanding
Weighted average common shares outstanding – basic and diluted	20,735,694		115,965		20,694,593		102,775

See accompanying notes to unaudited condensed financial statements.

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Shoulder Innovations, Inc.

Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except shares and per share amounts)


	Preferred Stock		Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
			Shares	Amount
Balance, December 31, 2024	$	74,475	83,882	$	1	$	2,148	$	197	$	(57,041)	$	(54,695)
Issuance of preferred stock in private placement, net of issuance cost of $352	19,542		—	—		—		—		—		—
Exercise of preferred stock warrant	130		—	—		—		—		—		—
Issuance of common stock	—		18,903	—		32		—		—		32
Stock-based compensation expense	—		—	—		127		—		—		127
Net loss	—		—	—		—		—		(4,662)		(4,662)
Other comprehensive loss, net	—		—	—		—		(116)		—		(116)
Balance, March 31, 2025	$	94,147	102,785	$	1	$	2,307	$	81	$	(61,703)	$	(59,314)
Issuance of preferred stock in private placement, net of issuance cost of $52	$	31,903	—	$	—	$	—	$	—	$	—	$	—
Exercise of preferred stock warrant	650		—	—		—		—		—		—
Issuance of common stock	—		46,018	—		119		—		—		119
Stock-based compensation expense	—		—	—		190		—		—		190
Net Loss	—		—	—		—		—		(19,196)		(19,196)
Other Comprehensive income, net	—		—	—		—		1		—		1
Balance, June 30, 2025	$	126,700	148,803	$	1	$	2,616	$	82	$	(80,899)	$	(78,200)











Balance, December 31, 2025	$	—	20,623,457	$	21	$	238,012	$	117	$	(97,400)	$	140,750
Issuance of common stock	—		79,702	—		101		—		—		101
Stock-based compensation expense	—		—	—		726		—		—		726
Net loss	—		—	—		—		—		(8,379)		(8,379)
Other comprehensive loss, net	—		—	—		—		(181)		—		(181)
Balance, March 31, 2026	$	—	20,703,159	$	21	$	238,839	$	(64)	$	(105,779)	$	133,017
Issuance of common stock	—		119,313	—		423		—		—		423
Stock-based compensation expense	—		—	—		1,081		—		—		1,081
Net Loss	—		—	—		—		—		(10,153)		(10,153)
Other Comprehensive loss, net	—		—	—		—		(40)		—		(40)
Balance, June 30, 2026	$	—	20,822,472	$	21	$	240,343	$	(104)	$	(115,932)	$	124,328

See accompanying notes to unaudited condensed financial statements.

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Shoulder Innovations, Inc.

Condensed Statements of Cash Flows

(Unaudited)

(amounts in thousands)


	Six Months Ended
	June 30, 2026		June 30, 2025
Cash flows from operating activities
Net loss	$	(18,532)	$	(23,858)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	2,265		1,385
Amortization of debt discounts	100		126


Stock-based compensation expense	1,807		317
Realized (gain) loss on marketable securities	40		(207)
Change in fair value of warrant liabilities and Series E purchase option	—		13,134

Loss on extinguishment of debt	589		—
Other	292		99
Change in operating assets and liabilities
Trade accounts receivable	(2,857)		(1,820)
Inventory	(1,329)		(3,126)
Prepaid expenses	(811)		(260)
Accounts payable	(2,222)		982
Other current assets and liabilities	908		1,954
Net cash used in operating activities	(19,750)		(11,274)
Cash flows from investing activities
Fixed asset purchases	(4,892)		(2,311)
Purchases of marketable securities	(18,170)		(20,477)
Sales of marketable securities	40,384		16,909
Net cash provided by (used in) investing activities	17,322		(5,879)
Cash flows from financing activities
Proceeds from exercise of common stock options	524		151
Proceeds from exercise of preferred stock warrants	—		362
Proceeds from Series E convertible preferred stock, net of issuance cost	—		39,553

Payments of long-term debt	(15,000)		—
Proceeds from debt issuance	15,000		—
Payments of debt issuance and extinguishment costs	(507)		—
Payment of deferred IPO offering costs	—		(1,982)
Net cash provided by financing activities	17		38,084
Net change in cash for period	(2,411)		20,931
Cash and cash equivalents, beginning of period	26,871		6,123
Cash and cash equivalents, end of period	$	24,460	$	27,054
Supplemental cash flows information
Cash paid for interest	$	1,257	$	863
Non-cash investing and financing activities
Series E convertible preferred stock issuance cost in other current liabilities	$	—	$	45
Series E second tranche right equity conversion	—		11,937
Preferred stock warrant liability equity conversion	—		418



Unpaid IPO offering costs included in accounts payable and accrued liabilities	—		1,835
Fixed asset purchases included in accounts payable	$	379	$	441

See accompanying notes to unaudited condensed financial statements.

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Shoulder Innovations, Inc.

Notes to the Unaudited Condensed Financial Statements

(in thousands, except share, per share data and percentages)

1. Summary of Significant Accounting Policies

Business Activity

Shoulder Innovations, Inc. (the “Company”) is principally involved in developing next generation shoulder replacement implants, utilizing contract manufacturing partners, and distributing them nationwide for surgeries through a network of employed and contracted sales representatives. The Company is headquartered in Grand Rapids, Michigan and markets and sells its products throughout the United States.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Certain information and note disclosures included in the Company’s audited annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed financial statements should be read in conjunction with the audited annual financial statements for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K dated December 31, 2025, filed with the SEC on March 10, 2026. There have been no material changes in our significant accounting policies as described in our audited annual financial statements for the year ended December 31, 2025. In the opinion of management, these unaudited condensed financial statements reflect all adjustments, including those of a normal and recurring nature, which are necessary for a fair presentation of the results for the interim period presented.

Reverse Stock Split

On July 23, 2025, the Company amended its amended and restated certificate of incorporation to effect a reverse stock split of shares of the Company’s common stock on a 1-for-19.08 basis (the “Reverse Stock Split”). The common stock warrants and options to purchase common stock were subsequently adjusted as a result of the Reverse Stock Split. All impacted share and per-share information included in these unaudited condensed financial statements and notes thereto have been retroactively adjusted to give effect to the Reverse Stock Split.

Initial Public Offering

On August 1, 2025, the Company closed its initial public offering (“IPO”), and issued 5,000,000 shares of common stock at public offering price of $15.00 per share. The Company received net proceeds of approximately $64,212, after deducting underwriting discounts and commissions and offering expenses. Immediately prior to the closing of the IPO, all outstanding shares of convertible preferred stock and $40,000 in aggregate principal amount of convertible notes converted into 15,176,862 shares of common stock. In connection with the closing of the IPO, on August 1, 2025, the Company amended and restated its certificate of incorporation to authorize the issuance of up to 730,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.

New Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The update requires all public business entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold and an explanation, if not otherwise evident, of the individual reconciling items disclosed, such as the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items. In addition, the update requires certain new disclosures of the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid (net of refunds received). Other new disclosures required include income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The new guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments are to be applied on a prospective basis, with retrospective application permitted. As an emerging growth company that has not opted out of the extended transition period for complying with new or revised financial accounting

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Shoulder Innovations, Inc.

Notes to the Unaudited Condensed Financial Statements

(in thousands, except share, per share data and percentages)

standards, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2025. The Company is currently evaluating the impact of the new standard on its financial statements and related 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, which requires additional, disaggregated disclosure around certain income statement expense line items. This ASU mandates that entities, at each interim and annual period, disclose the amounts of (a) inventory purchases, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depletion, depreciation, and amortization for oil and gas activities included within each relevant expense caption presented on the income statement within continuing operations. Entities are also required to (1) combine certain disclosures already mandated under GAAP with these new requirements, (2) provide qualitative descriptions of expenses that are not disaggregated quantitatively, and (3) disclose total selling expenses and, annually, the definition of selling expenses. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.

2. Fair Value Measurements

The fair value of marketable securities as of June 30, 2026 and December 31, 2025 are summarized below:


	June 30, 2026
	Level 1		Level 2		Level 3
Assets:
Cash Equivalents
Money market funds	$	9,659	$	—	$	—
Short-term marketable securities at fair value
U.S. treasury and government agencies	55,469		—		—
Corporate and international bonds	—		19,064		—
Total	$	65,128	$	19,064	$	—


	December 31, 2025
	Level 1		Level 2		Level 3
Assets:
Cash Equivalents
Money market funds	$	11,799	$	—	$	—
Short-term marketable securities at fair value
U.S. treasury and government agencies	76,678		—		—
Corporate and international bonds	—		20,756		—
Total	$	88,477	$	20,756	$	—

Liabilities related to preferred stock warrants and the Series E purchase option are remeasured at fair value on a recurring basis using the Black-Scholes option pricing model. The following table presents the change in fair value of the preferred stock warrants and the Series E purchase option which are classified in Level 3 of the fair value hierarchy for the six months ended June 30, 2025:

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Shoulder Innovations, Inc.

Notes to the Unaudited Condensed Financial Statements

(in thousands, except share, per share data and percentages)


	June 30, 2025
	Preferred stock warrant liability		Series E purchase option
Balance, January 1, 2025	$	970	$	—
Additions	—		218
Change in fair value	1,415		11,719
Exercises	(418)		(11,937)

Balance, June 30, 2025	$	1,967	$	—

The preferred stock warrants and the Series E purchase option were valued under the Black-Scholes option pricing model, which considers the estimated volatility of the Company’s equity at the date of measurement based on selected metrics of applicable volatility calculations from guideline public companies. The remeasurement of the convertible preferred stock warrant liability resulted in $1,415 being recognized as other expense, net for the six months ended June 30, 2025. The remeasurement of the Series E purchase option resulted in $11,719 recognized as an increase in fair value of Series E purchase option for the six months ended June 30, 2025.

The fair value of the preferred stock warrants were estimated as of June 30, 2025 using the following weighted average assumptions:


Description	June 30, 2025
Weighted average volatility	55.00	%
Weighted average risk-free rate	3.79	%
Expected dividend yield	—	%

3. Accrued Liabilities

Accrued liabilities consist of the following:


	June 30, 2026		December 31, 2025
Commissions payable	$	1,893	$	1,401
Accrued legal fees	393		236
Accrued payroll	3,362		1,776
Accrued royalties	698		1,074
Other	518		772
Accrued liabilities	$	6,864	$	5,259

4. Related Party Transactions

On October 22, 2020, the Company entered into a software license agreement with Genesis Software Innovations, LLC (“Genesis Software”), which was amended and restated on January 1, 2023, and subsequently amended on June 10, 2025 (the “License Agreement”). Robert Ball, the Company’s Chief Executive Officer and Executive Chairman, is a co-founder and director of Genesis Software. Mr. Ball and Matthew Ahearn, the Company’s Chief Operating Officer and a director, are directors of Genesis Investment Holdings, LLC, which has an ownership interest in Genesis Software. The License Agreement has a 5-year term and required an upfront payment of $1,000, an incremental $500 payment when Food and Drug Administration clearance was obtained, and quarterly payments of royalties equal to 4% of the net sales price of each licensed product sold, until such time we have paid Genesis Software an aggregate of $7,000 under the License Agreement. As of June 30, 2026, the Company has made all payments under the License Agreement and has no future payment obligations pursuant to the agreement. For the three and six months ended June 30, 2026, the Company paid Genesis Software $666 and $1,241, respectively, pursuant to the License Agreement. For the three and six months ended

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Shoulder Innovations, Inc.

Notes to the Unaudited Condensed Financial Statements

(in thousands, except share, per share data and percentages)

June 30, 2025, the Company paid Genesis Software $398 and $741, respectively, pursuant to the License Agreement. Amounts owed under the agreement of $0 and $575 are included in accrued liabilities on the condensed balance sheets at June 30, 2026, and December 31, 2025, respectively.

For the three and six months ended June 30, 2026, the Company paid $1,994 and $4,330, respectively, for software development to Genesis Software. For the three and six months ended June 30, 2025, the Company paid $453 and $1,024, respectively for software development to Genesis Software. Amounts payable of $982 and $863 are included in accounts payable on the condensed balance sheets at June 30, 2026 and December 31, 2025, respectively.

The Company has entered into a consulting agreement with Genesis Innovation Group, an entity under common ownership. The consulting agreement is currently on a year-to-year basis. The agreement requires compensation for services performed. If services performed are on an hourly basis, the Company shall be responsible to pay for hours actually worked by the consultant’s employees. The Company will reimburse the consultant for all reasonable expenses incurred in connection with performing services for the Company. For the three and six months ended June 30, 2026, the Company paid Genesis Innovation Group $1,261 and $2,399, respectively. For the three and six months ended June 30, 2025, the Company paid Genesis Innovation Group $1,060 and $2,295, respectively. Amounts payable of $396 and $357 are included in accounts payable on the condensed balance sheets at June 30, 2026 and December 31, 2025, respectively.

5. Convertible Preferred Stock

On March 6, 2025, the Company entered into a Series E Preferred Stock Purchase Agreement pursuant to a Series E Preferred Stock financing, whereby it received a total commitment amount of $40,130 for the issuance and sale of 58,774,332 shares of Series E Preferred Stock pursuant to two separate closing tranches, the first of which closed on March 6, 2025, whereby the Company issued 29,455,169 shares of Series E preferred stock resulting in total gross proceeds to the Company of $20,111.

In June 2025 the Company called the second tranche of its Series E Preferred Stock for the issuance of 29,319,143 shares of Series E Preferred Stock resulting in gross proceeds to the Company of $20,019. The Company recognized the change in value of the Series E purchase option in the other expense, net caption in its condensed statements of operations and comprehensive loss.

On March 4, 2025, Genesis Investment Holdings, LLC exercised 988,999 Series Seed warrants resulting in proceeds of $83.

For the three and six months ended June 30, 2025, 625,000 and 750,000 Series B warrants were exercised, resulting in proceeds of $232 and $279, respectively.

Immediately prior to the closing of the Company’s IPO on August 1, 2025, all shares of the Company’s redeemable convertible preferred stock converted into shares of the Company’s common stock.

6. Loss Per Share

Basic net loss per share is computed by dividing the net loss after tax attributable to common stockholders by the weighted average shares outstanding during the period. Diluted net loss per share is computed by including potentially dilutive securities outstanding during the period in the calculation of weighted average shares outstanding. The Company did not have any dilutive securities during the periods presented; therefore, diluted net loss per share is equal to basic net loss per share.

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Shoulder Innovations, Inc.

Notes to the Unaudited Condensed Financial Statements

(in thousands, except share, per share data and percentages)

Presented in the table below is a reconciliation of the numerator and denominator for the basic and diluted net loss per share calculations for the three and six months ended June 30, 2026 and 2025 (in thousands, except par value, share and per share amounts):


	Three Months Ended				Six Months Ended
	June 30, 2026		June 30, 2025		June 30, 2026		June 30, 2025
Net loss	$	(10,153)	$	(19,196)	$	(18,532)	$	(23,858)
Basic and diluted weighted average shares outstanding	20,735,694		115,965		20,694,593		102,775
Net loss attributable to common shareholders, basic and diluted	$	(0.49)	$	(165.53)	$	(0.90)	$	(232.13)

The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive:


	June 30, 2026	June 30, 2025
Series Seed	—	882,620
Series A	—	1,173,971
Series B	—	349,264
Series C	—	2,626,639
Series D	—	4,240,522
Series E	—	3,080,414
Common options	2,613,353	1,716,821
Common warrants	43,578	17,827
Restricted stock units	25,230	—
Series Seed warrants	—	—
Series B warrants	—	13,102
Series D warrants	—	130,736
Total	2,682,161	14,231,916

7. Segment Information

The Company reports segment information based on how the Company’s chief operating decision maker (“CODM”), who is the Chief Executive Officer, regularly reviews operating results, allocates resources and makes decisions regarding business operations. The Company’s business structure is comprised of one operating and reportable segment. The CODM uses segment gross margin and net loss for determining the allocation of resources, including employees, financial, or capital resources, to the segment to achieve the Company’s strategic plan and to assess the performance of the segment by monitoring actual results against performance targets established in the Company’s annual budget and forecasting process.

All revenue for the three and six months ended June 30, 2026 and 2025 was generated from customers located in the United States. No customers represent 10% or more of the Company’s net revenue for the three and six months ended June 30, 2026 and 2025. The measure of segment assets is reported on the condensed balance sheets as total assets.

The table below is a summary of the segment net loss and total net loss, including significant segment expenses (in thousands):

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Shoulder Innovations, Inc.

Notes to the Unaudited Condensed Financial Statements

(in thousands, except share, per share data and percentages)


	Three Months Ended				Six Months Ended
	June 30, 2026		June 30, 2025		June 30, 2026		June 30, 2025
Net revenue	$	17,175	$	11,013	$	33,883	$	21,145
Cost of goods sold	3,734		2,620		7,456		4,961
Gross profit	13,441		8,393		26,427		16,184
Operating expenses:
General and administrative	8,936		5,820		17,561		11,033
Sales and marketing	9,347		5,449		17,623		10,182
Medical education	1,803		1,580		3,110		2,136
Research and development	3,391		1,406		7,145