CapsoVision 提交 2026 年第一季 10-Q 報告：虧損擴大，私募注資 1,400 萬美元

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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 March 31, 2026
OR

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

For the transition period from ____________ and ____________
Commission file number 001-42705
_________________________
CAPSOVISION, INC.
(Exact name of registrant as specified in its charter)
_________________________

Delaware
20-3369494
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

18805 Cox Avenue, Suite 250
95070
Saratoga, CA

(Address of Principal Executive Offices)(Zip Code)

(408) 624 1488
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
common stock, $0.001 par value per share CVThe Nasdaq Stock Market LLC

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 fileroAccelerated filero

Non-accelerated filerxSmaller reporting companyx

Emerging growth companyx

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.
o
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 May 12, 2026, the registrant had 49,963,586 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

Page(s)
Part I - Financial Information
1

Item 1. Financial Statements (unaudited)
1

Condensed Balance Sheets as of March 31, 2026 and December 31, 20251
Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2026 and 20252
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2026 and 20253
Condensed Statements of Cash Flows for the three months ended March 31, 2026 and 20254
Notes to Condensed Financial Statements5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
25

Item 3. Quantitative and Qualitative Disclosures About Market Risk
36

Item 4. Controls and Procedures
36

Part II - Other Information
39

Item 1. Legal Proceedings
39

Item 1A. Risk Factors
39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
86

Item 3. Defaults Upon Senior Securities
86

Item 4. Mine Safety Disclosures
86

Item 5. Other Information
86

Item 6. Exhibits
87

Signatures
88

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance, including: our financial performance and projections; our growth in revenue and earnings; and our business prospects and opportunities. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “hopes” or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including: our ability to change the direction of the Company; our ability to keep pace with new technology and changing market needs; and the competitive environment of our business. These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. The forward-looking events discussed in this Quarterly Report on Form 10-Q may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. We are not obligated to publicly update or revise any forward-looking statement, whether as a result of uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report on Form 10-Q might not occur.
While we believe we have identified material risks, these risks and uncertainties are not exhaustive. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, 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.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations, and we do not intend to do so.
Forward-looking statements include, but are not limited to, statements about:
•our expectations regarding the acceptance of our products by patients and doctors;
•our expectations regarding the potential market size for our current CapsoCam Plus capsule and CapsoCam Colon (once FDA cleared) and those markets that we may pursue;
•our plans to increase small bowel capsule sales following recent 510(k) clearance for pediatric use and telehealth supervision and related products currently under development;
•our expected timing and enrollment size of the second arm pivotal study of our second-generation of CapsoCam Colon capsule and our expected timing for submission of 510(k) application for our second-generation of CapsoCam Colon capsule;
•our expected receipt of and related timing for FDA 510(k) clearance of our CapsoCam Colon capsule and related sales;
•our expected timing and enrollment size of our study CapsoCam UGI system and our expected resubmission of the Breakthrough Device Designation application following the study;
ii

•our plans and efforts to expand into new indications in terms of new GI pathologies and expanded patient populations;
•our plans and efforts to introduce enhancements and improvements to our products and technologies, including the AI capabilities incorporated into our products;
•our commercialization capabilities and strategies, including our plans to increase revenues and sales capabilities in and outside the United States (the “U.S.”);
•the implementation of our strategic plan for our business and products and technology;
•our relationships with, and capabilities of, our assembly manufacturers and component suppliers;
•the protection of our intellectual property (including our AI capabilities) including through patents and trade secret protections;
•the expected performance of our products;
•our ability to manage our growth;
•the anticipated use of proceeds from this offering;
•our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) or smaller reporting company under U.S. securities laws;
•estimates of our expenses, future revenue, capital requirements, our needs for additional financing, and our ability to obtain additional capital;
•our ability to continue as a going concern; and
•our future financial performance.
We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q in the case of forward-looking statements contained in this Quarterly Report on Form 10-Q.
iii

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAPSOVISION, INC.
CONDENSED BALANCE SHEETS (UNAUDITED) 
(in thousands, except par value and share amounts)

 

 

March 31, 2026December 31, 2025
ASSETS
Current Assets
Cash and cash equivalents$17,933 $10,112 
Accounts receivable, net1,925 2,498 
Inventory3,491 2,987 
Prepaid expenses and other current assets1,151 1,072 
Total current assets24,500 16,669 
Property and equipment, net620 611 
Operating lease right-of-use assets749 843 
Other long-term assets76 41 
TOTAL ASSETS$25,945 $18,164 

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable$1,359 $1,143 
Accrued expenses and other current liabilities3,494 2,697 
Deferred revenue84 177 

Operating lease liabilities – current426 410 
Total current liabilities5,363 4,427 

Operating lease liabilities – long-term362 477 
Total liabilities5,725 4,904 

Commitments and contingencies - Note 8

Stockholders’ Equity
Common stock, $0.001 par value: 300,000,000 shares authorized as of March 31, 2026; 49,838,867 and 46,865,051 issued and outstanding as of March 31, 2026 and December 31, 2025, respectively
50 47 
Additional paid-in capital182,868 168,878 
Accumulated deficit(162,698)(155,665)
Total stockholders’ equity20,220 13,260 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$25,945 $18,164 

The accompanying notes are an integral part of these condensed financial statements.
1

CAPSOVISION, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
(in thousands, except share and per-share amounts)

Three Months Ended March 31,
20262025

Net revenue$2,792 $2,783 

Costs of revenue$1,463 $1,289 

Gross profit1,329 1,494 

OPERATING EXPENSES
Selling and marketing2,091 1,961 
Research and development4,435 3,107 
General and administrative1,896 1,808 
Total operating expenses8,422 6,876 

Operating loss(7,093)(5,382)

NON-OPERATING INCOME
Interest income, net59 6 
Other non-operating income, net1 1 
Total non-operating income, net60 7 

Loss before income taxes(7,033)(5,375)

Provision for income taxes— — 

Net loss and comprehensive loss$(7,033)$(5,375)

Net loss per share – basic and diluted $(0.15)$(2.49)

Weighted average common shares outstanding – basic and diluted47,456,908 2,157,627 

The accompanying notes are an integral part of these condensed financial statements.
2

CAPSOVISION, INC.
CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
(in thousands, except share amounts)

 

Convertible Preferred StockCommon Stock
SharesAmountSharesPar ValueAdditional Paid-in-CapitalAccumulated DeficitTotal Stockholders’ Equity
December 31, 2025— $— 46,865,051$47 $168,878 $(155,665)$13,260 
Issuance of common stock upon Private Placement, net of issuance cost— — 2,867,089 3 13,617 — 13,620 
Issuance of common stock upon exercises of stock options—— 106,727— 39 — 39 
Stock-based compensation—— —— 334 — 334 
Net loss—— —— — (7,033)(7,033)
March 31, 2026— $— 49,838,867 $50 $182,868 $(162,698)$20,220 

Convertible Preferred StockCommon Stock
SharesAmountSharesPar ValueAdditional Paid-in-CapitalAccumulated DeficitTotal Stockholders’ Deficit
December 31, 202438,665,583$143,625 2,090,945$2 $838 $(130,350)$(129,510)

Issuance of common stock upon exercises of stock options—— 87,549— 34 — 34 
Stock-based compensation—— —— 152 — 152 
Net loss—— —— — (5,375)(5,375)
March 31, 202538,665,583 $143,625 2,178,494 $2 $1,024 $(135,725)$(134,699)

The accompanying notes are an integral part of these condensed financial statements.
3

CAPSOVISION, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

Three Months Ended March 31,

20262025
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(7,033)$(5,375)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization56 52 
Loss on disposal of property and equipment1 — 
Amortization of operating lease right-of-use assets94 85 
Unrealized foreign exchange gains(4)(12)

Stock-based compensation334 152 
Bad debt expense— 11 
Changes in operating assets and liabilities:
Accounts receivable594 296 
Inventory(504)(408)
Prepaid expenses and other current assets8 (621)
Other long-term assets(35)— 
Accounts payable198 134 
Accrued expenses and other current liabilities417 833 
Deferred revenue(93)(48)
Operating lease liabilities(99)(85)
Net cash used in operating activities$(6,066)$(4,986)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment(48)(40)
Net cash used in investing activities $(48)$(40)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from Private Placement14,000 — 
Payment of Private Placement issuance costs(87)— 
Proceeds from exercises of options on common stock and warrants39 34 
Net cash provided by financing activities$13,952 $34 

Net increase (decrease) in cash and cash equivalents7,838 (4,992)
Effect of exchange rate changes on cash and cash equivalents(17)71 
Cash and cash equivalents at beginning of period10,112 9,319 
Cash and cash equivalents at end of period$17,933 $4,398 

NON-CASH FINANCING AND INVESTING ACTIVITIES

Private Placement issuance costs in accounts payable and accruals$380 $— 

The accompanying notes are an integral part of these condensed financial statements.
4

CAPSOVISION, INC. 
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per-share amounts)

 

1. DESCRIPTION OF BUSINESS AND ORGANIZATIONAL STRUCTURE
CapsoVision, Inc. (“CapsoVision” or the “Company”), a commercial stage medical technology enterprise, that innovates, manufactures, and markets endoscopic video imaging devices focused on internal imaging of the gastrointestinal (“GI”) system. Internal GI imaging facilitates earlier detection of colorectal cancer and other diseases, enabling more timely and effective treatment regimens for patients. The Company is based in Saratoga, California. Its customers include, in the U.S., gastrointestinal medical practices, clinics, and hospitals; outside of the U.S., the Company sells to distributor customers who resell products.
Since its 2005 formation, the Company’s organizational structure has comprised a single Delaware corporation with a branch office in Taiwan, Republic of China, the location of certain suppliers and Company personnel.
The Company’s core technology platform is an orally ingestible capsule including multiple cameras facilitating 360 degree imaging, light-emitting diodes for measurement, onboard memory storage, and battery life permitting recording and onboard storage of video images. This platform obviates the need for external data transmission or for a patient to remain in a medical facility throughout the digestive cycle. The Company’s products consist of (i) the on-market CapsoCam Plus®, directed at the small intestines, and (ii) the in-development CapsoColon 3D® directed at the large intestines (colon). Stored video imagery is downloaded from capsules with a data access device, CapsoAccess® and enabling software, CapsoView®. This video access solution permits on-site, on-demand video download and viewing by customers. The Company operates the CapsoCloud® cloud-based software-as-a-service ecosystem as an off-premise video access and download solution. Using CapsoCloud®, retrieved capsules are sent by customers to a centralized processing center for video downloading; patient video content is then made available via web portal or dedicated app access for customers to view, download, and generate patient reports. The Company’s services also include video reading; pursuant to this offering, physician customers may purchase a video reading and generation of patient report carried out by a second physician.
CapsoCam Plus® was cleared by the U.S. Food and Drug Administration ("FDA") in 2016 and has since been approved in various other countries. CapsoColon 3D® is completing the second arm of our pivotal clinical study with planned submission for regulatory clearance, starting with the FDA, and we anticipate filing with the FDA in the third quarter of 2026. The Company is subject to risks and uncertainties common to life sciences companies including, but not limited to, risks associated with the success of research and development, risks associated with contract manufacturing, competition from other companies, protection of intellectual property and the risk of litigation related thereto, compliance with government regulations, and the ability to secure additional capital to fund operations and research and development. Current and future programs, including for products focused on other areas of the GI system, will require significant research and development efforts, extensive clinical testing, and submissions for regulatory approval prior to commercialization.
Private Placement
On March 16, 2026, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with selected accredited investors (the “Investors”), for the purposes of raising approximately $14 million in aggregate gross proceeds for the Company (the “Private Placement”). Pursuant to the terms of the Securities Purchase Agreement, the Company agreed to issue and sell to the Investors in the Private Placement an aggregate of 2,867,089 shares (the “Shares”) of common stock of the Company, par value $0.001 per share (the “Common Stock”), at $4.883 per Share. The closing of the Private Placement occurred on March 16, 2026. The Company intends to use the net proceeds from the Private Placement for general corporate purposes, including sales and marketing, research and development activities, general and administrative matters, working capital and capital expenditures.
In connection with the Private Placement, the Company entered into a registration rights agreement, dated March 16, 2026 (the “Registration Rights Agreement”), with the Investors, pursuant to which, among other things, the Company will (i) prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement to register for resale the Shares within 90 days after the closing of the Private Placement, and (ii) use 
5

CAPSOVISION, INC. 
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per-share amounts)

commercially reasonable efforts to have such registration statement declared effective as soon as reasonably practicable following the filing thereof with the SEC. The Registration Rights Agreement contains customary terms and conditions for a transaction of this type. On April 22, 2026, the SEC declared effective the registration of the Shares sold in the Private Placement.

2. GOING CONCERN
The Company has incurred operating losses and negative cash flows from operations since its inception. Since the launch of CapsoCam Plus® in 2016, the Company has been able to fund increasing portions of its operating expenses from sales. However, the Company has continued to incur operating losses, net losses, and negative operating cash flows. The Company expects to continue to experience similar circumstances until existing and future products’ sales yield further growth in revenues, achievement of break-even, and realization of future operating income, net income, and positive operating cash flows. As of March 31, 2026, the Company had cash and cash equivalents of $17,933. For the three months ended March 31, 2026, the Company had an operating loss of $7,093, a net loss and comprehensive loss of $7,033, and net cash used in operating activities of $6,066. The Company, having evaluated the extant facts and circumstances, concluded that the facts and circumstances raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of these financial statements. While the Company raised approximately $14 million in gross proceeds resulting from subsequent Private Placement described in Note 1. DESCRIPTION OF BUSINESS AND ORGANIZATIONAL STRUCTURE and further discussed in Note 9. COMMON STOCK, it is not probable that these funds are sufficient to fund expenditures necessary to achieve sales growth and innovation objectives. The Company intends to consummate additional capital raising activities, but there is no certainty as to such capital raising activities occurring at all, or occurring with sufficient timing or magnitude, sufficient to alleviate such substantial doubt.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation 
These unaudited interim condensed financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). Any reference in these notes as it concerns U.S. GAAP is meant to refer to authoritative pronouncements as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). 
These unaudited interim condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to effect fair presentation of financial position as of March 31, 2026, the results of operations for the three months ended March 31, 2026 and 2025, and cash flows for the three months ended March 31, 2026 and 2025. The condensed balance sheet at December 31, 2025 was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the audited annual financial statements. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period and should be read in conjunction with the audited annual financial statements.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.
6

CAPSOVISION, INC. 
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per-share amounts)

Reporting Entity
The Company’s organizational structure reflects a single incorporated entity, CapsoVision, Inc.. This single entity has a foreign branch and physical presence in Taiwan, Republic of China, which is an extension of the U.S. corporation.
Private Placement Issuance Costs
The Company accounts for costs directly attributable to the issuance of equity securities in a private placement as a reduction to the gross proceeds received from the offering, in accordance with ASC 340-10 and ASC 505-10. These costs typically include legal, accounting, advisory, and other professional fees, as well as regulatory and filing fees, that are incremental and would not have been incurred absent the private placement transaction.
Issuance costs are initially recorded as deferred assets within prepaid expenses and other current assets on the balance sheet until the closing of the private placement. Upon closing, the total amount of issuance costs incurred is reclassified as a reduction to additional paid-in capital (APIC) within stockholders’ equity. This treatment ensures that the net proceeds from the private placement reflect the actual funds available to the Company after all directly related costs.
The Company's legal and advisory cost directly attributable to the Private Placement of approximately $380 and other incremental costs associated with the SEC registration of shares issued as a result of the Private Placement are qualified as issuance costs and recorded to stockholder's equity as a reduction to the gross proceeds from the offering in the period when they are incurred.
Reverse Stock Split
On July 2, 2025, the Company amended and restated its amended and restated certificate of incorporation to effect a 1-for-3.33 reverse stock split of the Company's common stock, which automatically resulted in reciprocal adjustments (reductions) to the conversion ratios of each of the Company's series of convertible preferred stock (the "Reverse Stock Split"). The par values per share of the common and convertible preferred stock were not adjusted as a result of the Reverse Stock Split. All amounts for issued and outstanding common stock, convertible preferred stock, options to purchase common stock, warrants on common stock, and reserves related to common stock, as well as related per-share amounts, contained in the financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented. No fractional shares were issued as a result of the reverse stock split.
Foreign Currency
The reporting currency for the financial statements of the Company is the United States Dollar. The functional currency of the U.S. corporation, and its foreign branch which is an extension of the U.S. corporation, is the U.S. Dollar. The assets, liabilities, and expenses of the Company’s foreign branch recorded in local currency are remeasured into the U.S. Dollar each period, with associated gains and losses included in operating expenses (as a component of general and administrative expenses). Monetary assets and liabilities denominated in currencies other than the functional currency are translated at exchange rates in effect at the balance sheet date with associated gains and losses included in operating expenses (as a component of general and administrative expenses). For the three months ended March 31, 2026 and 2025, the Company recorded $7 and $(6), respectively, of net foreign exchange gains (losses) as components of general and administrative expenses.
Use of Estimates 
The preparation of financial statements in conformity with U.S. GAAP requires the making and usage of estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosure of contingent assets and liabilities, if any. The Company bases its estimates on historical 
7

CAPSOVISION, INC. 
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per-share amounts)

experience when available and on other assumptions that management believes are reasonable under the circumstances. The Company seeks to moderate the influence of subjectivity and estimation uncertainty through reliance on useful information from market participants and peers wherever possible. Estimates and assumptions affect various financial statement amounts and their related disclosures, including, but not limited to, the recognition of revenue, underwriters' warrants valuation, stock based compensation, research and development expenses, income tax-related amounts, lease-related amounts, and allowances for credit losses. Actual results could materially differ from estimates. 
Segments 
The Company is organized as, and managed as, one operating (and reportable) segment. Its chief operating decision maker is its Chief Executive Officer.
Fair Value Measurements 
Where required, certain assets and liabilities are carried at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A framework is used for measuring fair value utilizing a three-tier hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the three levels of the hierarchy:
•Level 1 - defined as observable inputs, such as quoted prices unadjusted in active markets for identical assets or liabilities
•Level 2 - defined as inputs other than quoted prices included in Level 1 that are either directly or indirectly observable
•Level 3 - defined as significant unobservable inputs for which little or no market data exists, therefore necessitating entity-specific assumptions 
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value. 
The carrying amounts of the Company’s financial assets (which include cash and accounts receivable) and liabilities (which include accounts payable) approximate fair value due to their insensitivity to interest rates and/or close proximity to maturity and qualify as Level 1 measurements.
Concentration Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of demand deposits at well-known financial institutions and accounts receivable.  At times, the Company’s cash deposits may exceed U.S. Federal deposit insurance limits.
The Company's sales to customers are typically originated with trade credit terms and receivables are uncollateralized, with limited exceptions for prepayments required for certain customers or credit card sales. The Company historically has experienced insignificant levels of bad debt; allowances for credit losses on accounts receivable were insignificant for all periods presented. 
The Company’s concentration risk related to revenues relates primarily to its product revenues being derived from a single product. 
The following table summarizes the information about the Company’s concentration of customers:
8

CAPSOVISION, INC. 
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per-share amounts)

Customer ACustomer B
Revenues, customer concentration risk
Three Months Ended March 31, 2026
12 %10 %

Accounts receivable, customer concentration risk
As of March 31, 2026
31 %12 %
As of December 31, 2025
22 %Less than 10%

The Company’s supply concentration risk relates primarily to its materials procurement and contract manufacturing being substantially concentrated with vendors located in Asia.
Comprehensive Income (Loss)
Comprehensive income (loss) comprises net income (loss) and other comprehensive income (loss), which is defined as all changes in stockholders’ equity (deficit) other than net income (loss) and those resulting from investments by and distributions to stockholders. Historically, and for all periods presented, there are no differences between net loss and comprehensive loss.
Revenue Recognition
Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers. The core principle is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company recognizes revenue using a five-step model resulting in revenue being recognized as performance obligations within a contract are satisfied. The steps within that model include: (i) identifying the existence of a contract with a customer; (ii) identifying the performance obligations within the contract; (iii) determining the contract’s transaction price; (iv) allocating the transaction price to the contract’s performance obligations; and (v) recognizing revenue as the contract’s performance obligations are satisfied. Judgment is required to apply the model and make certain estimates and assumptions about the Company’s contracts with its customers, including, among others, the nature and extent of its performance obligations, its transaction price amounts and any allocations thereof (including estimates of standalone selling prices), the events which constitute satisfaction of its performance obligations, and when control of any promised goods or services is transferred to customers. The guidance also requires certain incremental costs incurred to obtain or fulfill a contract to be deferred and amortized on a systematic basis consistent with the transfer of goods or services to a customer. 
The Company generates (i) product revenue from the sale of capsule medical devices, (ii) service revenue from the provision of reading services for videos, and (iii) product or service revenue depending on which video delivery option is utilized by the customer to download and view capsule videos. The customer’s delivery options include (1) a capsule data reading device shipped to the customer which works together with downloadable software installed locally on a customer’s computer (classified as product revenue), or (2) a software-as-a-service offering which involves the customer mailing capsule devices to an off-site Company-operated facility which processes uploads of video content to a cloud platform the customer can access via a web browser or a smart device application in order to view videos and generate reports (classified as service revenue).
The Company’s contracts with customers contain fixed consideration reflecting prices negotiated with customers and immaterial variable consideration. For contracts with variable consideration, the Company uses the most likely amount method to estimate the transaction price. Variable consideration is constrained to the extent that it is deemed probable that a significant reversal of the amount of revenue recognized will not occur. Where products or services are not sold separately or experience a range of selling prices, the Company estimates standalone selling prices using a cost-plus-expected margin approach and utilizes the resultant standalone selling prices to allocate transaction prices at transaction inception on a relative standalone selling price basis. The Company 
9

CAPSOVISION, INC. 
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per-share amounts)

recognizes revenue for its product and reading service performance obligations at a point in time, that being when the performance obligations are satisfied and control is transferred to the customer (generally upon shipment for products, or conveyance of final deliverable for services). For the software-as-a-service video delivery offering performance obligation, the associated revenue is recognized over time, typically less than one fiscal quarter, representing the estimate of the typical period of time in which customers derive utility from the cloud-based service.
The Company does not have any significant financing components as payment is received at or shortly after sale. Standard trade credit terms are typically 30 to 60 days from invoice date. Costs incurred to obtain or fulfill a contract are expensed as incurred when the amortization period is less than one year, which is the case for the Company. The Company considers all shipping and handling to be fulfillment activities and not a separate performance obligation. Shipping and handling costs are recorded as costs of revenue. The Company has elected an accounting policy to exclude sales taxes and other similar taxes from the measurement of the transaction price.
The Company has certain U.S. customers characterized as group purchasing organizations that function as procurement agents for their underlying medical practice, clinic, or hospital members; these group purchasing organizations typically charge the Company percentage-based fees in exchange for the right to do business with the group purchasing organization. Such fees, which do not provide a distinct separate benefit to the Company, are recorded as reductions to revenue in the same period as the recognition of the related revenue.
The Company’s products are sold with the same limited quality assurance warranties offered to all customers; the Company typically does not allow returns of products, except for cases of damage or defect, whereby products would be replaced. Actual product returns have historically been immaterial given the one-time-use nature of capsule devices; estimated product returns (periodically adjusted to reflect actual experience), if warranted, are accounted for as reductions to revenue with offsets to a product return liability included within accrued expenses and other current liabilities in the balance sheet.
Contract Assets and Contract Liabilities; Accounts Receivable and Related Allowance
The Company records contract assets when it has completed performance obligations prior to receiving consideration from the customer and where such amounts are unbilled; where billed, amounts are reflected as trade accounts receivable. The Company promptly invoices its accounts receivable; therefore, the Company’s contract assets were zero for all periods presented.
Contract liabilities, portrayed as deferred revenue, reflect (i) obligations to provide goods for which the Company has already received consideration (generally arising from up-front payments received) and (ii) performance obligations to provide services which are not yet satisfied in the context of a particular contract (principally consisting of video delivery obligations related to the Company’s off-premise cloud-based video delivery offering).
Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The Company grants trade credit to most of its customers in the normal course of business and generally does not require collateral. An allowance for credit losses arises subsequent to the origination of a sale for estimated uncollectible receivables based on the Company's assessment of the collectability of customer accounts. A provision (or a reversal of the allowance) is recorded as a component of general and administrative expenses. In determining the amount of the allowance, the Company considers aging of accounts, historical credit losses, customer-specific information, the current economic environment, supportable forecasts, and other relevant factors. Uncollectible receivables are written off against the allowance when all attempts to collect have been exhausted. Allowances for credit losses were insignificant for all periods presented.
Costs of Revenue
Costs of revenue include materials, direct labor, and manufacturing overhead costs related to sold products, as well as certain period costs such as non-allocated overhead, scrap, and outbound freight costs, fees paid to 
10

CAPSOVISION, INC. 
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except share and per-share amounts)

physicians for providing reading services, and the costs of operating the Company’s cloud-based software-as-a-service offering for video delivery such as shipping costs, processing costs, and data storage costs. Shipping and handling costs directly related to bringing products to their final point of sale are included in costs of revenue and were $35 and $17 for the three months ended March 31, 2026 and 2025, respectively.
Selling, General and Administrative Expenses
Selling and marketing expenses include costs directly attributable to actively marketing the Company’s products and services using both direct employees and outside contractors or vendors. These costs include, but are not limited to, salaries, bonuses, benefits, stock-based compensation, sales commissions, travel costs and expense reimbursements, and the costs of sponsoring programs, events, and conferences. Advertising costs were nil for all periods presented.
General and administrative expenses consist primarily of salaries, bonuses, benefits, and stock-based compensation related to the Company’s executive, administrative, finance, human resources, and other supporting functions. Also included are professional fees for legal services, consulting services, tax matters and audits, information technology, office expenses, rent, insurance, and foreign exchange gains (losses).
Research and Development Expenses (including Clinical Trial Expenses)
Research and development ("R&D") costs are expensed as incurred in accordance with ASC 730, Research and Development. Research and development expenses include costs directly attributable to the conduct of research and development programs, including salaries, bonuses, benefits, and stock-based compensation for employees focused on research and development or clinical trials, costs of independent contractors and outside vendors, costs of supplies consumed in or product inventory utilized in clinical trials, and the costs of clinical trial activities as charged within the negotiated budgets by trial sites or vendors responsible for multiple trial sites.
The Company capitalizes prepayments for good