cv-20260331

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


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 class	Trading Symbol(s)	Name of each exchange on which registered
common stock, $0.001 par value per share	CV	The 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 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 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, 2025			1
Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2026 and 2025			2
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2026 and 2025			3
Condensed Statements of Cash Flows for the three months ended March 31, 2026 and 2025			4
Notes to Condensed Financial Statements			5
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

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;

•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, 2026		December 31, 2025
ASSETS
Current Assets
Cash and cash equivalents	$	17,933	$	10,112
Accounts receivable, net	1,925		2,498
Inventory	3,491		2,987
Prepaid expenses and other current assets	1,151		1,072
Total current assets	24,500		16,669
Property and equipment, net	620		611
Operating lease right-of-use assets	749		843
Other long-term assets	76		41
TOTAL ASSETS	$	25,945	$	18,164

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	1,359	$	1,143
Accrued expenses and other current liabilities	3,494		2,697
Deferred revenue	84		177

Operating lease liabilities – current	426		410
Total current liabilities	5,363		4,427

Operating lease liabilities – long-term	362		477
Total liabilities	5,725		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 capital	182,868		168,878
Accumulated deficit	(162,698)		(155,665)
Total stockholders’ equity	20,220		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,
	2026		2025


Net revenue	$	2,792	$	2,783


Costs of revenue	$	1,463	$	1,289

Gross profit	1,329		1,494

OPERATING EXPENSES
Selling and marketing	2,091		1,961
Research and development	4,435		3,107
General and administrative	1,896		1,808
Total operating expenses	8,422		6,876

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

NON-OPERATING INCOME
Interest income, net	59		6
Other non-operating income, net	1		1
Total non-operating income, net	60		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 diluted	47,456,908		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 Stock			Common Stock
	Shares	Amount		Shares	Par Value		Additional Paid-in-Capital		Accumulated Deficit		Total 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 Stock			Common Stock
	Shares	Amount		Shares	Par Value		Additional Paid-in-Capital		Accumulated Deficit		Total Stockholders’ Deficit
December 31, 2024	38,665,583	$	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, 2025	38,665,583	$	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,
	2026		2025
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 amortization	56		52
Loss on disposal of property and equipment	1		—
Amortization of operating lease right-of-use assets	94		85
Unrealized foreign exchange gains	(4)		(12)

Stock-based compensation	334		152
Bad debt expense	—		11
Changes in operating assets and liabilities:
Accounts receivable	594		296
Inventory	(504)		(408)
Prepaid expenses and other current assets	8		(621)
Other long-term assets	(35)		—
Accounts payable	198		134
Accrued expenses and other current liabilities	417		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 Placement	14,000		—
Payment of Private Placement issuance costs	(87)		—
Proceeds from exercises of options on common stock and warrants	39		34
Net cash provided by financing activities	$	13,952	$	34

Net increase (decrease) in cash and cash equivalents	7,838		(4,992)
Effect of exchange rate changes on cash and cash equivalents	(17)		71
Cash and cash equivalents at beginning of period	10,112		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

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.

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

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:

CAPSOVISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per-share amounts)


	Customer A		Customer 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

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

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 goods or services, including trial device inventory, that will be used, consumed, or rendered for future research and development activities and recognizes expense as the related goods are delivered or services are performed. The Company also records expenses and accruals for estimated costs of research and development activities, including third party services for clinical trials. The Company bases its estimates on information available at the time. Costs for certain clinical trial activities are recognized based on the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in the balance sheet as prepaid expenses or as accrued expenses. The Company recognizes R&D expenses for non-recurring engineering services from outside vendors calculated as an estimated percentage of completion based on management's estimated total effort for the programs.

For the three months ended March 31, 2026 and 2025, the Company incurred $1,634 and $697, respectively, of expenses related to ongoing clinical trial activities which are included within research and development expenses.

Net Loss Per Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period without consideration of potentially dilutive securities. Diluted net loss per share reflects the potential dilution that could occur if options or warrants on common stock were exercised or convertible preferred stock shares were converted into common stock. Diluted net loss per share is the same as basic net loss per common share since the effect of the potentially dilutive securities are anti-dilutive. Potential dilutive common share equivalents consist of incremental common shares issuable upon exercise of vested stock options, common stock warrants, and the Company’s various series of convertible preferred stock. Upon completion of the IPO in July 2025, all outstanding shares of preferred stock were converted into shares of Company's common stock (after giving effect to the 1-for-3.33 reverse stock split). Subsequent to the conversion, only common stock remains outstanding. Accordingly, the two-class method is no longer applicable for periods after the IPO.

CAPSOVISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per-share amounts)

Cash and cash equivalents

Cash and cash equivalents comprises demand deposits in the form of checking accounts and money market accounts (which may be deposited into and withdrawn at will with no restrictions as to investment or redemption) and includes cash balances denominated in the Euro and New Taiwan Dollar, for which fluctuations in exchange rates result in gains or losses reported within operating expenses as a component of general and administrative expenses.

Inventory

Inventories, consisting of materials, direct labor and manufacturing overhead, are subdivided into raw materials, work in process, and finished goods and are stated at the lower of cost (average cost) or net realizable value.

The Company evaluates inventories as to (i) net realizable value and (ii) circumstances or indicators of loss, damage, insufficient time to expiry (determined by battery life), excess quantities, or obsolescence and provisions accordingly via direct charges against the carrying value of inventory.

Long-Lived Assets

Property and equipment is recorded at historical cost, less accumulated depreciation. The Company capitalizes major improvements and expenses repairs and maintenance as incurred. Depreciation is recorded using the straight-line method based on the estimated useful lives of the depreciable property or, for leasehold improvements, the remaining term of the lease, whichever is shorter. Useful lives are as follows.


Asset Class			Estimated Useful Life
Machinery & equipment			5 years
Computer equipment and office equipment			3 to 5 years
Purchased software			3 to 5 years
Leasehold improvements			Shorter of remaining lease term or useful life

Upon disposal (retirement or sale) of property and equipment, as applicable, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected within operating expenses. Such amounts were insignificant for all periods presented.

Long-lived assets are evaluated for impairment as warranted by triggering events related to changes in facts and circumstances. There have historically been no impairments and there were none for all periods presented.

Leases

The Company has operating leases for office and storage space in California and office space in Taiwan, Republic of China. The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are depicted in operating lease liabilities, current and operating lease liabilities, non-current in the balance sheet. ROU assets represent the right to use an underlying asset, and lease liabilities represent the obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.

ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the future minimum lease payments over the lease term. The Company utilizes an incremental borrowing rate when assessing lease classification and measuring lease liabilities. The estimated incremental borrowing rate considers credit rating practices applied by well known statistical rating organizations to borrowers, Company-specific factors, and the actual lease term at commencement date. The lease term may include options to extend

CAPSOVISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per-share amounts)

when it is reasonably certain that the Company will exercise that option. The Company recognizes operating lease expense on a straight-line basis over a lease's term.

The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component. Variable lease payments that are not dependent on an index or rate are not included in lease measurements and are accounted for as incurred.

Stock-Based Compensation

The Company accounts for employee and nonemployee equity compensation awards in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). In accordance therewith, the Company accounts for stock-based compensation for awards granted to nonemployees in a similar fashion to stock-based compensation awards to employees. ASC 718 requires the recognition of stock-based compensation expense, using a fair-value based method, for costs related to all stock-based compensation awards.

Stock-based compensation awards issued under the Company’s 2005 Stock Plan (the “2005 Plan”) and the Company’s 2025 Equity Incentive Plan (the “2025 Plan”) take the form of stock options (non-qualified or incentive stock options), restricted stock or restricted stock units (the "RSUs"). The 2025 Plan also provides for the grant of stock appreciation rights, stock bonuses, stock units and other forms of awards including cash awards to the Company’s officers, directors, employees, consultants and advisors. The Black-Scholes option-pricing model is used to determine the fair value of options; application of the model requires judgment to develop assumptions input into the model, some of which are more subjective, including: (i) the fair value of the underlying common stock on the date of grant; (ii) the expected term of the award; (iii) the expected volatility of the underlying common stock; (iv) the risk-free interest rate; and (v) expected dividends. Income and market approaches to valuation are judgmentally weighted and combined to determine a composite value representing the fair value of the underlying common stock. In estimating the fair value of the underlying common stock prior to IPO, the Company utilized a third party professional valuation firm whose analyses supported management's concluded estimate. Post IPO the fair value of the underlying common stock is based on the Company’s closing stock price on the date of grant. An expected volatility assumption is based on stock price volatility of a peer group of comparable public companies over a similar expected term. The risk-free rate is based on U.S. Treasury yields in effect at the time of grant for periods corresponding with the expected term; no dividends are assumed.

The Company’s employee and nonemployee stock-based compensation awards granted on or before March 31, 2026 contain only service conditions for vesting. The Company recognizes stock-based compensation cost as a component of the related functional expense (costs of revenue or category of operating expenses) on a straight-line basis over the requisite service period, which is explicitly stated in the case of awards issued to employees and implicitly understood to be the period over which services are provided for nonemployees. The Company recognizes forfeitures as they occur and reverses any previously recognized compensation cost associated with pre-vesting forfeitures.

Stock-based compensation awards in the form of the restricted stock units (the "RSUs") are issued to the Directors of CapsoVision, Inc, who are not employed by the Company ("Non-Employee Directors"). These RSUs are issued in lieu of annual cash compensation (annual base retainer). Each RSU granted to the Non-Employee Directors represents a right to receive one share of the Company common stock when the RSU vests. The Company estimates compensation cost based on the grant date fair value and recognizes the expense on a graded vesting basis over the vesting period of the award. Please, see Note 10. STOCK-BASED COMPENSATION for details.

Warrants

In connection with the IPO, offering costs related to legal, accounting, and underwriting costs were net with the proceeds and recorded as a reduction in additional paid in capital, in the stockholders’ equity section of the balance sheet. The Company also issued Underwriters Warrants (as defined in Note 9. COMMON STOCK) for services provided during the IPO to purchase 168,898 shares of common stock. The Underwriters Warrants are

CAPSOVISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per-share amounts)

accounted for as equity instruments and are included in the Stockholders’ Equity section of the balance sheet. The fair value of the Underwriters Warrants has been estimated using the Black-Scholes option pricing model.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires that the asset and liability method be used. Deferred tax assets and liabilities are determined based on the differences between financial reporting (book basis) and the tax reporting (tax basis) amounts of assets and liabilities; these pre-tax differences are measured and reflected after-tax using the enacted tax rates and law that will be in effect when the differences are expected to reverse.

ASC 740 requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company evaluates the realizability of its deferred tax assets at least annually and more frequently as warranted by changes in facts and circumstances and adjusts the amount of the valuation allowance accordingly. Factors considered include the presence of reversing taxable temporary differences as a source of taxable income, forecasts of future taxable income, and available tax planning strategies that could be implemented and are both prudent and feasible. The Company has recorded a full valuation allowance with respect to all of its deferred tax assets based upon the significant negative evidence presented by its accumulated deficit position, its operating losses and negative operating cash flows, and the uncertainty associated with the timing and amount of future profits and therefore taxable income that enable realization. In future periods, if the Company generates book income and taxable income, changes in judgment may reduce or eliminate the valuation allowance.

The Company accounts for uncertain tax positions in accordance with a two-step model. Firstly, a recognition threshold must be met; a tax benefit from an uncertain tax position may only be recognized if the tax position would, more likely than not, be sustained by the taxing authority assuming an examination and the application of typical practices and precedents. Secondly, a measurement rule is applied; the amount of tax benefit that can be recognized is the portion that is greater than 50% likely of being realized upon a settlement. The determination as to whether a tax benefit will, more likely than not, be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances, without consideration of detection risk. As of March 31, 2026 and 2025 the Company’s uncertain tax positions were principally related to the non-recognition of a portion of Federal and U.S. state research and development tax credits. The Company recognizes any interest and penalties associated with its income tax positions in the provision for income taxes.

Accounting Pronouncements Issued and Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses ("ASU 2024-03"). The new guidance requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the statement of operations. ASU is effective for public business entities for annual periods beginning after December 15, 2026, and for quarters in the years beginning after December 15, 2027; early adoption is permitted. The new guidance may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact ASU 2024-03 will have on its disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for and disclosure of internal-use software costs. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted and the amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date, retrospectively to any or all prior periods presented in the financial statements, or through a modified prospective transition approach which

CAPSOVISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per-share amounts)

is based on the status of the project and whether software costs were capitalized before the date of adoption. The Company is currently evaluating the impact ASU 2025-06 will have on its disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which provides clarity about current interim disclosure requirements and adds a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, for public business entities and for interim reporting periods within annual reporting periods beginning after December 15, 2028, for entities other than public business entities. Early adoption is permitted for all entities. The amendments in this Update can be applied either (1) prospectively or (2) retrospectively to any or all prior periods presented in the financial statements. At the same time, the FASB issued ASU 2025-12 - Codification Improvements. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. If an entity adopts the amendments in this Update in an interim period, it must adopt them as of the beginning of the annual reporting period that includes that interim reporting period. An entity may elect to early adopt the amendments on an issue-by-issue basis. The Company is currently evaluating the impact ASU 2025-11 and ASU 2025-12 will have on its disclosures.

4. FAIR VALUE MEASUREMENTS

The Company’s demand deposit accounts include money market demand deposits which constitute cash, given the lack of investment restrictions or redemption conditions and the ability to immediately withdraw funds. 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 their maturities and qualify as Level 1 measurements. There were no transfers between Level 1, 2 or 3 during any periods presented.

5. BALANCE SHEET COMPONENTS

Inventory

Inventory comprised the following amounts:


	March 31, 2026		December 31, 2025
Finished goods	$	315	$	107
Work in process	1,324		994
Raw materials	1,852		1,886
Inventory	$	3,491	$	2,987

For the three months ended March 31, 2026 and March 31, 2025, there were no provisions to write down inventories.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets comprised the following amounts:


	March 31, 2026		December 31, 2025
Prepayment for insurance	$	245	$	324
Advance payments for inventory purchases	292		300
Deferred Private Placement issuance costs	87		—

CAPSOVISION, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except share and per-share amounts)


Other	527		448
Prepaid expenses and other current assets	$	1,151	$	1,072

Deferred Private Placement issuance costs are specific incremental costs directly attributable to the SEC registration of shares issued as a result of the Private Placement and will be reclassified from current assets to stockholders' equity and recorded as reductions to the gross proceeds from the offering when the registration is completed.

Property and Equipment, Net

Property and equipment comprised the following amounts:


	March 31, 2026		December 31, 2025
Machinery and equipment	$	993	$	928
Computer equipment, office equipment, and purchased software	101		101
Leasehold improvements	157		157
Accumulated depreciation and amortization	(631)		(575)
Property and equipment, net	$	620	$	611