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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-K
_______________________________________
(Mark One)

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

For the fiscal year ended December 31, 2025
OR

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

For the transition period from ___________ to ____________
Commission file number 001-42705
_______________________________________
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

Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
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 | o |  | Accelerated filer | o
Non-accelerated filer | x |  | Smaller reporting company | x
|  |  | Emerging growth company | x

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
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
The Registrant did not have an aggregate market value for the common equity held by non-affiliates of the Registrant on the last business day of its most recently completed second fiscal quarter because there was no public market for the Registrant’s common equity as of such date.
As of March 25, 2026, the registrant had 49,838,211 shares of common stock, $0.001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement relating to the Registrant's 2025 Annual Stockholders' Meeting, to be filed within 120 days of the Registrant's fiscal year ended December 31, 2025, are incorporated by reference into Part III of this Annual Report on Form 10-K.

|  | Page No.
PART I |
Item 1. | Business | 1
Item 1A. | Risk Factors | 49
Item 1B. | Unresolved Staff Comments | 95
Item 1 C. | Cybersecurity | 95
Item 2. | Properties | 96
Item 3. | Legal Proceedings | 96
Item 4. | Mine Safety Disclosures | 96
PART II |
Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 97
Item 6. | [ Reserved ] | 98
Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 98
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 112
Item 8. | Financial Statements and Supplementary Data | 113
Item 9. | Changes in and Disagreements with Accountants On Accounting and Financial Disclosure | 149
Item 9A. | Controls and Procedures | 149
Item 9B. | Other Information | 150
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 151
PART III |
Item 10. | Directors, Executive Officers and Corporate Governance | 152
Item 11. | Executive Compensation | 152
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 152
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 152
Item 14. | Principal Account ant Fees and Services | 153
PART IV |
Item 15. | Exhibits and Financial Statement Schedules | 154
Item 16. | Form 10-K Summary | 155
| Signatures | 156

i

Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K (the "Annual Report") contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, and expected market growth, are forward-looking statements. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “shall,” “should,” “expects,” “anticipates,” “could,” “intends,” “seeks,” “continues,” “target,” “contemplates,” “estimates,” “believes,” “plans,” “projects,” “predicts,” “potential,” “goal,” “objective,” or “hopes” or the negative of these or similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Annual Report 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 receipt of and related timing for FDA 510(k) clearance of our CapsoCam Colon and related sales;
•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 that the foregoing list does not contain all of the forward-looking statements made in this Annual Report.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report primarily on our current expectations, estimates, forecasts, and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. 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 Annual Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-
ii

looking statements contained in this Annual Report. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.
You should read this Annual Report and the documents that we reference in this Annual Report and have filed as exhibits to the registration statement, of which this Annual Report is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this Annual Report by these cautionary statements.
Summary Risk Factors
Below is a summary of the principal risks and uncertainties that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks that we face, follows this summary, and should be carefully considered, together with other information in this Annual Report and our other filings with the SEC before making investment decisions regarding our securities. This summary is qualified in its entirety by that more complete discussion of such risks and uncertainties.
The following is a summary of the principal risks and uncertainties described in more detail in this Annual Report:
•We have a history of net losses, and we expect to incur additional losses in the foreseeable future.
•Our audited financial statements for the years ended December 31, 2025 and December 31, 2024 include a footnote raising substantial doubt about our ability to continue as a “going concern” and we will likely need to raise additional financing to fund our business and revenue growth plans.
•All of our revenues to date have been, and in the near-term will continue to be, generated from CapsoCam Plus related sales for the small bowel; and our ability to grow our small-bowel-related revenue is subject to our ability to successfully and timely execute related elements of our revenue growth strategy.
•CapsoCam Colon is our initial strategic effort to expand revenues for our GI-tract capsule endoscopy solution beyond small-bowel-related sales; we do not currently expect to generate CapsoCam Colon-related revenues until the middle of 2027 based on the anticipated timing of FDA clearance for the second generation of our CapsoCam Colon solution.
•Broad adoption of our CapsoCam Colon solution (once cleared) and growing related revenues depend on, among other things, expanding beyond CapsoCam Colon’s initial indicated patient population, increasing the accuracy of our initial CapsoCam Colon solution, and achieving and maintaining a
iii

satisfactory successful completion rate for capsule endoscopies using our CapsoCam Colon solution; and we may fail to successfully and timely execute related elements of our CapsoCam Colon adoption and revenue growth strategy.
•Our longer term efforts to expand our GI-tract capsule endoscopy solutions beyond small bowel and colon pathologies and medical conditions may not succeed.
•Any failure or defect in our GI-tract capsule endoscopy solution could harm our reputation, expose us to liability, and reduce our sales.
•We face substantial geopolitical and trade risks (including a possible trade war and imposition of tariffs and supply chain interruptions) and natural disaster risks associated with our business operations in Asia (particularly Taiwan and Japan).
•We may face expansion risks when expanding in existing and entering into new foreign markets.
•The clinical results of our various clinical studies (including those for our CapsoCam Colon capsule) may not be released in any peer-reviewed publications.
•We may not obtain or may experience delays in obtaining 510(k) clearance for our planned second generation of our CapsoCam Colon solution (with improved optics and other components), which would adversely impact our ability to commercialize this product and generate related revenue.
•Failure to obtain or delays in obtaining 510(k) clearance for our CapsoCam Colon capsule endoscopy solution could result in additional costs or liabilities and adversely impact our reputation, ability to sell our CapsoCam Plus capsule endoscopy solution, and our ability to compete effectively in this or other markets. Any of these outcomes could have a material adverse effect on our business, financial condition, and results of operations.
•We may face regulatory challenges and delays in obtaining 510(k) clearance for marketing of those CapsoCam capsules incorporating our self-developed AI technology, including our CapsoCam Colon capsule endoscopy solution and CapsoCam Plus capsule endoscopy solution (small bowel).
•If Medicare and other third-party payors, including managed care organizations, do not approve reimbursement for our products at adequate reimbursement rates, we may be unable to successfully commercialize our products which would likely have a material adverse effect on our business.
•We rely on various suppliers to assist us in the assembly and manufacture of our GI-tract capsule endoscopy solution and sourcing of critical and other components and many of these suppliers are single source suppliers located in Asia (particularly Taiwan and Japan); any disruption in our supply chain could adversely affect our ability to meet the demand for our products and fulfil our orders.
iv

PART I
Item 1. Business
We are a global commercial-stage medical technology company focused on creating diagnostic and screening products to identify abnormalities of the GI tract. We develop advanced imaging and AI technologies in creating such products while maximizing the flexibility, convenience, profitability, and safety of patient care. We are a Delaware company, incorporated in 2005. Our corporate headquarters is located in Saratoga, California.
Currently, our GI-tract capsule endoscopy solution comprises our single-use CapsoCam capsule and the associated software, CapsoCloud and CapsoView. The CapsoCam capsule, with its panoramic view, acquires and stores video images in onboard memory while moving through the GI tract and the software component allows healthcare providers to view the video retrieved from the capsule by either streaming it from the cloud, where it is securely stored, anywhere at their convenience using our CapsoCloud software or downloading data from the capsule themselves and reviewing it in our CapsoView software. Our first U.S. Food and Drug Administration (“FDA”) cleared capsule endoscopy is our small bowel capsule (the current generation of which we refer to as CapsoCam Plus), for which we received a CE Mark in 2011 and began commercial sales in Europe in 2012, subsequent to which we received 510(k) clearance in 2016 and began commercial sales in the U.S. in 2017. CapsoCam Plus is classified as a Class II device and is used to visualize the small bowel mucosa to detect abnormalities of the small bowel in adults and children aged 2 years and above. As of December 31, 2025, our CapsoCam Plus has been used in more than 161,000 patients. For the years ended December 31, 2025 and 2024, we generated approximately $13.6 million and $11.8 million, respectively, in revenue from sales of CapsoCam Plus, an increase of approximately 15% over the prior year. Our revenue has increased in each year since we began U.S. direct sales in 2020, primarily driven by an increase in the number of CapsoCam Plus capsules sold. We are in the process of updating CapsoCam Plus to add our self-developed AI assisted pathology detection technology. We made the related FDA 510(k) submission in December 2025 and are targeting related EU submission in the second quarter of 2026. We anticipate to obtain FDA clearance of the updated capsule by the middle of 2026 and EU clearance in the third quarter of 2026, with commercialization in U.S. and EU shortly thereafter. Our AI assisted pathology detection tools detect and highlight suspected abnormalities for a clinician, reducing their time to review a capsule video and making capsule endoscopy more financially attractive to their practice.
Building upon the commercial success and the existing design of our CapsoCam Plus capsule, we developed our next pipeline capsule endoscope, CapsoCam Colon. Our CapsoCam Colon capsule (i) leverages CapsoCam Plus’s existing capsule design with its panoramic view and (ii) incorporates both our self-developed AI to automatically detect polyps in the video and our polyp-size measurement tool enabled by a 3D sensor in the capsule (polyp size being highly correlated with a polyp’s risk of becoming cancer). We submitted the 510(k) application for our first generation CapsoCam Colon capsule to the FDA in June 2025 and received responses from the FDA in September 2025. During our meeting with the FDA in December 2025, the FDA raised inquiries on topics including panoramic image processing methodology, and the proposed study design, sample size and primary endpoint for an extended study. Based on our communications with the FDA, we have decided not to further pursue the first generation CapsoCam Colon capsule submission and approval, and to prioritize our resources for the development of our second generation CapsoCam Colon capsule, featuring improved imaging quality and increased field of review with use of AI and better lens. We also expanded a second arm pivotal study to enroll approximately 800 patients at up to 20 sites in the U.S. in preparation for submitting a new 510(k) application for the second generation CapsoCam Colon capsule. As of the date of this Annual Report, over 500 patients have been enrolled for the second arm pivotal study. We currently expect to submit the 510(k) application for the second generation CapsoCam Colon capsule to the FDA in the third quarter of 2026. The CapsoCam Colon would be classified as a Class II device. Additionally, we intend to seek EU approval and commercialization for the second generation CapsoCam Colon capsule shortly after the FDA clearance. There is no guarantee that the clinical results of any of our clinical trials will demonstrate the requisite performance needed to meet applicable regulatory requirements in order to obtain FDA clearance. Further, FDA review of our 510(k) submissions may be delayed and we may not receive 510(k) clearances from the FDA on a timely basis or at all.
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We currently sell CapsoCam Plus capsules in the U.S. to our customers, which primarily include gastroenterologists practicing in clinics and/or hospitals, primarily through our in-house sales team. Outside the U.S., we sell CapsoCam Plus through a combination of our in-house sales team and qualified distributors. In 2025 and 2024, international sales accounted for 21% and 23% of total revenue.
We believe that our GI-tract capsule endoscopy solution is positioned to benefit from (i) our existing sales and marketing structure (with our in-house sales team and marketing team targeting sales of our various approved GI tract diagnostic products to the same target customer base), (ii) technological advancements (including improvements to our proprietary AI and other technologies and third-party supplier improvements in optics and storage capacity) and (iii) increased telemedicine adoption (following FDA clearance in December 2024 of remote ingestion of our CapsoCam Plus). We also believe our solution can be adapted to address new GI indications. Potential new medical indications include esophageal medical conditions (such as esophageal varices and Barrett’s esophagus) and pancreatic cancer. We plan to (i) commence feasibility studies of CapsoCam’s accuracy in detecting abnormalities indicative of cancerous and precancerous pancreatic neoplasia (abnormal cell growth) in the second quarter of 2026 and (ii) commence clinical studies of CapsoCam's accuracy in screening esophageal varices (i.e. enlarged blood veins in the esophagus) in cirrhotic patients with portal hypertension in the first half of 2027, in each case, subject to timely availability of sufficient funding and liquidity and/or potential adjustment of our clinical development priorities. In connection with our efforts to address pancreatic cancer, we submitted an FDA “Breakthrough Device Designation” for our capsule endoscopy solution on November 6, 2025. A response from FDA in January 2026 determined that the CapsoCam UGI, our capsule endoscopy system for use in early-stage pancreatic cancer detection, does allow for visualization of the papilla and its abnormalities, for both pre-cancerous and cancerous lesions. Due to the fact that the device does not specifically define diagnostic criteria, the application was not approved. The Company expects to resubmit the Breakthrough Device Designation application following the study, when additional data is available. The breakthrough designation is a part of the on-going project, potentially supplementing the regulatory pathway and approval for early pancreas cancer detection.
CapsoCam Plus
Diseases of the small bowel include obscure GI bleeding, chronic iron-deficiency anemia, Crohn’s disease, tumors, and polyposis. Capsule endoscopy is the first-line modality for imaging the mucosa of the small bowel including the pathologies characterizing these diseases. Various methods of enteroscopy for reaching the entirety of the small bowel, which is approximately 20 feet long, are invasive, time consuming, and require a high level of skill from the operator of the endoscope. Enteroscopy is still required for biopsy or to provide certain therapies, but for diagnostic visualization, capsule endoscopy is preferred for its simplicity, non-invasiveness, and relatively low cost. Competitor capsule endoscopy systems that are currently available in the market consist of capsules with end-view systems, which provide only limited “tunnel” or partial “wall” views of the small bowel, and wired data recorders worn on the body, which incur an upfront capital expense and clinical workflow complications for providers and discomfort and multiple clinical visits for patients.
We believe our CapsoCam Plus is a superior capsule endoscopy system, both in how it captures and presents images of the GI tract and the clinical workflow and patient experience that it enables. Our CapsoCam captures a full 360° panoramic video, providing a complete view of the GI mucosa—unobstructed by folds and with complete coverage of the bending intestine’s inner curvature, ultimately resulting in superior diagnostic yield. This was demonstrated by a large, single center retrospective study comparing the clinical performance of the CapsoCam system to competitor systems between 2012 and 2018. The same study also noted CapsoCam’s operational benefits, which included, greater lesion detection, 60% better visualization of the papilla, higher exam completion rates of 97% and less lost data.1 In particular, our CapsoCam is a zero-capex “wire-free” data collection solution for providers as it stores the entire video in onboard memory. Following retrieval, our cloud-based platform, CapsoCloud, gives providers in the U.S. the ability to remotely access data from the cloud and stream in vivo
1 Dr. Thomas Pachofszky. World’s largest series with CapsoCam. Feasibility, completion and detection rate of the new generation of capsule endoscope with a 360° lateral panoramic view—as single center retrospective study. Abstract UEG Week 2019.
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videos anywhere at their convenience. Outside of the U.S., providers review procedure videos using CapsoView software (primarily due to foreign data privacy and access regulations).
For the use of AI in our CapsoCam Plus capsule, we made 510(k) submission in December 2025 and are targeting making EU submission in the second quarter of 2026. We anticipate to obtain FDA clearance by the middle of 2026 and EU clearance in the third quarter of 2026. Also, we are currently developing a capsule delivery device with full commercialization expected in the fourth quarter of 2026, and a patency capsule (for verifying a capsule endoscope can pass through the bowel without retention prior to an exam) with tentative FDA 510(k) submission planned by the end of the second quarter of 2026. Our 510(k) submissions and FDA review thereof may be delayed and we may not receive 510(k) clearances from the FDA on a timely basis or at all. The recent indication for children aged 2 years and above and the delivery device should enable faster penetration of the pediatric market. Of the patients who are unable to swallow a capsule, many are children. Patency capsules are used primarily with Crohn’s disease patients to verify that a capsule endoscope can pass through the GI tract without retention at a stricture, a narrowing of the small bowel which can result from inflammation and scarring associated with Crohn’s disease. The patency capsule is the same diameter as a capsule endoscope such that if it passes without delay, the CapsoCam is also likely to pass without retention (but will dissolve if retained). The global capsule endoscopy market for the small bowel is forecasted to reach approximately $335 million in 2030. The U.S. capsule endoscopy market for the small bowel is forecasted to reach approximately $126 million in 2030.2
CapsoCam Colon
A colon polyp is a clump of cells that forms on the lining of the colon. Most colon polyps are harmless, but, over time, some colon polyps develop into CRC. The size of a polyp is highly correlated with its risk of becoming cancerous. Currently, optical colonoscopy, accompanied by polypectomy and biopsy, is considered the gold-standard for the detection of colorectal polyps and cancers. Colon capsule endoscopy provides non-invasive visualization of the entire colon from the cecum to the rectum, and it has demonstrated good sensitivity and specificity for the detection of colon polyps. It is intended to be used for (a) patients after an incomplete optical colonoscopy with adequate preparation and a complete evaluation of the colon was not technically possible and (b) patients with evidence of GI bleeding of lower GI origin with major risks for colonoscopy or moderate sedation, but who can tolerate colonoscopy and moderate sedation in the event a clinically significant colon abnormality is identified on capsule endoscopy. Currently, only two competitive products are available in the market for these indications–only one of which, Medtronic’s PillCam COLON 2, is available in the U.S. These competitor capsules have end-view systems, which provide only limited “tunnel” views of the colon, and wired data recorders worn on the body, which incur an upfront capital expense and clinical workflow complications for providers and discomfort and multiple clinical visits for patients.
We believe our CapsoCam Colon, once FDA cleared, will be a superior capsule endoscopy system, both in how it captures and presents images of the GI tract and the clinical workflow and patient experience that it enables. Our CapsoCam Colon utilizes our self-developed AI for automated polyp detection. AI improves diagnostic yield and provides more consistent accuracy with reduced dependency on the experience level of the physician video reader and their level of fatigue and distraction. Our CapsoCam Colon also incorporates our proprietary 3D-sensing technology to more accurately measure the size of polyps in the GI tract, enabling physicians to more confidently decide that patients with small (e.g., less than 6mm) polyps may forgo a follow-on colonoscopy, increasing the utility of the procedure for healthcare providers and patients alike. Similar to our CapsoCam Plus, our CapsoCam Colon also captures a full 360° panoramic video, is a zero-capex “wire-free” data collection solution for providers and utilizes our cloud-based platform, CapsoCloud, for providers in the U.S. and CapsoView software for providers outside of the U.S. Further, CapsoCam Colon is a panenteric capsule which, when programmed with slightly different operating parameters, can be used to visualize both the small bowel and the colon in one procedure for the evaluation of Crohn’s disease, ulcerative colitis, irritable bowel syndrome and obscure GI bleeding.
2 Grand View Research, Inc., “Capsule Endoscopy Market Estimates & Trend Analysis From 2018 to 2030,” an independent report commissioned by CapsoVision, Inc.
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Current indications for colon capsule endoscopy are limited to patients with evidence of lower-GI bleeding (such as a positive stool test) for whom the risk of colonoscopy or moderate sedation is significant and for patients who have had an incomplete colonoscopy, with adequate preparation. The global colon capsule endoscopy market is forecasted to reach approximately $311 million in 2030.3 This estimate only considers current products on the market and does not take into account advanced products currently in development and/or awaiting approval for introduction into the market. We believe that our CapsoCam Colon, once FDA cleared and commercialized, will be a superior capsule endoscopy system that will expand the market for colon capsule endoscopy.
We have established a competitive advantage through multiple strategic initiatives, including investing substantial resources to create our intellectual property portfolio. As of December 31, 2025, we had over 140 issued patents covering multiple aspects of our capsules and technology.
We invest in research and development initiatives that are focused on introducing enhancements and improvements aimed at increasing the value provided by our GI-tract capsule endoscopy solution. Our research and development team includes hardware and software engineers with deep expertise in medical technology, optics, data science, AI, and cloud-based data and security architecture and individuals with extensive clinical development expertise.
Our Program
We developed our first commercial product, the CapsoCam capsule endoscopy solution (the current generation of which we refer to as CapsoCam Plus), for visualization of the small bowel mucosa. The following table summarizes key information about our clinical program for the small bowel capsule:

Indication | Clinical Trials | Timeline
Visualize small bowel and detect pathologies | Completed | Received FDA 510(k) clearance in 2016*
| Data Collection (AI) Study | FDA 510(k) submitted at the end of 2025

* Received FDA 510(k) clearance in December 2024 for pediatric (children aged 2 years and above) use and telemedicine supervision (i.e., remote ingestion) indications.
We have developed our next pipeline product, the CapsoCam Colon capsule endoscopy system, for visualization of the colon and detection and measurement of polyps. The following table summarizes key information about our clinical program for CapsoCam Colon:

Indication | Clinical Trials | Estimated Timeline
Visualize colon and detect/measure polyps | Feasibility Study | Completed in 2018**
| Pilot Study | Completed in 2021
| Pivotal Study (first arm)—1st generation capsule | Completed in 2025
| Pivotal Study (second arm)—improved 2nd generation capsule | FDA 510(k) submission expected in the third quarter of 2026

** Operationally, the study used to enroll feasibility study subjects remains active to facilitate continued research and development of the CapsoCam Colon, which from time to time requires a limited investigation in healthy volunteers.
3 Grand View Research, Inc., “Capsule Endoscopy Market Estimates & Trend Analysis From 2018 to 2030,” an independent report commissioned by CapsoVision, Inc.
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Our Strengths
We believe the continued growth of our Company will be driven by the following factors:
•Sole capsule endoscope with a 360° panoramic view available in the market. We believe only our CapsoCam Plus boasts a 360° panoramic lateral view. It houses four high-resolution cameras around its circumference, and the images from each are stitched into a single panoramic image. Compared to competitive end-view systems, a 360° panoramic lateral view provides a complete view of the GI mucosa—unobstructed by folds and with complete coverage of the bending intestine’s inner curvature, resulting in demonstrated superior diagnostic yield.
•Telemedicine-enabled and zero-capex “wire-free” data collection and remote data analysis. Our CapsoCam is a zero-capex “wire-free” data collection solution for providers, as it stores the entire video in onboard memory. In December 2024, we received FDA 510(k) clearance for telemedicine supervision (i.e., remote ingestion) of our CapsoCam Plus, allowing patients to ingest our capsule in the comfort of their own homes, under the remote supervision of providers. The CapsoCam solution frees up exam-room schedules for providers and provides flexibility to administer capsules any day at any time. A provider’s practice can easily scale to multiple capsules per day with no added cost, and there is no equipment to recover from patients. Our CapsoCam Plus solution includes our cloud-based platform, CapsoCloud, which provides a flexible, trackable, streamlined, and capital-equipment-free workflow for providers in the U.S. It also allows clinicians to track procedures and stream in vivo videos anywhere at their convenience, generate reports, store and manage patient data, and transfer data to third-party reading services. We believe at-home procedures and remote analysis via CapsoCloud will be attractive to providers and patients alike, particularly for future screening indications.
•Automated pathology detection due to usage of AI. CapsoCam Colon (subject to FDA clearance) incorporates deep learning AI for automated pathology detection of polyps, a capability that competitive systems lack. For the use of AI in our CapsoCam Plus capsule, we made 510(k) submission in December 2025 and are targeting making EU submission by the second quarter of 2026. We anticipate to obtain FDA clearance by the middle of 2026 and EU clearance in the third quarter of 2026. Our AI assisted pathology detection tools detect and highlight suspected abnormalities for a clinician, reducing their time to review the video and making capsule endoscopy more financially attractive to their practice. CapsoCloud continuously acquires consenting patients’ clinical data, enabling our in-house AI experts to develop ever-improving automated lesion detection and classification. Our 510(k) submission and FDA review thereof may be delayed and we may not receive 510(k) clearance from the FDA on a timely basis or at all.
•3D-sensing technology informs follow-on care decisions. Our CapsoCam Colon (subject to FDA clearance) incorporates our proprietary 3D-sensing technology to more accurately measure polyp sizes. Polyp size is highly correlated with its risk of becoming cancer. No other capsule endoscope currently in the market has 3D-enabled measurement capability. With automated pathology detection and the ability to manually review video frames adjacent to an identified polyp, physicians can more confidently decide that patients with small (e.g., less than 6mm) polyps may forgo a follow-on colonoscopy, increasing the utility of the procedure for healthcare providers and patients alike.
•Experienced leadership team. Our senior management team consists of industry professionals with deep industry expertise across various disciplines, including medical technology, engineering, optics, sales and marketing, finance, operations, data science, AI, and clinical operations and research.
Our Growth Strategies
Our long-term, lifesaving vision is an ingestible capsule that, in a single convenient non-invasive procedure, screens for multiple cancers—esophageal, gastric, pancreatic, small-bowel, and colorectal—at early and precancerous stages, utilizing AI to analyze thousands of images captured in the GI tract. We are building towards
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this goal with a planned succession of FDA-cleared indications, targeting existing and nascent markets. Until then, key elements of our nearer-term growth strategy include:
•Obtain 510(k) clearance of CapsoCam Colon. We have developed our next pipeline product, CapsoCam Colon, for visualization of the colon and detection and measurement of polyps. In addition to having a 360° panoramic lateral view, it incorporates deep learning AI for automated pathology detection of polyps and 3D-sensing technology to more accurately measure polyp sizes. We submitted the 510(k) application for our first generation CapsoCam Colon capsule to the FDA in June 2025 and received responses from the FDA in September 2025. During our meeting with the FDA in December 2025, the FDA raised inquiries on topics including panoramic image processing methodology, and the proposed study design, sample size and primary endpoint for an extended study. Based on our communications with the FDA, we have decided not to further pursue the first generation CapsoCam Colon capsule submission and approval, and to prioritize our resources for the development of our second generation CapsoCam Colon capsule, featuring improved imaging quality and increased field of review with use of AI and better lens. We also expanded a second arm pivotal study to enroll approximately 800 patients at up to 20 sites in the U.S. in preparation for submitting a new 510(k) application for the second generation CapsoCam Colon capsule. As of the date of this Annual Report, over 500 patients have been enrolled for the second arm pivotal study. We currently expects to submit the 510(k) application for the second generation CapsoCam Colon capsule to the FDA in the third quarter of 2026. There is no guarantee that the clinical results of any of our clinical trials will demonstrate the requisite performance needed to meet applicable regulatory requirements in order to obtain FDA clearance. Current indications for colon capsule endoscopy are limited to patients with evidence of lower-GI bleeding (such as a positive stool test) for whom the risk of colonoscopy or moderate sedation is significant and for patients who have had an incomplete colonoscopy, with adequate preparation. As a part of this 510(k) application, to increase the population of indicated patients, we intend to seek FDA clearance of expanded indications that remove the requirement for evidence of GI bleeding of lower GI origin for patients with major risks for colonoscopy or moderate sedation. Our 510(k) submission for the second generation of CapsoCam Colon and FDA review of our 510(k) applications may be delayed and we may not receive 510(k) clearances from the FDA on a timely basis or at all. Additionally, we intend to seek EU approval and commercialization for the second generation CapsoCam Colon capsule shortly after the FDA clearance. The global colon capsule endoscopy market is forecasted to reach approximately $311 million in 2030.4 This estimate only considers current products on the market and does not consider advanced products currently in development and/or awaiting approval for introduction into the market. We believe that our CapsoCam Colon, once FDA cleared and commercialized, will be a superior capsule endoscopy system that will expand the market for colon capsule endoscopy.
•Expand clinical use cases and accessories for CapsoCam Plus. In December 2024, we received 510(k) clearance of our CapsoCam Plus for pediatric use in children aged 2 years and above and telemedicine supervision (i.e., remote ingestion). Also, we are currently developing a capsule delivery device with full commercialization expected in the fourth quarter of 2026 for patients who are unable to swallow the capsule, many of whom are children. The capsule delivery device should enable faster penetration of the newly indicated pediatric market. We are also currently developing a patency capsule with tentative FDA 510(k) submission planned by the end of the second quarter of 2026, which is used primarily with Crohn’s disease patients to verify that a capsule endoscope can pass through the GI tract without retention at a stricture, a narrowing of the small bowel which can result from inflammation and scarring associated with Crohn’s disease.
•Continue to improve and innovate our GI-tract capsule endoscopy solution. Our research and development initiatives are focused on introducing enhancements and improvements aimed at increasing the value provided by our GI-tract capsule endoscopy solution. In particular, we are working on improvements to our CapsoCam, including a new lens and illumination optics with an increased field of
4 Grand View Research, Inc., “Capsule Endoscopy Market Estimates & Trend Analysis From 2018 to 2030,” an independent report commissioned by CapsoVision, Inc.
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view, improved image quality and higher peak frame rate. For our AI assisted pathology detection technology, we plan to continue investing to (i) improve the pathology-detection and classification accuracy and the scope of our AI algorithms and (ii) apply AI, including large language models, to streamline the diagnostic and medical-report-generation processes, which in turn improves the efficiency and effectiveness of our healthcare provider customers. We also plan to continue making improvements to our CapsoCloud and CapsoView software.
•Expand into new indications and clinical use cases beyond small bowel and colon. In the first half of 2027, we plan to commence clinical studies of our CapsoCam’s accuracy in screening esophageal varices in cirrhotic patients with portal hypertension, subject to timely availability of sufficient funding and liquidity and/or potential adjustment of our clinical development priorities. Patients with cirrhosis who develop portal hypertension are at risk for complications, including bleeding from esophageal varices. Portal hypertension is the result of resistance to portal blood flow, which most often occurs in the liver and with increases in portal blood flow. When esophageal varices rupture, bleeding may be severe and life- threatening. There are approximately 5.5 million people in the U.S. with Cirrhosis.5 Up to 85% of cirrhotic patients at some point develop esophageal varices15 6, a significant clinical stage.7 Esophageal varices is one of the most common causes of acute upper gastrointestinal bleeding. Acute variceal bleeding is a potentially fatal complication of liver cirrhosis and represents an important economic and population health issue.8 We believe that our CapsoCam’s panoramic imaging is particularly well suited to visualizing the esophagus and measuring the size of varices, which may translate to significant improvement in sensitivity and staging accuracy. In the second quarter of 2026, we plan to commence feasibility studies of our CapsoCam’s accuracy in detecting abnormalities indicative of cancerous and precancerous pancreatic neoplasia (abnormal cell growth) by visualizing abnormalities of the duodenal papilla, subject to timely availability of sufficient funding and liquidity and/or potential adjustment of our clinical development priorities. A dilated, or unnaturally opened, duodenal papilla is correlated with GI tract content reflux into the pancreas duct and pancreatic neoplasia and may indicate the presence of, or elevated risk of developing, serious abnormalities like pancreatitis or a tumor of the pancreas. The CapsoCam has detected the duodenal papilla (Ampulla of Vater) at a higher rate than non-panoramic systems in prior studies. For example, a 2024 retrospective study was conducted at a single Japanese center with 33 patients ingesting the CapsoCam Plus and another random sample of propensity-score-matched patients ingesting the Medtronic PillCam SB3. Physician video readers observed the duodenal papilla at a significantly higher rate using the CapsoCam Plus (82% vs. 15%, p < 0.001).9 There is currently no effective screening for pancreatic cancer. In connection with our efforts to address pancreatic cancer, we submitted an FDA “Breakthrough Device Designation” for our capsule endoscopy solution on November 6, 2025. A response from FDA in January 2026 determined that the CapsoCam UGI does allow for visualization of the papilla and its abnormalities, for both pre-cancerous and cancerous lesions. Due to the fact that the device does not specifically define diagnostic criteria, the application was not approved. The Company expects to resubmit the Breakthrough Device Designation application following the study, when additional data is available. The breakthrough designation is a part of the on-going
5 https://gi.org/topics/liver-cirrhosis/
6 Socrate Pallio, et al. Diagnosis and Management of Esophagogastric Varices. Diagnostics 2023, 13, 1031.
7 D’Amico G, Pasta L, Morabito A, et al. Competing risks and prognostic stages of cirrhosis: a 25-year inception cohort study of 494 patients. Aliment Pharmacol Ther. 2014; 39:1180–1193.
8 Socrate Pallio, et al. Diagnosis and Management of Esophagogastric Varices. Diagnostics 2023, 13, 1031.
9 Hirata, Issei; Tsuboi, Akiyoshi; Matsubara, Yuka; Sumioka, Akihiko; Takasago, Takeshi; Tanaka, Hidenori; Yamashita, Ken; Takigawa, Hidehiko; Urabe, Yuji; Oka, Shiro. Clinical usefulness and acceptability of small-bowel capsule endoscopy with panoramic imaging compared with axial imaging in Japanese patients. DEN Open. 2024 Jun 6
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project, potentially supplementing the regulatory pathway and approval for early pancreas cancer detection.
Market Overview
Overview and Challenges of Visualizing Small Bowel and Detecting Small Bowel Pathologies
Diseases of the small bowel include obscure GI bleeding, chronic iron-deficiency anemia, Crohn’s disease, tumors, and polyposis.
Obscure GI bleeding is recurrent or persistent GI bleeding of uncertain origin. 5% of all GI bleeding is obscure GI bleeding. In approximately 80% of obscure GI bleeding cases, the origin is localized to the small bowel.10 Chronic iron-deficiency anemia is a condition in which blood lacks adequate healthy red blood cells. Red blood cells carry oxygen to the body’s tissues. Chronic iron-deficiency is the most common nutrient deficiency in the world and a significant common cause of anemia worldwide. Crohn’s disease is a type of inflammatory bowel disease that causes swelling and irritation of the tissues, called inflammation, in the digestive tract. This can lead to belly pain, severe diarrhea, fatigue, weight loss and malnutrition. Inflammation caused by Crohn’s disease can affect different areas of the digestive tract in different people. Crohn’s disease most commonly affects the end of the small intestine and the beginning of the large intestine. The inflammation often spreads into the deeper layers of the bowel. Crohn’s disease often begins in a person’s teens or twenties, though some patients experience symptoms even earlier.
Capsule endoscopy is the first-line modality for imaging the mucosa of the small bowel including the pathologies characterizing these diseases. Various methods of enteroscopy for reaching the entirety of the small bowel, which is approximately 20 feet long, are invasive, time consuming, and require a high level of skill from the operator of the endoscope. Enteroscopy is still required for biopsy or to provide certain therapies. For diagnostic visualization, however, capsule endoscopy is preferred given its simplicity, non-invasiveness, and relatively low cost.
After obtaining negative esophagogastroduodenoscopy and colonoscopy procedure results, capsule endoscopy of the small bowel is the first-line investigational procedure for obscure GI bleeding. The reported diagnostic yield of capsule endoscopy ranges from 30% to 70%, exceeding that of alternative diagnostic methods, such as push enteroscopy (which has a reported diagnostic yield estimated at approximately 31%), double-balloon enteroscopy (which has a reported diagnostic yield estimated at approximately 23%), and small-bowel series (which has a reported diagnostic yield estimated at approximately 5%). Capsule endoscopy has the additional advantage of non-invasiveness. Due to the often-intermittent nature of GI bleeding, performing capsule endoscopy within 14 days of a bleeding episode maximizes the diagnostic yield.11
The sources of bleeding found by capsule endoscopy include ulcers, vascular anomalies, tumors, polyps, and non-specific enteritis. Sometimes blood is detected without identifying a source lesion. Over one half of patients regularly taking non-steroidal anti-inflammatory drugs have small-bowel lesions with the potential to bleed. Capsule endoscopy identifies the type, location, and extent of lesions, and helps determine therapeutic interventions and monitor their effectiveness. The localization of lesions determines the route (upper or lower) of follow-on device-assisted enteroscopy.
Capsule endoscopy is indicated for patients with chronic iron-deficiency anemia when obscure GI bleeding is merely suspected, after obtaining negative esophagogastroduodenoscopy and colonoscopy procedure results. In particular, capsule endoscopy can be considered for patients with severe anemia—requiring blood transfusions, hemoglobin level <100 g/L, or persistent or recurrent iron-deficiency anemia despite iron replacement therapy.
10 Lee, Bo-In (2022). Indications and Contraindications of Small-bowel Capsule Endoscopy. In: Chun, H.J., Seol, SY., Choi, MG., Cho, J.Y. (eds) Small Intestine Disease. Springer, Singapore.
11 Lee, Bo-In (2022). Indications and Contraindications of Small-bowel Capsule Endoscopy. In: Chun, H.J., Seol, SY., Choi, MG., Cho, J.Y. (eds) Small Intestine Disease. Springer, Singapore.
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Capsule endoscopy is also indicated for patients presenting with clinical features consistent with Crohn’s disease, after negative ileocolonoscopy and imaging studies. Capsule endoscopy has shown good sensitivity (91%-100%) and specificity (91%-92%) when using ileocolonoscopy as the reference test. A prospective study reported that capsule endoscopy aided Crohn’s disease diagnosis in 83% of cases, influenced decision making in 72%, and changed management in 78%.12 Capsule endoscopy can be used to provide additional information influencing disease management in patients with known Crohn’s disease, when ileocolonoscopy or imaging results do not fully explain the clinical presentation. It further can be used to assess mucosal healing or when Crohn’s disease is recurrent after colectomy.
Capsule endoscopy is recommended for ongoing surveillance of polyps in patients with intestinal polyposis syndromes, especially Peutz-Jeghers Syndrome. Hereditary polyposis syndromes (including Peutz-Jeghers Syndrome) present a significant risk of complications including bleeding and intussusception. Capsule endoscopy has better diagnostic yield than endoscopy for polyps beyond the duodenum. Capsule endoscopy also has demonstrated detection of more polyps and smaller polyps compared to other non-invasive imaging modalities, such as radiography or magnetic resonance enterography, and similar detection compared to device-assisted enteroscopy.13
Our Addressable Market Opportunity in Visualizing Small Bowel and Detecting Small Bowel Pathologies
The global capsule endoscopy market for the small bowel is forecasted to reach approximately $335 million in 2030. The U.S. capsule endoscopy market for the small bowel is forecasted to reach approximately $126 million in 2030.14
Overview and Challenges of Detecting Colon Polyps
A colon polyp is a clump of cells that forms on the lining of the colon. Most colon polyps are harmless, but, over time, some colon polyps develop into CRC. The size of a polyp is highly correlated with its risk of becoming cancerous.
Currently, optical colonoscopy, accompanied by polypectomy and biopsy, is considered the gold-standard for the detection of colorectal polyps and cancers. Each year in the U.S., there are approximately 153,000 new cases of CRC and approximately 53,000 deaths.15 It is widely accepted that CRC is among the most preventable, yet least-prevented cancers. CRC can take up to 10-15 years to progress from a pre-cancerous lesion to metastatic cancer and death. Patients who are diagnosed early in the progression of the disease—with pre-cancerous lesions or early-stage cancer—are more likely to have a complete recovery and to be treated less expensively.
Colon capsule endoscopy provides non-invasive visualization of the entire colon from the cecum to the rectum, and it has demonstrated good sensitivity and specificity for the detection of colon polyps. It is intended to be used for (a) patients after an incomplete optical colonoscopy with adequate preparation and a complete evaluation of the colon was not technically possible and (b) patients with evidence of GI bleeding of lower GI origin with major risks for colonoscopy or moderate sedation, but who can tolerate colonoscopy and moderate sedation in the event a clinically significant colon abnormality is identified on capsule endoscopy. As a part of our 510(k) application for our second generation CapsoCam Colon and to increase the population of indicated patients, we intend to seek
12 Enns, Robert A.; Hookey, Lawrence; Armstrong, David; Bernstein Charles N.; Heitman, Steven J; Teshima, Christopher; Leontiadis, Grigorios I.; Tse, Frances; Sadowski, Daniel. Clinical Practice Guidelines for the Use of Video Capsule Endoscopy. Gastroenterology. 2017 Feb;152(3):497-514.
13 Enns, Robert A.; Hookey, Lawrence; Armstrong, David; Bernstein Charles N.; Heitman, Steven J; Teshima, Christopher; Leontiadis, Grigorios I.; Tse, Frances; Sadowski, Daniel. Clinical Practice Guidelines for the Use of Video Capsule Endoscopy. Gastroenterology. 2017 Feb;152(3):497-514.
14 Grand View Research, Inc., “Capsule Endoscopy Market Estimates & Trend Analysis From 2018 to 2030,” an independent report commissioned by CapsoVision, Inc.
15 https://www.cancer.org/cancer/types/colon-rectal-cancer/about/key-statistics.html
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FDA clearance of expanded indications that remove the requirement for evidence of GI bleeding of lower GI origin for patients with major risks for colonoscopy or moderate sedation.
Incomplete colonoscopies are reported at rates from 4% to 25%. Of these, approximately half result from inadequate bowel preparation and otherwise due to the tortuosity of the colon, adhesions from previous surgeries, angulation, fixation of bowel loops, diverticulosis, or ineffective sedation. A large multicenter study found that 50% of screening patients had a significant dysplastic lesion in the proximal colon. The risk of proximal cancer is 2 times greater when colonoscopy is incomplete.16 A complete colonoscopy can often be achieved in a second attempt, especially by highly skilled endoscopists employing specialized equipment and techniques, taking extra time, and choosing an appropriate sedation. However, often a non-invasive procedure to visualize the proximal colon is preferred. Computed tomography colonography (“CTC”) and colon capsule endoscopy are both non-invasive options. CTC, also referred to as virtual colonoscopy, is an imaging examination of the entire colon and rectum. CTC uses computed tomography to acquire images and advanced two-dimensional and three-dimensional image display techniques for interpretation. Following incomplete colonoscopy, compared to CTC, colon capsule endoscopy has demonstrated a 61.5% higher diagnostic yield for polyps greater than 5mm and 3 times greater for all polyps.17 In a multicenter prospective study, among 286 analyzable subjects of average risk in a screening population, the sensitivity for polyps greater than or equal to 6mm for colon capsule endoscopy was 78.2% compared to only 26.8% for CTC.18
Many patients have an elevated risk for colonoscopy or the moderate sedation that typically accompanies it. For them, the risk of a screening or surveillance colonoscopy may not be justified without prior evidence that a significant lesion requiring polypectomy is present. Colon capsule endoscopy is a non-invasive low-risk procedure that does not require sedation. It may be used as a preliminary test to determine if a significant polyp is present. However, colon capsule endoscopy is not yet widely used for these patients. A major reason may be that the labeled indications stipulate that these patients have evidence of bleeding from a lower GI origin, such as a positive stool test, prior to colon capsule endoscopy. In most cases, after a positive stool test, providers in the U.S. are likely to refer patients to colonoscopy directly, with colon capsule endoscopy reserved for those cases where the patient refuses colonoscopy or the risk associated with colonoscopy or sedation is especially high.
Our Addressable Market Opportunity in Colon Capsule Endoscopy
The global colon capsule endoscopy market is forecasted to reach approximately $311 million in 2030.19 This estimate only considers current products on the market and does not consider advanced products currently in development and/or awaiting approval for introduction into the market. We believe that our CapsoCam Colon, once FDA cleared and commercialized, will be a superior capsule endoscopy system that will expand the market for colon capsule endoscopy.
Other Potential Opportunities
In the first half of 2027, we plan to commence clinical studies of our CapsoCam’s accuracy in screening esophageal varices in cirrhotic patients with portal hypertension, subject to timely availability of sufficient funding
16 Franco, Diana L.; Leighton, Jonathan A.; Gurudu, Suryakanth R. Approach to Incomplete Colonoscopy: New Techniques and Technologies. Gastroenterol Hepatol (N Y). 2017 Aug;13(8):476-483.
17 Deding, Ulrik; Kaalby; Lasse; Bøggild, Henrik; Plantener, Eva; Wollesen, Mie K; Kobaek-Larsen, Morten; Hansen, Siri J.; Baatrup, Gunnar. Colon Capsule Endoscopy vs. CT Colonography Following Incomplete Colonoscopy: A Systematic Review with Meta-Analysis. Cancers (Basel). 2020 Nov 13;12(11):3367.
18 Cash, Brooks D; Fleisher, Mark R.; Fern, Steven; Rajan, Elizabeth; Haithcock, Robyn; Kastenberg, David M; Pound, David; Papageorgiou Neofytos P; Fernández-Urién Ignacio; Schmelkin Ira J; Rex Douglas K. Multicentre, prospective, randomised study comparing the diagnostic yield of colon capsule endoscopy versus CT colonography in a screening population (the TOPAZ study). Gut. 2021 Nov;70(11):2115-2122. DOI:10.1136/gutjnl-2020-322578
19 Grand View Research, Inc., “Capsule Endoscopy Market Estimates & Trend Analysis From 2018 to 2030,” an independent report commissioned by CapsoVision, Inc.
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and liquidity and/or potential adjustment of our clinical development priorities. Patients with cirrhosis who develop portal hypertension are at risk for complications, including bleeding from esophageal varices. Portal hypertension is the result of resistance to portal blood flow, which most often occurs in the liver and with increases in portal blood flow. When esophageal varices rupture, bleeding may be severe and life threatening. There are approximately 5.5 million people in the U.S. with Cirrhosis.20 Up to 85% of cirrhotic patients at some point develop esophageal varices 21, a significant clinical stage.22 Esophageal varices is one of the most common causes of acute upper gastrointestinal bleeding. Acute variceal bleeding is a potentially fatal complication of liver cirrhosis and represents an important economic and population health issue.23 Esophageal varices screening or surveillance is typically conducted for decompensated cirrhosis or compensated but liver stiffness > 20 KPa or platelet count < 150,000/mL (CSPH).24 Traditional endoscopy poses a risk for rupture of the varices and an increased risk of sedation-related complications typical of those with liver cirrhosis 25, with potential medicolegal implications. Medicare reimbursement is indicated as an alternative to endoscopy for suitable patients with CSPH, for example those anticipated to tolerate adequate doses of beta-blockers to alleviate CSPH if varices are detected or those who cannot tolerate traditional endoscopy or when endoscopic procedures may be inappropriate or contraindicated. Despite the potential benefits of capsule endoscopy to screen for varices, the Medtronic PillCam is not widely used for this purpose, mostly because the sensitivity is insufficient. In a prospective study with 330 cirrhotic patients with no known esophageal varices, only 64% of those with varices detected by endoscopy were correctly diagnosed and correctly staged by the PillCam.26 We believe that our CapsoCam’s panoramic imaging is particularly well suited to visualizing the esophagus and measuring the size of varices, which may translate to significant improvement in sensitivity and staging accuracy.
Further, in the second quarter of 2026, we plan to commence feasibility studies of our CapsoCam’s accuracy in detecting abnormalities indicative of cancerous and precancerous pancreatic neoplasia (abnormal cell growth) by visualizing abnormalities of the duodenal papilla, subject to timely availability of sufficient funding and liquidity and/or potential adjustment of our clinical development priorities. A dilated, or unnaturally opened, duodenal papilla is correlated with GI tract content reflux into the pancreas duct and pancreatic neoplasia and may indicate the presence of, or elevated risk of developing, serious abnormalities like pancreatitis or a tumor of the pancreas. The CapsoCam has detected the duodenal papilla (Ampulla of Vater) at a higher rate than non-panoramic systems in prior studies. For example, a 2024 retrospective study was conducted at a single Japanese center with 33 patients ingesting the CapsoCam Plus and another random sample of propensity-score-matched patients ingesting the Medtronic PillCam SB3. Physician video readers observed the duodenal papilla at a significantly higher rate using the CapsoCam Plus (82% vs. 15%, p < 0.001).27 Another retrospective single-center study in Austria compared the detection of the duodenal papilla in 516 CapsoCam Plus, 803 Medtronic PillCam, and 315 IntroMedic MiroCam procedures from 2012-2018 and observed an 82% detection rate for CapsoCam Plus and an average of 10% detection rate for PillCam and MiroCam. According to the ACS, pancreatic cancer is estimated to be diagnosed in 67,530 patients in the U.S. in 2026, and approximately 52,740 patients are estimated to die from it. Due to the asymptomatic early stages, in most cases this disease is detected too late, making pancreatic cancer one of the most lethal malignant neoplasms. The overall 5-year survival rate is approximately 13%, which is the lowest survival rate of all cancer types. On the other hand, the 5-year survival rate is around 44% if the pancreatic cancer is still in the early stages at the time of diagnosis. A definitive diagnosis is currently made
20 https://gi.org/topics/liver-cirrhosis/
21 Socrate Pallio, et al. Diagnosis and Management of Esophagogastric Varices. Diagnostics 2023, 13, 1031.
22 D’Amico G, Pasta L, Morabito A, et al. Competing risks and prognostic stages of cirrhosis: a 25-year inception cohort study of 494 patients. Aliment Pharmacol Ther. 2014; 39:1180–1193.
23 Socrate Pallio, et al. Diagnosis and Management of Esophagogastric Varices. Diagnostics 2023, 13, 1031.
24 Socrate Pallio, et al. Diagnosis and Management of Esophagogastric Varices. Diagnostics 2023, 13, 1031.
25 Socrate Pallio, et al. Diagnosis and Management of Esophagogastric Varices. Diagnostics 2023, 13, 1031.
26 Sacher-Huvelin S, Cales P, Bureau C, et al. Screening of esophageal varices by esophageal capsule endoscopy: results of a French multicenter prospective study. Endoscopy. 2015; 47:486–92.
27 Hirata, Issei; Tsuboi, Akiyoshi; Matsubara, Yuka; Sumioka, Akihiko; Takasago, Takeshi; Tanaka, Hidenori; Yamashita, Ken; Takigawa, Hidehiko; Urabe, Yuji; Oka, Shiro. Clinical usefulness and acceptability of small-bowel capsule endoscopy with panoramic imaging compared with axial imaging in Japanese patients. DEN Open. 2024 Jun 6
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through a series of investigations, including imaging scans, blood tests and biopsy, which are usually only performed in symptomatic patients. There is currently no effective screening for pancreatic cancer. In connection with our efforts to address pancreatic cancer, we submitted an FDA “Breakthrough Device Designation” for our capsule endoscopy solution on November 6, 2025. A response from FDA in January 2026 determined that the CapsoCam UGI does allow for visualization of the papilla and its abnormalities, for both pre-cancerous and cancerous lesions. Due to the fact that the device does not specifically define diagnostic criteria, the application was not approved. The Company expects to resubmit the Breakthrough Device Designation application following the study, when additional data is available. The breakthrough designation is a part of the on-going project, potentially supplementing the regulatory pathway and approval for early pancreas cancer detection.
Despite its advantages, colon capsule endoscopy has not yet been granted approval for a CRC screening indication in the U.S., and is not widely used for screening in other markets. Although many studies suggest that colon capsule endoscopy has polyp-detection accuracy similar to that of a colonoscopy, the quantity of high-quality evidence establishing its effectiveness in a screening population is currently considered insufficient.28 Colon capsule endoscopy adoption is also hindered by a relatively high percentage of procedures that do not afford complete visualization of the colon, due to inadequate bowel preparation or a battery life shorter than the GI transit time. In many cases, significant polyps detected by colon capsule endoscopy are not detected during subsequent colonoscopy.29 In part, this reflects the imperfect sensitivity of colonoscopy.30
Colon capsule endoscopy has advantages relative to other non-invasive tests that are used for CRC screening. Compared to CTC, colon capsule endoscopy has demonstrated superior polyp detection accuracy and diagnostic yield. Stool tests and blood tests have demonstrated good sensitivity for cancer, but sensitivity for advanced precancerous lesions is under 50%. Relatively high false-positive rates for multi-targeted stool DNA tests, such as Cologuard, lead to unnecessary colonoscopies. In a study with over 10,000 average-risk screening patients, advanced neoplasia was not detected by colonoscopy in 75% of Cologuard-positive cases.31
We believe the large, underserved population of unscreened and inadequately screened patients represents a significant opportunity for our CapsoCam Colon capsule endoscopy solution. CRC is the second leading cause of cancer deaths in the U.S. and the leading cause of cancer deaths in the U.S. among non-smokers. Each year in
28 See (1)Vuik, Fanny ER; Nieuwenburg, Stella AV; Moen, Sarah; Spada, Cristiano; Senore, Carlo; Hassan, Cesare; Pennazio, Marco; Rondonotti, Emanuele; Pecere, Silvia; Kuipers, Ernest J; Spaander, Manon CW. Colon capsule endoscopy in colorectal cancer screening: a systematic review. Endoscopy. 2021 Aug;53(8):815-824. DOI: 10.1055/a-1308-1297; (2) Deding, Ulrik; Kaalby; Lasse; Bøggild, Henrik; Plantener, Eva; Wollesen, Mie K; Kobaek-Larsen, Morten; Hansen, Siri J.; Baatrup, Gunnar. Colon Capsule Endoscopy vs. CT Colonography Following Incomplete Colonoscopy: A Systematic Review with Meta-Analysis. Cancers (Basel). 2020 Nov 13;12(11):3367.
29 Rex, Douglas K; Adler, Samuel N; Aisenberg, James; Burch, Wilmot C Jr; Carretero, Cristina; Chowers, Yehuda; Fein, Steven A; Fern, Steven E; Fernandez-Urien Sainz, Ignaico; Fich, Alexander; Gal, Eyal; Horlander Joh C Sr; Isaacs, Kim L; Kariv, Revital; Lahat, Adi; Leung, Wai-Keung; Malik, Pramond; Morgan, Doug; Papageorgiou, Neofytos; Romeo, David P; Shah Smita S; Waterman Matti. Accuracy of capsule colonoscopy in detecting colorectal polyps in a screening population. Gastroenterology. 2015 May;148(5):948-957.e2. doi: 10.1053/j.gastro.2015.01.025
30 Zhao, Shengbing; Wang, Shuling; Pan, Peng; Xia, Tian; Chang, Xin; Yang, Xia; Guo, Liliangzi; Meng, Qianqian; Yang, Fan; Qian, Wei; Xu, Zhichao; Wang, Yuanqiong; Wang, Zhijie; Gu, Lun; Wang, Rundong; Jia, Fangzhou; Yao, Jun; Li, Zhaoshen; Bai, Yu. Magnitude, Risk Factors, and Factors Associated With Adenoma Miss Rate of Tandem Colonoscopy: A Systematic Review and Meta-analysis. Gastroenterology. 2019 May;156(6):1661-1674.e11. doi: 10.1053/j.gastro.2019.01.260
31 For FIT test, see Imperiale, Thomas F.; Ransohoff, David F.; Itzkowitz, Steven H.; Levin, Theodore R; Lanvin, Philip;Lidgard, Graham P. Multitarget Stool DNA Testing for Colorectal-Cancer Screening. N Engl J Med. 2014 April 13. DOI: 10.1056/NEJMoa1311194 For blood test, see Chung, Daniel C; Gray, Darrell M.; Singh, Harminder; Issaka, Rachel B.; Raymond, Victoria M.; Eagle, Craig; Hu Sylvia; Chudova, Darya I.; Talasaz AmirAli; Greenson, Joel K.; Sinicrope Frank A.; Gupta, S,amir;Grady, William M. A Cell-free DNA Blood-Based Test for Colorectal Cancer Screening. N Engl J Med. 2024 Mar 14;390(11):973-983. DOI: 10.1056/NEJMoa2304714.
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the U.S., there are approximately 153,000 new cases of CRC and approximately 53,000 deaths.32 It is widely accepted that CRC is among the most preventable, yet least-prevented cancers. CRC can take up to 10-15 years to progress from a pre-cancerous lesion to metastatic cancer and death. Patients who are diagnosed early in the progression of the disease—with pre-cancerous lesions or early-stage cancer—are more likely to have a complete recovery and to be treated less expensively. The ACS recommends that men and women over the age of 45 receive an optical colonoscopy every 10 years or other structural test, such as sigmoidoscopy or CTC, every 5 years or alternatively, a multi-targeted stool DNA test, such as Cologuard, should be performed every 3 years, or other stool-based test, such as FIT or FOBT, should be performed every year. The U.S. colon screening, diagnostic, and surveillance market is forecasted to reach approximately $21.8 billion in 2030.33
In the future, we intend to conduct clinical studies to support FDA approval of a premarket approval application (“PMA”) for use of CapsoCam Colon as a method for non-invasive detection of cancer and pre-cancerous lesions in the colon. In other words, we would like to seek FDA approval of CapsoCam Colon as a screening test for both the potential prevention of and the detection of cancer.
Our Solutions
CapsoCam Plus
Our CapsoCam Plus capsule endoscopy system is intended for visualization of the small bowel mucosa, to detect abnormalities of the small bowel in adults and children aged 2 years and above. Capsule endoscopy is the first-line modality for imaging the mucosa of the small bowel. After first launching our small bowel capsule in Europe in 2012, we launched in the U.S. in 2017, and as of December 31, 2025, our CapsoCam Plus has been used in more than 161,000 patients.
Key Benefits of CapsoCam Plus
We believe that our CapsoCam Plus is a superior capsule endoscopy system compared to competitor systems, both in how it captures and presents images of the GI tract and the clinical workflow and patient experience that it enables. The benefits delivered by the CapsoCam Plus include the following:
•Sole capsule endoscope with a 360° panoramic view available in the market. We believe our CapsoCam is the only capsule endoscope currently available in the market that captures a full 360° panoramic video, providing a complete view of the GI mucosa—unobstructed by folds and with complete coverage of the bending intestine’s inner curvature. Our CapsoCam houses four high-resolution cameras around the capsule circumference, and the images from each are stitched into a single panoramic image. Our competitors’ end-view systems have a camera at one end of the capsule, which affords a limited “tunnel view” when the capsule is in a straight section of the small bowel or a partial “wall view” of the outer curvature when it is in a curved section of the small bowel.
32 https://www.cancer.org/cancer/types/colon-rectal-cancer/about/key-statistics.html
33 Grand View Research, Inc., “Colon Screening Market Estimates & Trend Analysis From 2018 to 2030,” an independent report commissioned by CapsoVision, Inc.
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Competitor’s “tunnel view” can miss inner curvature |  | CapsoCam’s direct mucosal view sees inner curvature

CapsoCam captures a complete 360° view of the GI mucosa:
Competitive capsules have a “tunnel view” in straight sections of the small bowel:
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Competitive capsules have a partial wall view in curved sections of the small bowel:
•Telemedicine-enabled and zero-capex “wire-free” data collection. Our CapsoCam is a zero-capex solution for providers as it stores the entire video in onboard memory. In addition, patients are able to ingest our capsule in the comfort of their own homes, under the remote supervision of providers. The CapsoCam solution frees up exam-room schedules for providers and provides flexibility to administer capsules any day at any time. A provider’s practice can easily scale to multiple capsules per day with no added cost. In contrast, our competitors’ data recorder comprises a belt that must be worn close to the skin around the patient’s abdomen, which is connected by wires to a recorder module. We believe this system is an uncomfortable and inconvenient encumbrance for patients. In addition, this system is a burden for providers as it is a piece of capital equipment with upfront cost. The equipment must be recovered from the patient, cleaned and batteries recharged, before it is ready to be fitted for the next patient. The data must also be downloaded from the recorder to a computer, which takes additional time.
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•Zero-capex remote data analysis via cloud-based platform. Our cloud-based platform, CapsoCloud, provides a flexible, trackable, streamlined, and capital-equipment-free workflow for providers in the U.S. By giving providers the ability following capsule retrieval to remotely access data obtained from the capsule endoscopy, CapsoCloud allows clinicians to track procedures and stream in vivo videos anywhere at their convenience, generate reports, store and manage patient data, and transfer data to third-party reading services. In contrast, our competitors’ data recorder equipment must be returned to the provider after the procedure.
Key Components of CapsoCam Plus
The principal component of the CapsoCam Plus capsule endoscopy system is a single-use ingestible capsule that acquires and stores video images in onboard memory while moving through the GI tract, propelled by natural peristalsis. The patient or an authorized caregiver retrieves the capsule after it is egested using the retrieval kit and may return it directly to the clinic, or, in the U.S., mail it in a pre-paid envelop to a CapsoVision-affiliated download center. Thereupon, the capsule is cleaned and disinfected and the procedure data is downloaded using the CapsoAccess system.
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The components of a CapsoCam Plus capsule include the capsule housing, a lens module, the image sensor, the multichip package, an illumination system, a battery pack, a switch, the optical transceiver, and a printed circuit board assembly.
In particular, our CapsoCam Plus capsule consists of a diagnostic imaging system in a capsule housing. The four cameras within the image sensor share a single custom CMOS image sensor, and, as the capsule passes through the GI tract, they together capture a full 360° panorama of the GI tract and the high-resolution color images and other data are stored in the onboard flash memory. The multichip package contains 1.5 GB memory to store the procedure data and an application-specific integrated circuit for controlling the capsule and performing image processing functions, including image compression.
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Specifications:

Length | 30.5 mm
Diameter | 11.3 mm
Mass | 3.7 grams
Camera combined field of view | 74° x 360°
Depth of field | 0 to 18 mm
Video Format | JPEG color images
Video resolution | 1152 x 212 pixels
Frame rate | Up to 20 fps, 3-5 fps per camera
Operating time (typical) | 15-20 hours

The CapsoCam Plus procedure comprises the following steps:
i.Preparation. To ensure that the upper GI tract is free of food, the patient abstains from eating the morning of the procedure and may begin fasting at some point the prior day, depending on the physician’s instructions. A light dose of osmotic laxative is recommended to further clean the small bowel.
ii.Ingestion. The patient ingests the capsule with a glass of water under the clinician’s supervision. Unlike competing capsule endoscopy systems, the patient need not be fitted with a data recorder and the in-office procedure consists only of the capsule ingestion and instructing the patient on the retrieval process. In the U.S., the patient may swallow the capsule at home or another remote location with telemedicine supervision by the clinician. Removing the capsule from its package activates it. Once the patient has successfully swallowed the capsule, they are free to go about their day, and after an additional four hours of fasting, they may eat a light meal.
iii.Capsule Recovery. Patients place a rubber pan on the toilet to collect the capsule after excretion. When the patient next has a bowel movement, typically the next morning, they use the retrieval kit, CapsoRetrieve, to recover the capsule using a magnetic wand and package it for return to the clinic or to a data download center. The capsule is typically excreted within 3 to 30 hours after swallowing.
iv.Data Access. The Capsule Data Access system, CapsoAccess, is used to recover the procedure video from the capsule after it has been cleaned and disinfected, which may be done at the clinic if the patient returns the capsule there. Alternatively, the patient may use a pre-paid envelope to mail the capsule to an authorized download center where the data is accessed and transmitted via the Internet to the clinician.
v.Video Review. The physician reviews the procedure video and generates a report, using either CapsoView software or by streaming the video from CapsoCloud. CapsoCloud, a cloud-based software application, provides the physician the flexibility to review the procedure on any computer or Apple iPad connected to the Internet, at their convenience. CapsoCloud also stores the videos and reports, allows management and tracking of the procedure, and facilitates video review by third-party services or multiple physician colleagues.
CapsoRetrieve major elements—retrieval pan, magnetic wand, and capsule container:
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CapsoAccess accesses procedure data from the CapsoCam Plus capsule after its retrieval:
CapsoCam Colon
We have developed our next pipeline product, CapsoCam Colon, for visualization of the colon and detection and measurement of polyps. We submitted the 510(k) application for our first generation CapsoCam Colon capsule to the FDA in June 2025 and received responses from the FDA in September 2025. During our meeting with the FDA in December 2025, the FDA raised inquiries on topics including panoramic image processing methodology, and the proposed study design, sample size and primary endpoint for an extended study. Based on our communications with the FDA, we have decided not to further pursue the first generation CapsoCam Colon capsule submission and approval, and to prioritize our resources for the development of our second generation CapsoCam Colon capsule, featuring improved imaging quality and increased field of review with use of AI and better lens. We also expanded a second arm pivotal study to enroll approximately 800 patients at up to 20 sites in
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the U.S. in preparation for submitting a new 510(k) application for the second generation CapsoCam Colon capsule. As of the date of this Annual Report, over 500 patients have been enrolled for the second arm pivotal study. We currently expects to submit the 510(k) application for the second generation CapsoCam Colon capsule to the FDA in the third quarter of 2026. As a part of this second 510(k) application and to increase the population of indicated patients, we intend to seek FDA clearance of expanded indications that remove the requirement for evidence of GI bleeding of lower GI origin for patients with major risks for colonoscopy or moderate sedation. There is no guarantee that the clinical results of any of our clinical trials will demonstrate the requisite performance needed to meet applicable regulatory requirements in order to obtain FDA clearance. Further, our 510(k) submission for the second generation of CapsoCam Colon and FDA review of our 510(k) applications may be delayed and we may not receive 510(k) clearances from the FDA on a timely basis or at all.
Key Benefits of CapsoCam Colon
We believe that our CapsoCam Colon, once FDA cleared, will be a superior capsule endoscopy system compared to competitor systems, both in how it captures and presents images of the GI tract and the clinical workflow and patient experience that it enables. The benefits delivered by the CapsoCam Colon include the following:
•Sole capsule endoscope with a 360° panoramic view. We believe our CapsoCam is the only colon capsule endoscope that captures a full 360° panoramic video, providing a complete view of the colon mucosa—unobstructed by folds and with complete coverage of the bending intestine’s inner curvature. Our CapsoCam houses four high-resolution cameras around the capsule circumference, and the images from each are stitched into a single panoramic image. Our competitors’ end-view systems have a camera at each end of the capsule, which affords a limited “tunnel view” and polyps may be hidden by pockets (haustra) between folds. Our CapsoCam, by contrast, has a panoramic view of the colon and can visualize polyps on folds or within the pockets (haustra) between folds. In addition, the inflatable balloon which extends the CapsoCam Colon capsule helps to stabilize its movement through the intestines, resulting in a smoother video.
CapsoCam captures a complete 360° view of the colon mucosa:
Competitive capsules have a “tunnel view” of the colon:
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•Automated pathology detection due to usage of AI. We believe our CapsoCam Colon is the only colon capsule endoscopy system (subject to FDA clearance) that utilizes AI for automated polyp detection. Instead of reviewing the entire procedure video, clinicians can focus on those frames with suspected lesions, highlighted with a bonding box, reducing the time taken to review the video and making colon capsule endoscopy financially attractive to their practice. AI improves diagnostic yield and provides more consistent accuracy with reduced dependency on the experience level of the physician video reader and their level of fatigue and distraction. Without AI, physicians can overlook polyps captured in the video. In addition, CapsoCloud automatically accumulates patient data critical to develop and train improved AI-based lesion-detection and classification capabilities. We have an in-house AI development team of experts who will leverage archived patient data on CapsoCloud as it grows during commercial use of CapsoCam Colon to make ongoing improvements to the AI algorithm. In contrast, with competitor capsule endoscopy systems, the clinic downloads patient data from the data recorder and the manufacturer does not have ready access to that data.
•3D-sensing technology informs follow-on care decisions. Our CapsoCam Colon (subject to FDA clearance) also incorporates our proprietary 3D-sensing technology to more accurately measure polyp sizes. Polyp size is highly correlated with its risk of becoming cancer. No other capsule endoscope currently in the market has 3D-enabled measurement capability. With automated pathology detection and the ability to manually review video frames adjacent to an identified polyp, physicians can more confidently decide that patients with small (e.g., less than 6mm) polyps may forgo a follow-on colonoscopy, increasing the utility of the procedure for healthcare providers and patients alike.
•Telemedicine-enabled and zero-capex “wire-free” data collection. Our CapsoCam is a zero-capex solution for providers as it stores the entire video in onboard memory. In contrast, our competitors’ data recorder comprises a belt that must be worn close to the skin around the patient’s abdomen, which is connected by wires to a recorder module. We believe this system is an uncomfortable and inconvenient encumbrance for patients. In addition, this system is a burden for providers as it is a piece of capital equipment with upfront cost. The equipment must be recovered from the patient, cleaned and batteries recharged, before it is ready to be fitted for the next patient. The data must also be downloaded from the recorder to a computer, which takes additional time. With no data recorder, our CapsoCam frees up exam-room schedules for providers and provides flexibility to administer capsules any day at any time. A provider’s practice can easily scale to multiple capsules per day with no added cost.
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•Zero-capex remote data analysis via cloud-based platform. Our cloud-based platform, CapsoCloud, provides a flexible, trackable, streamlined, and capital-equipment-free workflow for providers in the U.S. In contrast, our competitors’ data recorder equipment must be returned to the provider after the procedure. Following the commercial launch of our CapsoCam Colon solution, providers will initially utilize CapsoCloud to download in vivo videos for remote review. Within one year of commercial launch, we plan to introduce user-friendly streaming functions to facilitate via CapsoCloud remote in vivo video review, procedure report generation and image annotation.
•Panenteric capsule. CapsoCam Colon is a panenteric capsule which, when programmed with slightly different operating parameters, can be used to visualize both the small bowel and the colon in one procedure for the evaluation of Crohn’s disease, ulcerative colitis, irritable bowel syndrome and obscure GI bleeding.
Key Components of CapsoCam Colon
The principal component of the CapsoCam Colon capsule endoscopy system is a single-use ingestible capsule that acquires and stores video images in onboard memory while moving through the GI tract, propelled by natural peristalsis. The patient or an authorized caregiver retrieves the capsule after it is egested using the retrieval kit and may return it directly to the clinic, or, in the U.S., mail it in a pre-paid envelop to a CapsoVision-affiliated download center. Thereupon, the capsule is cleaned and disinfected and the procedure data is downloaded using the CapsoAccess system.
The components of a CapsoCam Colon capsule include the capsule housing, a balloon, a shell, a lens module, the image sensor, the multichip package, an illumination system, a structured-light projector, a battery pack, a switch, the optical transceiver and a printed circuit board assembly.
In particular, our CapsoCam Colon capsule consists of a diagnostic imaging system in a capsule housing with an attached inflatable balloon, where the inflatable balloon is protected by an outer dissolvable shell covering only the balloon end of the camera capsule. Once inside a liquid environment, the shell softens and dissolves. When the balloon is fully inflated, typically after about 2-3 hours, the capsule is slightly buoyant, enabling it to move through the intestines more readily with flowing liquid, increasing the likelihood of a complete colon visualization.
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Specifications:

Length (at ingestion / at max inflation) | 32.6 mm / 38 mm
Diameter (at ingestion / at max inflation) | 11.8 mm / 12.4 mm
Mass | 3.8 grams
Camera combined field of view | 74° x 360°
Depth of field | 0 to 18 mm
Video Format | JPEG color images
Video resolution | 1152 x 144 pixels
Frame rate | Up to 48 fps, 12 fps per camera
Operating time (typical) | 24 hours

The CapsoCam Colon procedure comprises the following steps:
i.Preparation. The colon is cleansed with a preparation similar to that needed for a colonoscopy. The exact protocol is determined by the patient’s physician, but the recommended process comprises a low-residue diet for several days, clear liquids the day before and on the day of ingestion, and 4 liters of PEG osmotic laxative solution split between the night before and the morning of ingestion. Shortly before ingesting the capsule, the patient may be administered a prokinetic to speed the capsule’s transit through the stomach and small bowel.
ii.Ingestion. The patient ingests the capsule with a glass of water under the clinician’s supervision. Unlike competing capsule endoscopy systems, the patient need not be fitted with a data recorder and the in-office procedure consists only of the capsule ingestion and instructing the patient on the retrieval process. Where authorized, the patient may swallow the capsule at home or another remote location with telemedicine supervision by the clinician. Removing the capsule from its package activates it. The patient continues a clear-liquid diet until the capsule is egested or the following morning, whichever comes first. The patient drinks low-volume osmotic laxative boosters every few hours for a total of 2-4 doses, stopping if the capsule is egested. If the capsule has not yet been egested, a bisacodyl suppository in the evening and upon arising the next day is recommended.
iii.Capsule Recovery. Patients place a rubber pan on the toilet to collect the capsule after excretion. When the patient next has a bowel movement, they use the retrieval kit, CapsoRetrieve, to recover the capsule using a magnetic wand and package it for return to the clinic or to a data download center. The capsule is typically excreted within 1 to 24 hours after swallowing.
iv.Data Access. The Capsule Data Access system, CapsoAccess, is used to recover the procedure video from the capsule after it has been cleaned and disinfected, which may be done at the clinic if the patient returns the capsule there. Alternatively, the patient may use a pre-paid envelope to mail the capsule to an authorized download center where the data is accessed and transmitted via the Internet to the clinician.
v.Video Review. The physician reviews the procedure video and generates a report, using either CapsoView software or, when and where available, by streaming the video from CapsoCloud. Following the commercial launch of our CapsoCam Colon solution, providers will initially utilize CapsoCloud to download in vivo videos for remote review. Within one year of commercial launch, we plan to introduce user-friendly streaming functions to facilitate via CapsoCloud remote in vivo video review, procedure report generation and image annotation.
Clinical Development
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CapsoCam Colon
Following the completion of our Pilot Study described below, in 2021, we commenced our pivotal study for CapsoCam Colon (described below). We submitted the 510(k) application for our first generation CapsoCam Colon capsule to the FDA in June 2025 and received responses from the FDA in September 2025. During our meeting with the FDA in December 2025, the FDA raised inquiries on topics including panoramic image processing methodology, and the proposed study design, sample size and primary endpoint for an extended study. Based on our communications with the FDA, we have decided not to further pursue the first generation CapsoCam Colon capsule submission and approval, and to prioritize our resources for the development of our second generation CapsoCam Colon capsule, featuring improved imaging quality and increased field of review with use of AI and better lens. We also expanded a second arm pivotal study to enroll approximately 800 patients at up to 20 sites in the U.S. in preparation for submitting a new 510(k) application for the second generation CapsoCam Colon capsule. As of the date of this Annual Report, over 500 patients have been enrolled for the second arm pivotal study. We currently expects to submit the 510(k) application for the second generation CapsoCam Colon capsule to the FDA in the third quarter of 2026.
As of the date of this Annual Report, the FDA has only authorized one colon capsule imaging system, the Medtronic PillCam COLON 2, introduced in 2014, which does not include any AI-driven analytics; and one AI-driven capsule endoscopy analysis software, the AnX Robotics NaviCam ProScan, introduced in 2023, which exclusively supports AnX Robotics’ small bowel capsule system. These devices will respectively serve as predicate devices for our second generation CapsoCam Colon 510(k) submission. In particular, to receive FDA clearance for our second generation CapsoCam Colon, the clinical results must demonstrate that:
•CapsoCam Colon, considered without the integration of AI, demonstrates a polyp-detection accuracy that is, at a minimum, comparable to the performance of the predicate device (i.e., Medtronic PillCam COLON 2); and
•our AI technology can (i) reliably and accurately identify and analyze images and video of the colon to detect abnormalities as quantified by diagnostic accuracy measures such as sensitivity and specificity, and, in doing so, (ii) aid qualified physicians in achieving improved diagnostic performance relative to not using AI.
Pivotal Study
First Arm. On June 10, 2025, we completed analyzing the data collected from the first arm of our pivotal study and have made our 510(k) submission seeking FDA clearance of our initial, first generation CapsoCam Colon capsule endoscope.
This study was a prospective, open label, pivotal study of the accuracy of CapsoCam Colon in detecting colonic polyps, using colonoscopy as the reference. Enrollment began in 2021 and was completed in October 2024. A total of 1,327 patients were enrolled at 20 sites throughout the U.S. The patient population were males and females between 45-75 years of age referred for colonoscopy. The study was designed to enroll sufficient subjects with clinically-significant colon polyps (≥6mm), accounting for sufficient polyp prevalence in the study population, which is necessary to evaluate the device performance in accordance with study endpoints, as discussed below.
The purpose of this pivotal study was to evaluate the safety and effectiveness of our CapsoCam Colon capsule endoscope system in the visualization of the colon and in the detection and size measurement of colonic polyps and to show that AI-based computer assisted detection improves the polyp-detection accuracy and efficiency of capsule video readers. In the study, each enrolled patient (i.e., patients who were otherwise scheduled to receive a colonoscopy under applicable standard of care) agreed for comparative purposes to (i) first, undergo a capsule endoscopy using the CaspsoCam Colon capsule and (ii) second, within a specified time period (typically, 3-6 weeks) undergo an optical colonoscopy, conducted per standard of care with administration by a GI at a medical facility and sedation as appropriate. The capsule video resulting from the capsule endoscopy was then interpreted
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by a video reader twice with a month’s separation: once relying solely on the video and once with the aid of AI recommendations. Following this, the results of the capsule endoscopy readings were compared to the findings of optical colonoscopy to evaluate diagnostic performance. If these comparative findings suggest that a clinically-significant polyp was missed in the colonoscopy (as determined by an independent Clinical Events Committee), a second colonoscopy may be recommended for the patient. Additional notable study activities and analyses following these initial activities are required, including the measurement and characterization of polyps detected within the study (e.g., to facilitate appropriate subject stratification for endpoint analysis and facilitate evaluation of size measurement accuracy) and the use of a subset of the study data to conduct a standalone performance assessment of the AI algorithm.
The pivotal study’s coprimary endpoints were (a) sensitivity of the CapsoCam Colon for detecting the presence in a patient of the largest polyp detected by optical colonoscopy if that polyp is ≥ 6mm, where a match is considered to have occurred if a polyp detected by the CapsoCam Colon is assessed as having a size within plus or minus 50% of the size of the polyp detected by optical colonoscopy and as having a location within the same or an adjacent colon segment and (b) specificity of the CapsoCam Colon for not detecting any polyp ≥ 6mm in a patient for whom optical colonoscopy did not detect any polyp ≥ 6mm.
The secondary endpoints included, among others, the sensitivity and specificity of non-AI assisted detection reading versus AI-assisted detection reading for polyps ≥ 6mm and for advanced neoplasia.
On June 10, 2025, we completed analyzing the data collected and made our filing with the FDA of our 510(k) Premarket Notification to seek marketing clearance for the first-generation CapsoCam Colon. We received responses from the FDA in September 2025. During our meeting with the FDA in December 2025, the FDA raised inquiries on topics including panoramic image processing methodology, and the proposed study design, sample size and primary endpoint for an extended study. Based on our communications with the FDA, we have decided not to further pursue the first generation CapsoCam Colon capsule submission and approval, and to prioritize its resources for the development of its second generation CapsoCam Colon capsule, featuring improved imaging quality and increased field of review with use of AI and better lens.
Second Arm. The second arm of the pivotal study (modeled after the first arm of the pivotal study) will evaluate the safety and effectiveness of our second-generation CapsoCam Colon capsule in a similar patient population expected to involve approximately 800 patients enrolled at up to 20 sites in the U.S. In the third quarter of 2025, we commenced enrollment of patients within the second arm. As of the date of this Annual Report, over 500 patients have been enrolled for the second arm pivotal study. We currently expects to submit the 510(k) application for the second generation CapsoCam Colon capsule to the FDA in the third quarter of 2026.
Pilot Study
Prior to the initiation of the pivotal study, we completed our pilot study for our CapsoCam Colon in 2021. That study was a prospective, open label, pilot study of the CapsoCam Colon capsule endoscope compared to optical colonoscopy. Enrollment began in January 2020 and was completed in February 2021. A total of 112 patients ingested the capsule at 5 sites in the U.S. and results from 105 patients were included in the analysis. The patient population were males and females between 50-75 years of age who had been referred for colonoscopy and had an increased risk for having colon polyps.
This was a non-significant risk pilot study designed to evaluate the safety and performance of the CapsoCam Colon capsule endoscope in patients who met the eligibility criteria and were scheduled for colonoscopy. This study was not statistically powered.
Primary Efficacy Assessments: Sensitivity/Specificity
The coprimary endpoints were (a) sensitivity of the CapsoCam Colon for detecting the presence in a patient of the largest polyp detected by optical colonoscopy if that polyp was ≥ 6mm, where a match was considered to have occurred if a polyp detected by the CapsoCam Colon was assessed as having a size within plus or minus 50% of
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the size of the polyp detected by optical colonoscopy and as having a location within the same or an adjacent colon segment and (b) specificity of the CapsoCam Colon for not detecting any polyp ≥ 6mm in a patient for whom optical colonoscopy did not detect any polyp ≥ 6mm.
Overall, across 105 patients and for polyps ≥ 6mm in size, with a prevalence of 21.9%, sensitivity was 84.8% (95% confidence interval (“C.I.”): 71.1-95.5%) and specificity was 92.7% (95% C.I.: 87.5-97.9%). Overall, for polyps ≥ 10mm in size, with a prevalence of 7.6%, sensitivity was 87.5% (95% C.I.: 57.9 – 100%) and specificity was 99.0% (95% C.I.: 78.5 – 100%).
Safety Analysis
There were no reports of device-related adverse events, serious adverse events or unanticipated adverse device effects across 112 patients. All events and observations reported in the pilot study were not related to the study or related to medications for bowel preparation or to the prokinetic boosters. There were no serious adverse events reported for bowel preparation or booster consumption. These results are supportive of the safety of the CapsoCam Colon.
CapsoCam Plus
We made 510(k) submission on December 26, 2025 for the use of AI in our small bowel capsule, CapsoCam Plus, targeting obtaining FDA clearance by the middle of 2026. We are targeting making EU submission in the second quarter of 2026 and obtaining EU clearance in the third quarter of 2026 for the use of AI in our small bowel capsule, CapsoCam Plus. The incorporation of AI technology into our GI-tract capsule endoscopy solution (including the associated software, CapsoCloud and CapsoView) requires appropriate FDA regulatory authorization, supported by requisite clinical and other studies, prior to its commercialization in the U.S. Under the FDA’s current regulatory framework, our capsule endoscopy solution and the AI technology are assessed separately, with each component falling under a different regulatory classification and subject to distinct regulatory requirements. This bifurcated approach, set by precedent, ensures that each component meets the necessary safety, effectiveness, and performance expectations. Our 510(k) submission and FDA review thereof may be delayed and we may not receive 510(k) clearance from the FDA on a timely basis or at all.
In seeking 510(k) clearance for our AI technology as incorporated into CapsoCam Plus we are (i) utilizing the NaviCam ProScan as the predicate device (confirmed with the FDA) and (ii) currently conducting a retrospective clinical study of the CapsoCam Plus solution with the AI technology incorporated to analyze in vivo videos from completed, real-world clinical cases, to assess the performance of the AI technology for small bowel. Similar to the first arm of our CapsoCam Colon pivotal study, the study seeks to demonstrate that the AI technology can (i) reliably and accurately identify and analyze images and video of the small bowel to detect abnormalities as quantified by diagnostic accuracy measures such as sensitivity and specificity, and, in doing so, (ii) aid qualified physicians in achieving improved diagnostic performance relative to not using AI.
Sales, Marketing and Distribution
We primarily generate revenues from the sales of our CapsoCam Plus capsule to our customers, including gastroenterologists practicing in clinics and/or hospitals, which typically place their orders on a monthly or bimonthly basis, as well as our distributors. We engage our customers by using data mining platforms to identify potential customers, initiating their comprehensive evaluation of our CapsoCam capsule and solutions, followed by our strategic sales efforts that ensure a high retention rate. Our customer retention rate stands at approximately 90% for 2025, showcasing our commitment to customer satisfaction and loyalty.
We operate with two sales groups and conduct our marketing strategies differently: one for the U.S. market and one for the international market, each tailored to effectively serve different geographical markets. Our U.S. market sales group, primarily using a direct sales model, focuses on the U.S. domestic market. Our international market sales group is comprised primarily of qualified distributors responsible for selling to customers outside the U.S. Using distributors internationally allows us to extend our global reach and effectively penetrate diverse markets.
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We are confident that our skilled sales force can be effectively leveraged to promote and distribute our CapsoCam Plus capsules and future CapsoCam capsules (including, once FDA cleared, our CapsoCam Colon capsules).
Our revenues for the years ended December 31, 2025 and 2024 totaled approximately $13.6 million and $11.8 million, respectively, representing a year-over-year growth of approximately 15%. In 2025 and 2024, international sales accounted for 21% and 23% of total revenue. Our average accounts receivable balance for 2025 was $2.0 million with 11% of our accounts receivable aged more than 60 days. As of December 31, 2025, we only had one customer representing more than 10% of our outstanding accounts receivable (with an accounts receivable balance of approximately $0.6 million).
U.S. Market
We currently market our CapsoCam Plus capsule endoscopy solution in the U.S. through a combination of our in-house sales team, integrated GPOs, and to a limited extent, select independent sales representatives. We intend to expand our direct sales force by increasing the number of sales employees and independent sales representatives and contractors. This strategic growth should enhance our market reach and drive higher sales performance. As of December 31, 2025, we had 28 full-time sales employees, including 4 sales directors and 23 territory managers covering all of the states in the U.S. We offer comprehensive training programs to our sales employees, sales representatives and contractors, aimed at enhancing sales performance and ensuring strict compliance with FDA regulations and any other applicable regulations.
Since the launch of our CapsoCam Plus capsule in 2017, we have endeavored to market our CapsoCam Plus capsule endoscopy solution effectively by leveraging the network outreach of independent sales representatives, who managed to bring our products to the attention of GI physicians across the U.S. Meanwhile, we also invested in building our in-house sales team by establishing the role of territory managers for overseeing and coordinating our sales effort in a specific state or states. We believe our hybrid marketing and sales team will enable our CapsoCam capsules to further penetrate into the healthcare market.
In-house Sales Team
We have built a dedicated team of sales directors and territory managers to promote our CapsoCam capsules. Based on our current sales output and strategic planning, we have put in place four regional sales directors, each overseeing a distinct region within the U.S. Our regional sales directors are responsible for supervising the work of territory managers within their region, providing them with technical support and training, as well as setting overall sales strategies for the region. Our regional sales directors are industry veterans who possess rich experience in medical device sales and distribution matters.
Our territory managers are our front-line sales persons who interact with physicians, clinics, hospitals and other healthcare providers on a daily basis. Utilizing the data-mining platforms we have procured, each of our territory managers generates a list of potential customers, and reaches out to introduce them to our CapsoCam capsule. After this introduction, subject to their protocols and practices, the potential customers will generally make an initial purchase of 5 to 10 capsules for evaluation, before placing subsequent orders. We provide constant assistance and monitoring throughout the customer evaluation process to answer questions, identify potential issues and obtain relevant feedback to a potential customer’s purchase decision. Following the evaluation process, we seek to onboard the customer, with customers typically ordering capsules, subject to their needs, on a monthly or bi-monthly basis and we strive to meet their expected timeline of delivery.
Our territory managers provide continued service and support to our customers, including periodic education of physicians, nurses and other healthcare providers about our capsule, feedback collection to understand and attend to any issues encountered in the course of using our capsule and CapsoCloud, and tracking any adverse events. As a result, we were able to secure a high customer retention rate of approximately 90% for 2025.
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Independent Sales Representatives
We engage independent sales representatives to complement our in-house sales team. We pay our independent sales representatives commissions and bonuses, if eligible, based on their sales results. We discourage our independent sales representatives from concurrently representing our competitors in promoting similar products.
Marketing Methods
We also use various sales and marketing methods to generate awareness and demand for our CapsoCam Plus capsule, such as traditional marketing through direct sales, channel partners and trade shows as well as digital marketing through websites, social media, videos and organic and paid searches.
Sales Arrangement with GPOs
We have entered into agreements with several GPOs, which are organizations that leverage the collective purchasing power of their members, such as hospitals, clinics, and other healthcare providers, to negotiate favorable pricing and terms for medical products and services. Our arrangement with GPOs can significantly enhance our ability to meet the stringent requirements set by hospitals, clinics, and other healthcare providers. By leveraging the collective purchasing power and compliance expertise of GPOs, we can ensure adherence to industry standards and regulations more effectively. Under these agreements, the GPOs’ members may elect to purchase our CapsoCam capsules from us on a direct sale basis. During the term of these agreements, which typically ranges from two to three years and are subject to renewal, we are generally prohibited from entering into new contracts outside of these agreements with the GPOs’ members for our CapsoCam capsules. The agreements also contain firm pricing provisions, which may limit our ability to adjust our prices in response to market conditions or competitive pressures. However, we may offer bulk purchase options or special promotions to the GPOs’ members, subject to certain conditions and approvals. We also agree to provide the GPOs’ members with pricing, terms, and conditions that are equal or better than those offered to our other customers. In addition, we agree to negotiate in good faith to equitably adjust the pricing for any current products under the agreements if it is affected by any new technology. We pay administrative fees to the GPOs based on a percentage of sales for products their members purchase from us.
International Market
We initially began commercial sales in Europe in 2012 for our GI-tract capsule endoscopy solution (i.e., our small bowel capsule). Since then, we have expanded into other non-U.S. countries or regions, and our largest international shipping destinations now include France, Germany, and Canada. Our distributors typically have exclusivity in their respective country or territory. As of December 31, 2025, we had entered into distribution agreements with approximately 55 exclusive distributors in connection with multiple non-U.S. regions, including the European Union (“EU”), South and Central America, Asia, Australia, the Middle East and Africa, which respectively accounted for approximately 43%34, 9%, 4%, 3%, 6% and 5% of our total non-U.S. sales revenue in 2025. As of December 31, 2025, the total revenue generated from our top ten distributors, most of which are in the EU, accounted for approximately 72% of our total non-U.S. sales revenue. We also have one exclusive distributor for sales of our CapsoCam capsule for the veterinary market worldwide. Although we have historically utilized exclusive distributors to access various countries or regions, we may choose to implement a direct sales model. For example, (i) in 2023, we established a direct sales team in Germany to better serve our customers and strengthen our market presence in this key market and (ii) we are transitioning to a direct sales model in some pivotal countries, including the G7 countries, to enhance market penetration and drive growth.
For both our direct sales and distributor sales, we are responsible for obtaining and maintaining the regulatory permits for our current CapsoCam Plus capsule, future CapsoCam capsules and associated software, CapsoCloud and CapsoView, in the relevant countries and regions.
34 Including shipments to Aureliance, our authorized agent and importer in the EU and EEA.
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Exclusive Distribution Agreements
We typically enter into exclusive distribution agreements with our international distributors, which typically specify the purchase price, payment terms, minimum purchase obligations, territory, term, renewal, termination, and other rights and obligations of the parties. The purchase price is usually agreed in the distribution agreement and may be revised through mutual agreement, taking into account the prevailing market prices. Such revision usually occurs no more than once per year. The payment terms vary depending on the distributor’s creditworthiness and performance, but generally range from 30 to 60 days from the date of invoice. The minimum purchase obligations are based on the projected sales volume and growth potential of the territory. The territory is defined as the country or region where the distributor has the exclusive right to sell and market our CapsoCam capsule endoscopy solution. The term of the distribution agreement is initially one to five years, and may be renewed for additional one to three years upon agreement or automatically, unless terminated earlier by either party for cause or convenience. Our exclusive distributors usually have the right of first offer for any new products that we develop.
We are responsible for the manufacturing, supply, packaging, and labeling of our CapsoCam capsules and for obtaining and maintaining the regulatory permit to manufacture and market our capsule endoscopy solution in the U.S. and other countries or regions where we export our products. We are also required to report any death, serious injury, or malfunction incidents involving our CapsoCam product to the relevant authorities and to conduct any necessary product recalls or corrective actions. Our distributors agree to supply us with any information and assistance related to such incidents and to comply with our instructions and policies regarding product safety and quality. Our distributors also agree to forward any customer and/or regulatory complaints or correspondence regarding our CapsoCam capsule endoscopy solution to us promptly and to cooperate with us in resolving any such issues.
We are prohibited from selling our CapsoCam capsules or engaging another distributor to sell our CapsoCam capsules in the territory of our exclusive distributors, unless we terminate the distribution agreement with the existing distributor. Our distributors are prohibited from advertising, marketing, or selling our CapsoCam capsules outside their territory or soliciting orders from persons or entities located outside their territory.
We may terminate our distribution agreements with our exclusive distributors for cause, such as breach of contract, failure to meet minimum purchase obligations, insolvency, or misconduct, or for convenience, subject to a prior notice period and a break-up fee based on the anticipated margin, if applicable. We also agree to honor our obligations to the distributor’s key customers (including governmental bodies) for a period of at least one year following the termination of the distribution agreement, unless we assign such obligations to a successor distributor.
Coverage and Reimbursement for CapsoCam
In the U.S., we derive substantially all of our revenue from gastroenterologists practicing in clinics and/or hospitals that use our CapsoCam Plus capsule endoscopy solution. These providers, in turn, bill third-party payers, including private insurers, Medicare, and Medicaid, for the services and items they provide to patients. The CapsoCam Plus enables our customers to operate under the existing reimbursement structure for optical capsule endoscopy of the small bowel, which has well-established reimbursement levels via CPT codes that varies by state. Subject to patient and provider compliance with guidelines around recommended procedures, government and commercial payers generally provide coverage for optical capsule endoscopy of the small bowel under this framework.
Similarly, our CapsoCam Colon, once FDA cleared, is expected to be covered under the existing reimbursement structure for colon capsule endoscopy for our initially indicated patient group, which has reimbursement levels via CPT codes.
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Research and Development
We invest in research and development initiatives that are focused on introducing enhancements and improvements aimed at increasing the value provided by our GI-tract capsule endoscopy solution. Our solution is currently comprised of our CapsoCam Plus capsule for the small bowel, our planned CapsoCam Colon (subject to FDA clearance), CapsoCloud, our cloud-based platform, and our CapsoView software. In doing so, we hope to realize our vision of creating an ingestible capsule that, in a single convenient non-invasive procedure, cost-effectively screens and/or identifies multiple pathologies in a broad patient population. In particular, for CRC, we hope to screen for both cancerous and precancerous polyps and lesions, recognizing that early detection can assist in the prevention and treatment of CRC. Our research and development team includes hardware and software engineers with deep expertise in medical technology, optics, data science, AI, and cloud-based data and security architecture and individuals with extensive clinical development expertise.
Initial and recent research and development efforts focused on developing our first capsule endoscopy, the small bowel capsule (510(k) clearance received in 2016) and improved versions thereof (the current generation of which we refer to as CapsoCam Plus), development of our AI assisted pathology detection technology and improving on CapsoCam Plus to develop CapsoCam Colon (with 510(k) submission for the second generation of CapsoCam Colon targeted for the third quarter of 2026). CapsoCam Colon incorporates our self-developed AI technology and other multiple self-developed proprietary technologies designed to assist in effectively visualizing the colon and detecting and measuring polyps. In addition to having AI for automated pathology detection of polyps, it incorporates a 360° panoramic lateral view and 3D-sensing technology to more accurately measure polyp sizes. We are researching and developing improvements to our CapsoCam Plus capsule to incorporate our AI assisted pathology detection technology. We are working on improvements to our CapsoCam, including a new lens and illumination optics with an increased field of view, improved image quality and higher peak frame rate. For our AI assisted pathology detection technology, we plan to incorporate improvements designed to deliver increased sensitivity for identifying polyps and pre-cancerous lesions, reduced viewing times, enhanced usability of the polyp size measurement tool, improved camera dynamic range for a clearer view of dark areas and improvements to increase completion rates. We also plan to continue making improvements to our CapsoCloud and CapsoView software.
Certain of our research and development efforts may also include conducting and overseeing clinical studies and obtaining FDA clearance, which may or may not be granted.
We incurred approximately $18.3 million and $15.1 million in research and development expenses for the years ended December 31, 2025 and 2024, respectively. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of our Results of Operations — Operating Expenses.”
Manufacturing and Supply
We manage all aspects of manufacturing, supply chain and distribution of our GI-tract capsule endoscopy products from our headquarters in Saratoga, California. We manufacture our products using component suppliers and assembly manufacturers based in Asia. The critical components of our products, such as lens modules, CMOS image sensors, and ASICs are provided by single-source suppliers. In particular, our lens modules are sourced from Largan, a single supplier based in Taiwan who we have an over 17-year relationship with, our CMOS image sensors are sourced from Toshiba, a single supplier based in Japan who we have an over 11-year relationship with, and our ASICs are sourced from Moai/Speedbridge, suppliers based in Taiwan who we have, respectively, an over 11-year and 6-year relationship with. As a result of our long-standing relationships with these suppliers, we are able to source those component parts on favorable terms and within reasonable lead-times.
In particular, we have entered into a memorandum of understanding with Largan Precision Company, Ltd. (“Largan”), which is based in Taiwan, in May 2008, for the supply of lens modules for our first-generation capsules, pursuant to which we make purchases on a purchase order basis. The terms of the memorandum of understanding were subsequently amended in January 2010 (as amended, the “First Largan MOU”). In addition,
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we entered into another memorandum of understanding with Largan in October 2022, for the supply of lens modules for our second-generation capsules (together with the First Largan MOU, collectively, the “Largan MOUs”). Each Largan MOU was effective upon signing and will continue until terminated in accordance thereunder. Either party may terminate either Largan MOU for certain breaches of the agreement by the other party and that party fails to cure the breach within 45 days after notice of such breach from the terminating party.
We have also entered into a development agreement with Toshiba, which is based in Japan, in August 2013 (the “Toshiba Agreement”), for the development and supply of our CMOS image sensors, pursuant to which we make purchases on a purchase order basis. The Toshiba Agreement contains a provision, pursuant to which Toshiba may discontinue the supply of CMOS image sensors to us if we do not place purchase orders totaling more than a specified number of units in any consecutive 12 months. The Toshiba Agreement was effective upon signing and will continue until terminated in accordance thereunder. If Toshiba intends to discontinue supply of the CMOS image sensors to us, Toshiba must provide us with 12 months’ prior notice and obtain our approval. Either party may also immediately terminate the Toshiba Agreement upon written notice if any of the Force Majeure events (as defined therein) extends for a period in excess of 30 days.
We have also entered into a development and manufacturing agreement with Moai, which is based in Taiwan, in June 2014, for the supply of our ASICs, pursuant to which we make purchases on a purchase order basis. The terms of the development and manufacturing agreement were subsequently amended in March 2015 (as amended, the “Moai Agreement”) and supplemented in February 2020, pursuant to which Moai, the owner of the ASIC design, outsourced the maintenance and technical support functions to Speedbridge (the “Speedbridge Supplement”, and together with the Moai Agreement, the “Moai/Speedbridge Agreement”). The Moai/Speedbridge Agreement was effective upon signing and will continue until terminated in accordance thereunder. We may terminate the Moai/Speedbridge Agreement if Moai and/or Speedbridge (i) breach(es) certain quality requirements, (ii) fail(s) to manufacture products and/or provide services specified therein, or (iii) breach(es) or is/are unable to perform any of the agreements or obligations thereunder, and, in the case of (i) and (ii) above, the breach is not cured within 30 days after notice thereof. The Moai/Speedbridge Agreement prohibits Moai and/or Speedbridge (including any subsidiary or affiliate) from entering into or continuing any discussions to develop, make or otherwise commercialize any competing products during the term thereof and for a period ending on the first anniversary of the termination thereof.
Currently, assembled CapsoCam capsules are shipped from Taiwan to our U.S. facility where we complete the manufacturing process before distributing the capsules to our distribution network. Once the assembled products in test form are delivered to us, we are responsible for the testing, cleaning, packaging and labeling of our products at our headquarters in Saratoga, California.
We are also in the process of planning or implementing various mitigation measures to address supply chain risks (including qualifying a backup supplier for certain critical components and looking to build reserve supplies of capsules and critical components to address unanticipated delays).
Competition
We operate in a highly competitive industry. The medical device market, particularly in the area of diagnostic imaging and endoscopic procedures, is characterized by rapid technological advancements and the continuous introduction of new products. The competition that we face for our current and future GI-tract capsule endoscopy solutions will vary based on numerous factors including: the nature of the pathology(ies) or medical condition(s); the ease of use of our products; the relevant patient population and related indicated patients; available indicated means to diagnose or treat the pathology/condition and related accuracy, reliability and safety; patient considerations (such as adherence, comfort, safety, and convenience); provider considerations (such as clinical workflow and convenience); and economic and time considerations (such as cost, availability of third-party reimbursement and provider time required).
CapsoCam Plus (small bowel). The competition that we face for our small bowel CapsoCam Plus is primarily from traditional enteroscopy procedures performed by trained physicians in hospital or clinical settings and other
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capsule-based imaging solutions manufactured by companies such as Medtronic, IntroMedic, JinShan and Ankon. Those competitors include well-established companies with significant resources and brand recognition such as Medtronic, that are constantly developing and marketing innovative products that may offer superior features or lower costs. With respect to Medtronic, it also enjoys other competitive advantages including (i) a “first mover advantage” as the first manufacturer of a small bowel capsule endoscopy and a colon capsule endoscopy (described below); (ii) exclusive supply arrangements (sometimes up to three years) with some of the larger GI practices and hospitals (particularly in the Northeast region of the U.S.) which our sales team also targets; and (iii) greater brand recognition and financial resources.
The competitor capsule endoscopy systems currently available in the market (i) consist of capsules with end-view systems, providing only limited “tunnel” or partial “wall” views of the small bowel and (ii) utilize wired data recorders worn on the patients. As a result, providers are forced to incur upfront capital expenses and clinical workflow complications and patients experience discomfort and multiple clinical visits. We believe our CapsoCam Plus is a superior capsule endoscopy system, both in how it captures and presents images of the GI tract and the clinical workflow and patient experience that it enables. Our CapsoCam captures a full 360° panoramic video, providing a complete view of the GI mucosa—unobstructed by folds and with complete coverage of the bending intestine’s inner curvature, ultimately resulting in superior diagnostic yield. Also, our CapsoCam is a zero-capex “wire-free” data collection solution for providers as it stores the entire video in onboard memory. Following retrieval, our cloud-based platform, CapsoCloud, gives providers in the U.S. the ability to remotely access data from the cloud and stream in vivo videos anywhere at their convenience. Outside of the U.S., providers review procedure videos using CapsoView software (primarily due to foreign data privacy and access regulations).
CapsoCam Colon. The competition that we face for CapsoCam Colon is primarily from (i) procedure-based detection technologies such as optical colonoscopy, flexible sigmoidoscopy and CTC (or “virtual” colonoscopy); (ii) stool-based DNA tests such as Cologuard (initial FDA clearance in 2014); and (iii) other capsule-based imaging solutions like PillCam COLON 2 (initial FDA clearance in 2014). Other sources of competition include (a) other common CRC screening tests, such as the FOBT and the FIT, and (b) other screening technologies including liquid biopsy tests, such as Epi proColon (510(k) clearance received in 2016) and C-Scan (CE Mark obtained in 2019). Those competitors include well-established companies with significant resources such as Medtronic, and are constantly developing and marketing innovative products that may offer superior features or lower costs.
We believe that our CapsoCam Colon, once FDA cleared, will compare favorably to other available products and services. All other colorectal cancer detection methods in use today are constrained by some combination of poor sensitivity, poor adherence, or high cost. For example, colonoscopy requires advanced dietary restrictions and bowel cleansing, potential time away from work, someone to drive the patient home from the procedure and can also be uncomfortable, time-consuming, hazardous, and expensive. Fecal blood testing, including FIT testing, suffers from poor sensitivity, with only a 74% detection rate for cancer and 24% detection rate for advanced precancerous lesions. Stool tests and blood tests have demonstrated good sensitivity for cancer, but sensitivity for advanced precancerous lesions is under 50%. Relatively high false-positive rates for multi-targeted stool DNA tests, such as Cologuard, lead to unnecessary colonoscopies. In a study with over 10,000 average-risk screening patients, advanced neoplasia was not detected by colonoscopy in 75% of Cologuard-positive cases.35
Colon capsule endoscopy provides non-invasive visualization of the entire colon from the cecum to the rectum, and it has demonstrated good sensitivity and specificity for the detection of colon polyps. Currently, the only two competitor products that are available in the market for a limited subset of indicated patients have end-view systems and require wired data recorders to be worn on the body. We believe our CapsoCam Colon, once FDA cleared, will be a superior capsule endoscopy system, both in how it captures and presents images of the GI tract
35 For FIT test, see Imperiale, Thomas F.; Ransohoff, David F.; Itzkowitz, Steven H.; Levin, Theodore R; Lanvin, Philip;Lidgard, Graham P. Multitarget Stool DNA Testing for Colorectal-Cancer Screening. N Engl J Med. 2014 April 13. DOI: 10.1056/NEJMoa1311194 For blood test, see Chung, Daniel C; Gray, Darrell M.; Singh, Harminder; Issaka, Rachel B.; Raymond, Victoria M.; Eagle, Craig; Hu Sylvia; Chudova, Darya I.; Talasaz AmirAli; Greenson, Joel K.; Sinicrope Frank A.; Gupta, S,amir;Grady, William M. A Cell-free DNA Blood-Based Test for Colorectal Cancer Screening. N Engl J Med. 2024 Mar 14;390(11):973-983. DOI: 10.1056/NEJMoa2304714.
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and the clinical workflow and patient experience that it enables. In addition to the competitive advantages described above for our CapsoCam Plus, which also apply to our CapsoCam Colon, CapsoCam Colon utilizes our self-developed AI for automated polyp detection and incorporates our proprietary 3D-sensing technology to more accurately measure the size of polyps in the GI tract.
CapsoCloud. Our cloud-based platform, CapsoCloud, provides a flexible, trackable, streamlined, and capital-equipment-free workflow for providers in the U.S. By giving providers the ability following capsule retrieval to remotely access data obtained from the capsule endoscopy, CapsoCloud (in connection with the CapsoCam Plus) allows clinicians to track procedures and stream in vivo videos anywhere at their convenience, generate reports, store and manage patient data, and transfer data to third-party reading services. Following the commercial launch of our CapsoCam Colon solution, providers will initially utilize CapsoCloud to download in vivo videos for remote review. Within one year of commercial launch, we plan to introduce user-friendly streaming functions to facilitate via CapsoCloud remote in vivo video review, procedure report generation and image annotation.
CapsoView. Outside of the U.S., providers review procedure videos using CapsoView software (primarily due to foreign data privacy and access regulations).
We might not be able to compete successfully in our market, particularly as we seek to obtain the required FDA clearance and seek to commercialize CapsoCam Colon. If our competitors introduce new diagnostic tests that compete with or surpass the accuracy, price or ease of use of our products, we may be unable to satisfy existing customers or attract new customers at the prices and levels that would allow us to generate attractive rates of return on our investment. Increased competition could result in price reductions and revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects, financial condition and operating results.
Government Regulation
Our products and operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in foreign jurisdictions. Our product candidates are subject to regulation as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act (the “FDCA”), as implemented and enforced by the FDA.
United States Regulation of Medical Devices
The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.
FDA premarket clearance and approval requirements
Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, or approval of a premarket approval (“PMA”) application. Under the FDCA, medical devices are classified into one of three classes—Class I, Class II, or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and effectiveness.
Class I includes devices with the lowest risk to the patient for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the Quality Management System Regulation (the “QMSR”), facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials. Class II devices are subject to the FDA’s General Controls, as well as any special controls deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include
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performance standards, post-market surveillance, patient registries and FDA guidance documents. Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting and some implantable devices, devices that have a new intended use, or devices that use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA.
While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA, requesting permission to commercially distribute the device. The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance. Some pre-amendment devices are unclassified, but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed. The products we currently market are classified as Class II devices and have received FDA marketing authorization through the 510(k) clearance process.
510(k) Clearance marketing pathway
To obtain 510(k) clearance, a manufacturer must submit to the FDA a premarket notification demonstrating that the proposed device is “substantially equivalent” to a predicate device already on the market. A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process. The FDA’s 510(k) clearance process usually takes from three to twelve months, but may take longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence. FDA collects user fees for certain medical device submissions and annual fees and for medical device establishments.
If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously-cleared device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements. The PMA process requires that the manufacturer demonstrate that the device is safe and effective for its intended uses, which generally requires the submission of extensive data, including results from pre-clinical studies and human clinical trials. A PMA must also contain a full description of the device and its components, the methods, facilities, and controls used for manufacturing, and proposed labeling. The PMA process is burdensome, and in practice, the FDA’s review of a PMA application may take up to several years following initial submission. Alternatively, a manufacturer can request a risk-based classification determination for a novel device in accordance with the “de novo” process, described below. We currently do not market any medical devices pursuant to a PMA.
After a device receives 510(k) clearance or de novo classification, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, PMA approval or de novo classification. The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k), de novo request or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA approval is obtained or a de novo request is granted. In these circumstances, the manufacturer may be subject to significant regulatory fines or penalties.
De novo classification process
Medical device types that the FDA has not previously classified as Class I, II, or III are automatically classified into Class III regardless of the level of risk they pose. The Food and Drug Administration Modernization Act of 1997 established a route to market for low-to-moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on
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the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Manufacturers may request de novo classification directly without first submitting a 510(k) pre-market notification to the FDA and receiving a not-substantially-equivalent determination. De novo classification requests are subject to the payment of user fees.
By statute, FDA is required to classify the device within 120 days following receipt of the de novo request, although the process may take significantly longer. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. If FDA grants the de novo request, the device may be legally marketed in the United States. However, the FDA may reject the request if the FDA identifies a legally marketed predicate device that would be appropriate for a 510(k) notification, determines that the device is not low-to-moderate risk, or determines that General Controls would be inadequate to control the risks and/or special controls cannot be developed. After a device receives de novo classification, any modification that could significantly affect its safety or efficacy, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, another de novo request or even PMA approval.
Medical device clinical trials
Clinical trials are sometimes required to support 510(k) or de novo submissions. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (“IDE”), regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. If the device under evaluation does not present a significant risk to human health, then the device sponsor is not required to submit an IDE application to the FDA before initiating human clinical trials, but must still comply with abbreviated IDE requirements when conducting such trials. A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or presents a potential for serious risk to a patient in some other way. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.
Regardless of the degree of risk presented by the medical device, clinical studies must be approved by, and conducted under the oversight of, an Institutional Review Board (the “IRB”), for each clinical site. The IRB is responsible for the initial and continuing review of the clinical study, and may pose additional requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. Acceptance of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials.
During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on
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making safety or effectiveness claims for them. The clinical investigators in the clinical study are also subject to FDA’s regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, such as strategic business decisions or a belief that the risks to study subjects may outweigh the anticipated benefits.
Expedited development and review programs
Following passage of the 21st Century Cures Act, the FDA implemented the Breakthrough Devices Program, which is a voluntary program offered to manufacturers of certain medical devices and device-led combination products that may provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. The goal of the program is to provide patients and health care providers with more timely access to qualifying devices by expediting their development, assessment and review, while preserving the statutory standards for PMA approval, 510(k) clearance and de novo classification. The program is available for medical devices that meet certain eligibility criteria, including that the device provides more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions, and that: (i) the device represents a breakthrough technology, (ii) no approved or cleared alternatives exist, (iii) the device offers significant advantages over existing approved or cleared alternatives, or (iv) the availability of the device is in the best interest of patients. Breakthrough Device Designation provides certain benefits to device developers, including more interactive and timely communications with FDA staff; use of post-market data collection, when scientifically appropriate, to facilitate expedited and efficient development and review of the device; opportunities for more efficient and flexible clinical study design; and prioritized review of premarket submissions. When reviewing Breakthrough Device Designation requests, the FDA may require a combination of literature or preliminary bench, animal or clinical data to demonstrate a reasonable likelihood of clinical and technological success. Receiving a Breakthrough Device Designation from the FDA does not guarantee that the FDA will grant marketing authorization for the device.
Post-market regulation
After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:
•establishment registration and device listing with the FDA;
•QMSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;
•labeling regulations and FDA prohibitions against the promotion of investigational products, or the promotion of “off-label” uses of cleared or approved products;
•requirements related to promotional activities;
•clearance or approval of product modifications to cleared devices or devices authorized through the de novo classification process that could significantly affect safety or effectiveness, or that would constitute a major change in intended use of such devices, or approval of certain modifications to PMA-approved devices;
•medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;
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•correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;
•the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and
•post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Manufacturing processes for medical devices are required to comply with the applicable portions of the QMSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QMSR also requires, among other things, maintenance of a medical device file and complaint files. As a manufacturer, we are subject to periodic scheduled or unscheduled inspections by the FDA. Failure to maintain compliance with the QMSR requirements could result in the shutdown of, or restrictions on, manufacturing operations and the recall or seizure of marketed products. The discovery of previously unknown problems with marketed medical devices, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that a manufacturer has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions, among others:
•warning letters, untitled letters, it has come to our attention letters, fines, injunctions, consent decrees, and civil penalties;
•recalls, withdrawals, or administrative detention or product seizures;
•operating restrictions or partial suspension or total shutdown of production;
•refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products;
•withdrawing 510(k) clearances or PMA approvals that have already been granted;
•refusal to grant export approvals for devices being shipped to foreign markets; or
•criminal prosecution.
We are also subject to regulation by the California Department of Public Health Food and Drug Branch (“FDB”) through the Medical Device Safety Program. We must maintain a California Medical Device Manufacturing license. Our facilities may be subjected to scheduled or unscheduled inspections by the FDB.
Healthcare Fraud and Abuse Laws
In the United States, we are subject to a number of federal and state healthcare regulatory laws that restrict business practices in the healthcare industry. These laws include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to
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induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item, or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
The federal false claims laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. A claim includes “any request or demand” for money or property presented to the government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.
In addition, the civil monetary penalties statute, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third party payers, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, impose requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, as well as business associates, independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.
The federal Physician Payments Sunshine Act ("Sunshine Act") was signed into law in 2010 as part of the Affordable Care Act and amended in 2018 with the SUPPORT Act. The Sunshine Act applies to (a) group purchasing organizations and (b) requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program ("Applicable Manufacturers"), with specific exceptions. Applicable Manufacturers must report annually to the Centers for Medicare & Medicaid Services (“CMS”), information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), certain other healthcare professionals such as physician assistants and nurse practitioners, and teaching hospitals, including ownership and investment interests held by physicians and their immediate family members. CMS has issued implementing regulations and the reported data is publicly available on the CMS Open Payments website.
Several states in which we operate have also adopted fraud and abuse laws similar to those described above. The scope of these laws and the interpretations of them vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Some state fraud and abuse laws apply to items or services
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reimbursed by any payer, including patients and commercial insurers, not just those reimbursed by a federally funded healthcare program.
Violations of fraud and abuse laws, including federal and state anti-kickback and false claims laws, may be punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid), disgorgement, and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.
Coverage and Reimbursement Regulation
In the United States, our commercial success depends in part on the extent to which governmental authorities, private health insurers and other third-party payers provide coverage for and establish adequate reimbursement levels for our products and related services. Use of the CapsoCam Plus is reimbursed under existing physician and hospital codes. We do not bill any third-party payers for the CapsoCam Plus. Instead, we invoice healthcare providers, and the cost is bundled into the reimbursement received by healthcare providers when the CapsoCam Plus is used. Failure by physicians, hospitals, and other users of our products to obtain adequate reimbursement from third-party payers for services performed with our products, or adverse changes in government and private third-party payers’ coverage and reimbursement policies, could adversely impact demand for our products.
Coverage and reimbursement for use of the CapsoCam Plus can differ significantly from payer to payer. Third-party payers are increasingly auditing and challenging the prices charged for medical products and services, with concern for upcoding, miscoding, using inappropriate modifiers, or billing for inappropriate care settings. Some third-party payers must approve coverage for new or innovative devices before they will reimburse healthcare providers who use the products or therapies. Even though a new product may have been cleared for commercial distribution by the FDA, we may find limited demand for the product unless and until reimbursement approval has been obtained from governmental and private third-party payers.
In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement levels. Third-party payers regularly update reimbursement amounts and, from time to time, revise the methodologies used to determine reimbursement amounts. These changes include routine updates to payments to hospitals under the IPPS. These updates could directly impact the demand for our products.
We believe the overall escalating cost of medical products and services being paid for by the government and private health insurance has led to, and will continue to lead to, increased pressures on the healthcare and medical device industries to reduce the costs of products and services. Third-party payers are developing increasingly sophisticated methods of controlling healthcare costs through prospective reimbursement and capitation programs, group purchasing, redesign of benefits, and exploration of more cost-effective methods of delivering healthcare. In the United States, some insured individuals enroll in managed care programs, which monitor and often require pre-approval of the services that a member will receive. Some managed care programs pay their providers on a per capita (patient) basis, which puts the providers at financial risk for the services provided to their patients by paying these providers a predetermined payment per member per month and, consequently, may limit the willingness of these providers to use our products.
As we also sell into international markets, we note that reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific product lines and procedures. In particular, in Europe, reimbursement is entirely regulated at member state level, varies significantly between countries, and member states are facing increased pressure to limit public healthcare spending. There can be no assurance that our products will be considered cost-effective by third party payers, that an adequate level of reimbursement will be available or that the third-party payers’ reimbursement policies will not adversely affect our ability to sell our products profitably. More and more, local, product-specific reimbursement law is applied as an overlay to medical device regulation, which has provided an additional layer of clearance requirements.
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Healthcare Reform
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for the procedures associated with the use of our products. The cost containment measures that payers and providers are instituting and the effect of any healthcare reform initiative implemented in the future could impact our revenue from the sale of our products.
The implementation of the Affordable Care Act (the “ACA”) in the United States, for example, substantially changed healthcare financing and delivery by both governmental and private insurers, and significantly affected medical device manufacturers. The ACA, among other things, provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians, and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models. Additionally, the ACA expanded eligibility criteria for Medicaid programs and created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. Since its enactment, there have been judicial, executive and political challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed a judicial challenge to the ACA brought by several states without specifically ruling on its constitutionality.
Other legislative changes have been proposed and adopted since the ACA was enacted. For example, the Budget Control Act of 2011, among other things, reduced Medicare payments to providers, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken. Additionally, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In 2025, as part of the budget reconciliation process, the One Big Beautiful Bill Act included significant reforms to Medicaid, including an estimated $1 trillion in reduced federal Medicaid spending from 2025 through 2034, the imposition of work requirements for certain adult enrollees, more frequent eligibility redeterminations and increased cost-sharing for beneficiaries. These changes are expected to reduce overall Medicaid enrollment and access to care. Although the effect on our business is currently unknown, any decrease in the number of insured patients or reimbursement levels for our products could adversely affect our revenue and commercial prospects.
We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.
Regulation of Medical Devices Outside the United States
Outside of the U.S., the regulation of medical devices is also complex. In Europe, for instance, products are subject to extensive regulatory requirements. In 2021, a new regulatory scheme for medical devices, the Medical Devices Regulation (“MDR”), became effective in EU member states. The MDR sets out the basic regulatory framework for medical devices in the EU and the European Economic Area (“EEA”) Countries. The MDR requires that medical devices may only be placed on the market if they are safe and effective and do not compromise safety and health when properly installed, maintained, and used in accordance with their intended purpose. The MDR has significant requirements for many medical devices, including requirements for clinical evidence and documentation, device identification and traceability, registration of economic operators throughout the distribution chain and post-market surveillance. The system of regulating medical devices operates by way of a certification for each medical device. Each certified device is marked with an EC certificate of conformity (“CE Mark”) which shows that the device has a Certificat de Conformité. There are national bodies known as Competent Authorities
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in each member state which oversee the implementation of the MDR within their jurisdiction. The means for achieving the requirements for the CE Mark vary according to the nature of the device. Devices are classified in accordance with their perceived risks, similarly to the U.S. system. The class of a product determines the conformity assessment required before the CE Mark can be placed on a product. Conformity assessments for our products are carried out as required by the MDR. Each member state can appoint Notified Bodies within its jurisdiction. If a Notified Body of one member state has issued a Certificat de Conformité, the device can be sold throughout the EU and the EEA without further conformance tests being required in other member states. The CE Mark is contingent upon continued compliance with the applicable regulations and the quality system requirements of the ISO 13485:2016 standard. Our current CE Mark is issued by TÜV Rheinland.
In some regions, the level of government regulation of medical devices is increasing, which can lengthen time to market and increase registration and approval costs. In many countries, the national health or social security organizations require products to be qualified before they can be marketed and considered eligible for reimbursement.
In many instances, global regulatory agencies have come together in an attempt to harmonize medical device regulatory requirements. In 2011, the regulatory agencies of the U.S., Canada, Brazil, Australia and Japan came together and established the International Medical Device Regulators Forum (the “IMDRF”). The IMDRF continues to grow and now has a management committee of regulatory agency representatives from 11 countries and affiliate members representing 7 countries. One example of the IMDRF harmonizing medical device regulatory requirements is the Medical Device Single Audit Program (the “MDSAP”), whereby a medical device manufacturer can have a single Quality Management System audit of their facility which covers the regulatory requirements of Australia, Brazil, Canada, Japan and the U.S. Instead of having periodic quality inspections from regulators of each of these countries, a single comprehensive inspection is performed. We are audited in compliance with the MDSAP.
Other regional groups working to harmonize regulatory requirements are the Asia-Pacific Economic Cooperation group, Global Harmonization Working Party and African Medical Devices Forum. While regulatory requirements are constantly evolving, regulatory agencies recognize the impact and are attempting to harmonize their efforts.
While the list of regulated countries continues to grow, many of the regulated countries leverage device approvals from the U.S. or Europe, meaning that the testing and clinical studies required to satisfy device safety and efficacy requirements of the U.S. and Europe, often carry over to other geographies.
Data Privacy and Security Laws
Numerous state, federal, and foreign laws, regulations, and standards govern the collection, use, disclosure, access to, confidentiality, and security of health-related and other personal information, and could apply now or in the future to our operations or the operations of our collaborators, third-party providers, and others upon whom we commercially rely upon. In the U.S., numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, and consumer protection laws and regulations govern the collection, use, disclosure and protection of health-related and other personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.
Intellectual Property
Intellectual property rights are important to us. We seek to protect our intellectual property and proprietary technologies through combined means, including by pursuing patent applications that cover our technologies and product candidates, as well as any other relevant inventions and improvements that are considered commercially important to the development of our business. We have developed, and are continuing to develop, a comprehensive intellectual property portfolio related to our capsule camera products and their portable usage,
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including structural and compartmental design, imaging mechanics and algorithms for optimizing the screening and detection performance.
Our success depends in part on our ability to: (a) obtain, maintain, protect and enforce intellectual property and other proprietary rights for our current and future technology, inventions, improvements, and know-how we consider important to our business, (b) preserve the confidentiality of our trade secrets, (c) defend and enforce our intellectual property rights, (d) prevent others from infringing, misappropriating, or violating our intellectual property and other proprietary rights, and (e) operate without infringing, misappropriating, or violating the intellectual property and other proprietary rights of others. Our objective is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the U.S. and in jurisdictions outside of the U.S. related to our proprietary technology, inventions, and improvements that are important to the development and implementation of our business. Our patent portfolio is intended to cover components of our products, as well as any other inventions that are important to our business. We also rely on trademarks, trade secrets, and know-how to develop and maintain our proprietary position.
As set forth in the tables below, our patent portfolio, as of December 31, 2025, contains over 140 issued patents worldwide with anticipated expiration dates and types as indicated. With respect to non-U.S. patents, the corresponding estimated expiration dates provided are anticipatory in nature. The actual expiration date of a non-U.S. patent can be subject to variations due to the complexities and nuances of individual country patent laws, regulations, and administrative practices, such as any applicable country specific term adjustment laws or regulations.

Jurisdiction | Title | Patent No. | Status | Date of Expiration | Type
US | In vivo autonomous camera with on-board data storage or digital wireless transmission in regulatory approved band | 8073223 | Issued | 9/19/2026 | Apparatus
US | Capture control for in vivo camera | 7940973 | Issued | 9/19/2026 | Apparatus and Method
US | Image capture control for in vivo autonomous camera | 7792344 | Issued | 9/19/2026 | Apparatus and Method
US | Onboard data storage and method | 7495993 | Issued | 10/25/2026 | Apparatus and Method
US | System and method for capsule camera with on-board storage | 8472795 | Issued | 11/22/2026 | Apparatus
US | Methods to compensate Manufacturing Variations and Design Imperfections in a Capsule Camera | 9307233 | Issued | 1/9/2027 | Method
US | Methods to compensate manufacturing variations and design imperfections in a display device | 11019318 | Issued | 1/9/2027 | Apparatus
US | Methods to compensate manufacturing variations and design imperfections in a display device | 10499029 | Issued | 1/20/2027 | Method
US | Systems and methods for capsule camera control | 8213698 | Issued | 6/23/2027 | Apparatus and Method
US | Panoramic imaging system | 7817354 | Issued | 3/7/2028 | Apparatus and Method
US | Lighting control for in vivo capsule camera | 7796870 | Issued | 6/5/2028 | Apparatus and Method
US | Detection of when a capsule camera enters into or goes out of a human body and associated operations | 9025017 | Issued | 1/2/2029 | Apparatus and Method
US | In vivo camera with multiple sources to illuminate tissue at different distances | 8956281 | Issued | 5/29/2029 | Apparatus and Method

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Jurisdiction | Title | Patent No. | Status | Date of Expiration | Type
US | Retrieval pan | D737,959 | Issued | 9/1/2029 | Design
US | In vivo autonomous camera with on-board data storage or digital wireless transmission in regulatory approved band | 7983458 | Issued | 11/24/2029 | Apparatus and Method
US | Detection of when a capsule camera enters into or goes out of a human body and associated operations | 8187174 | Issued | 4/10/2030 | Method
US | Capture control for in vivo camera | 7974454 | Issued | 5/10/2030 | Apparatus and Method
US | Multiple capsule camera apparatus and methods for using the same | 9041785 | Issued | 6/1/2030 | Apparatus and Method
US | Methods to compensate manufacturing variations and design imperfections in a capsule camera | 8405711 | Issued | 6/14/2030 | Method
US | System and method for multiple viewing-window display of capsule images | 8150124 | Issued | 6/20/2030 | Apparatus and Method
US | System and method for image enhancement of dark areas of capsule images | 8150123 | Issued | 9/3/2030 | Apparatus and Method
US | Capsule imaging system having a folded optical axis | 9001187 | Issued | 9/25/2030 | Apparatus
US | System and method for display of panoramic capsule images | 8724868 | Issued | 10/3/2030 | Apparatus and Method
US | Methods to compensate manufacturing variations and design imperfections in a capsule camera | 9007478 | Issued | 10/29/2030 | Apparatus and Method
US | Data communication between capsulated camera and its external environments | 9285670 | Issued | 12/7/2030 | Method
US | Multi-stream image decoding apparatus and method | 8803961 | Issued | 1/12/2031 | Apparatus and Method
US | In vivo image capturing system including capsule enclosing a camera | 8773500 | Issued | 1/18/2031 | Apparatus and Method
US | System and method for capsule camera with capture control and motion-compensated video compression | 8165374 | Issued | 6/9/2031 | Apparatus and Method
US | Imaging system having a folded optical axis | 8717413 | Issued | 6/10/2031 | Apparatus
US | In vivo camera with multiple sources to illuminate tissue at different distances | 8636653 | Issued | 8/3/2031 | Apparatus and Method
US | Multiple capsule camera apparatus and methods for using the same | 8300091 | Issued | 8/31/2031 | Apparatus and Method
US | Camera system with multiple pixel arrays on a chip | 9118850 | Issued | 11/3/2031 | Apparatus and Method
US | In vivo camera with multiple sources to illuminate tissue at different distances | 10244929 | Issued | 2/5/2032 | Apparatus and Method
US | Camera System with multiple Pixel Arrays On A Chip | 9621825 | Issued | 4/12/2032 | Apparatus
US | In vivo camera with multiple sources to illuminate tissue at different distances | 11103129 | Issued | 2/2/2033 | Apparatus and Method
US | System and Method for Displaying Annotated Capsule Images | 9626477 | Issued | 4/16/2033 | Apparatus and Method
US | Capsule orientation detection for capsule docking system with inductive power drive circuit | 10159400 | Issued | 5/2/2033 | Apparatus

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Jurisdiction | Title | Patent No. | Status | Date of Expiration | Type
US | Optical docking system with inductive powering for capsule camera | 10602913 | Issued | 5/2/2033 | Apparatus
US | Docking system with inductive powering for capsule camera | 10869594 | Issued | 5/2/2033 | Apparatus
US | Docking system with inductive powering for capsule camera | 10881282 | Issued | 5/2/2033 | Apparatus
US | System and method for displaying bookmarked capsule images | 10154226 | Issued | 9/30/2033 | Apparatus and Method
US | System and Method for Displaying Annotated Capsule Images | 9304669 | Issued | 3/1/2034 | Apparatus and Method
US | Method of overlap-dependent image stitching for images captured using a capsule camera | 9324172 | Issued | 5/19/2034 | Method
US | Power source control for medical capsules | 11129516 | Issued | 7/10/2034 | Apparatus
US | Image sensor with integrated power conservation control | 9357150 | Issued | 8/12/2034 | Apparatus
US | In vivo capsule device with electrodes | 10531786 | Issued | 8/20/2034 | Apparatus
US | Reconstruction of images from an in vivo multi-camera capsule | 10068334 | Issued | 5/28/2035 | Method
US | Power source control for medical capsules | 10206557 | Issued | 9/13/2035 | Apparatus
US | Method and apparatus for endoscope with distance measuring for object scaling | 10402992 | Issued | 10/16/2035 | Apparatus and Method
US | Single image sensor for capturing mixed structured-light images and regular images | 10447950 | Issued | 10/16/2035 | Apparatus
US | Endoscope employing structured light providing physiological feature size measurement | 10531074 | Issued | 10/16/2035 | Apparatus and Method
US | Endoscope with images optimized based on depth map derived from structured light images | 10624533 | Issued | 10/16/2035 | Apparatus and Method
US | Single image sensor for capturing mixed structured-light images and regular images | 10742909 | Issued | 10/16/2035 | Apparatus and Method
US | Single image sensor for capturing mixed structured-light images and regular images | 10785428 | Issued | 10/16/2035 | Apparatus and Method
US | Method and apparatus of sharpening of gastrointestinal images based on depth information | 10943333 | Issued | 10/16/2035 | Apparatus and Method
US | Single image sensor for capturing mixed structured-light images and regular images | 11102428 | Issued | 10/16/2035 | Apparatus
US | Endoscope employing structured light providing physiological feature size measurement | 11019327 | Issued | 10/16/2035 | Method
US | Reconstruction with Object Detection for Images Captured from a Capsule Camera | 9672620 | Issued | 12/18/2035 | Method
US | Capsule orientation detection for capsule docking system with inductive power drive circuit | 10010241 | Issued | 12/28/2035 | Apparatus
US | Single image sensor control for capturing mixed mode images | 10201266 | Issued | 1/28/2036 | Apparatus and Method
US | Reconstruction of images from an in vivo multi-camera capsule with two-stage confidence matching | 11116390 | Issued | 7/12/2037 | Apparatus

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Jurisdiction | Title | Patent No. | Status | Date of Expiration | Type
US | Single Image Sensor for Capturing Mixed Structured-light Images and Regular Images | 9936151 | Issued | 3/9/2036 | Method
US | Reconstruction of images from an in vivo multi-camera capsule with two-stage confidence matching | 11120547 | Issued | 3/28/2036 | Apparatus and Method
US | Method and apparatus of sharpening of gastrointestinal images based on depth information | 11354783 | Issued | 4/15/2036 | Apparatus and Method
US | Single image sensor for capturing mixed structured-light images and regular images | 10484629 | Issued | 7/31/2036 | Apparatus and Method
US | Method and apparatus for image stitching of images captured using a capsule camera | 10943342 | Issued | 2/4/2037 | Apparatus and Method
US | Capsule device having variable specific gravity | 10098526 | Issued | 2/10/2037 | Apparatus
US | Capsule device having variable specific gravity | RE48181 | Issued | 2/10/2037 | Apparatus
US | De-ghosting of images captured using a capsule camera | 10015372 | Issued | 3/18/2037 | Apparatus and Method
US | Method of image processing and display for images captured by a capsule camera | 11074672 | Issued | 4/19/2037 | Apparatus and Method
US | Method and apparatus of lens alignment for capsule | 10638920 | Issued | 6/30/2037 | Apparatus and Method
US | Method and apparatus for estimating area or volume of object of interest from gastrointestinal images | 10580157 | Issued | 8/4/2037 | Apparatus and Method
US | Method and apparatus for estimating area or volume of object of interest from gastrointestinal images | 10736559 | Issued | 8/4/2037 | Apparatus and Method
US | Method and apparatus for area or volume of object of interest from gastrointestinal images | 10346978 | Issued | 8/18/2037 | Apparatus and Method
US | Capsule enteric coating for controlling balloon expansion start time | 10674899 | Issued | 7/9/2038 | Apparatus
US | Method and apparatus for capturing images and associated 3D model based on a single image sensor and structured-light patterns in the visible spectrum | 10593055 | Issued | 9/12/2038 | Apparatus and Method
US | Method and apparatus for travelled distance measuring by a capsule camera in the gastrointestinal tract | 10506921 | Issued | 10/11/2038 | Apparatus and Method
US | Method and apparatus for travelled distance measuring by a capsule camera in the gastrointestinal tract | 10835113 | Issued | 10/11/2038 | Apparatus and Method
US | Method and apparatus for detecting missed areas during endoscopy | 11219358 | Issued | 3/2/2040 | Apparatus and Method
US | Method and apparatus for leveraging residue energy of capsule endoscope | 11612303 | Issued | 9/29/2041 | Apparatus and Method
US | Method and apparatus for objective assessment of gastrointestinal conditions based on images captured in the GI tract | 11948303 | Issued | 4/7/2042 | Apparatus and Method
US | Method and Apparatus for Objective Assessment of Gastrointestinal Conditions based on Images Captured in the GI Tract | 12490889 | Issued | 12/8/2045 | Apparatus and Method

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Jurisdiction | Title | Patent No. | Status | Date of Expiration | Type
Japan | In Vivo Sensor with Panoramic Camera | JP5,695,142B | Granted | 12/19/2026 | Method
Japan | In Vivo Sensor with Panoramic Camera | JP5,523,713B | Granted | 12/19/2026 | Apparatus
Japan | Multi-Stream Image Decoding Apparatus And Method | JP5,368,469B | Granted | 11/26/2028 | Apparatus
Japan | Method to Compensate Manufactoring Variation and Design Imperfections In A Capsule Camera | JP5,926,345B | Granted | 12/12/2027 | Apparatus and Method
Japan | Multi-Stream Image Decoding Apparatus And Method | JP5,592,358 | Granted | 3/30/2029 | Apparatus and Method
Japan | Optical Wireless Docking System for Capsule Camera | JP6,177,315 | Granted | 5/2/2033 | Apparatus
Japan | Power Source Control For Medical Capsulese | JP6,280,876 | Granted | 1/24/2033 | Apparatus
Japan | Reconstruction of Images from an in Vivo Multi-Cameras Capsule | JP6,501,800 | Granted | 4/27/2035 | Apparatus and Method
Japan | System and Method for Capsule Device with Multiple Phases of Density | JP6,510,591 | Granted | 10/22/2033 | Apparatus
Japan | Methods to Compensate Manufacturing Variations and Design Imperfections In A Display Device | JP6,737,937 | Granted | 7/25/2036 | Apparatus and Method
Japan | Methods to Compensate Manufacturing Variations and Design Imperfections In A Display Device | JP6,563,870 | Granted | 7/25/2036 | Apparatus and Method
Japan | Single Image Sensor for Capturing Mixed Structured-light Images and Regular Images | JP6,803,908 | Granted | 9/22/2036 | Method
Japan | Single Image Sensor for Capturing Mixed Structured-light Images and Regular Images | JP7,114,666 | Granted | 9/22/2036 | Apparatus
Japan | Single Image Sensor for Capturing Mixed Structured-light Images and Regular Images | JP7,114,667 | Granted | 9/22/2036 | Apparatus and Method
Japan | Camera System With Multiple Pixel Arrays On A Chip | JP5,368,469 | Granted | 11/26/2028 | Apparatus
Japan | Endoscope Employing Structured Light Providing Physiological Feature Size Measurement | JP6,891,345 | Granted | 4/12/2038 | Apparatus
Europe | Data communication between capsulated camera and its external environments | EP2198342 | Granted | 9/12/2028 | Method
Europe | In vivo sensor with panoramic camera | EP1974240 | Granted | 12/19/2026 | Apparatus and Method
Europe | Camera system with multiple pixel arrays on a chip | EP2225877 | Granted | 11/26/2028 | Apparatus
Europe | Power source control for medical capsules | EP 2816946 | Granted | 1/24/2033 | Apparatus
Europe | Capsule endoscopic docking system | EP 2858549 | Granted | 5/23/2033 | Apparatus
Europe | Multi-stream image decoding apparatus and method | EP2291119 | Granted | 3/30/2029 | Apparatus and Method
Europe | Optical wireless docking system for capsule camera | EP 2849627 | Granted | 5/2/2033 | Apparatus
Europe | Power source control for medical capsules | EP 3272270 | Granted | 1/24/2033 | Apparatus
Europe | In vivo camera with multiple sources to illuminate tissue at different distances | EP 2299895 | Granted | 6/1/2029 | Apparatus

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Jurisdiction | Title | Patent No. | Status | Date of Expiration | Type
Europe | Capsule device having variable specific gravity | EP 3270761 | Granted | 3/1/2036 | Apparatus
Europe | Reconstruction of images from an in vivo multi-camera capsule with confidence matching | EP 3148399 | Granted | 4/27/2035 | Apparatus and Method
Europe | Capsule coating for image capture control | EP 3226745 | Granted | 12/4/2034 | Apparatus and Method
Europe | Single image sensor for capturing structured-light images and regular images and its method of operation | EP3362989 | Granted | 9/22/2036 | Apparatus and Method
Taiwan | Reconstruction of images from an in vivo multi-camera capsule | TWI532460 | Granted | 5/26/2034 | Method
Taiwan | Method and Apparatus for Endoscope with Distance Measuring for Object Scaling | TW-I596931 | Granted | 11/5/2035 | Method
Taiwan | Capsule Orientation Detection for Capsule Docking System with Inductive Power Drive Circuit | TW-I592129 | Granted | 9/25/2034 | Apparatus
China | Image Capture Control For In Vivo Camera | ZL201180011653.4 | Granted | 3/21/2031 | Apparatus and Method
China | Multi-Stream Image Decoding Apparatus And Method | ZL200980129312.X | Granted | 3/30/2029 | Apparatus and Method
China | In Vivo Camera with Multiple Sources to Illuminate Tissue At different Distances | ZL200980120587.7 | Granted | 6/1/2029 | Apparatus and Method
China | Data Communication Between Capsulated Camera and Its External Environments | ZL200880106599.X | Granted | 9/12/2028 | Method
China | In Vivo Autonomous Camera with On-Board Data Storage or Digital Wireless Transmission in Regulatory Approved Band | ZL200680040026.2 | Granted | 10/26/2026 | Apparatus and Method
China | Camera System With Multiple Pixel Arrays On A Chip | ZL200880125638.0 | Granted | 11/26/2028 | Apparatus
China | Method to Compensate Manufactoring Variation and Design Imperfections In A Capsule Camera | ZL200780052067.8 | Granted | 12/12/2027 | Apparatus and Method
China | Method to Compensate Manufactoring Variation and Design Imperfections In A Capsule Camera | ZL201210082410.6 | Granted | 12/12/2027 | Method
China | Power Source Control for Medical Capsules | ZL201380004147.1 | Granted | 1/24/2033 | Apparatus
China | Optical Wireless Docking System for Capsule Camera | ZL201380026186.1 | Granted | 5/2/2033 | Apparatus
China | In Vivo Camera With Multiple Sources To Illuminate Tissue At Different Distance | ZL201410534382.6 | Granted | 6/1/2029 | Apparatus and Method
China | In Vivo Capsule Device with Electrodes | ZL201310346793.8 | Granted | 8/9/2033 | Apparatus
China | Capsule Camera Device With Multi-Spectral Light Sources | ZL201380081896.4 | Granted | 12/27/2033 | Apparatus
China | In Vivo Sensor with Panoramic Camera | ZL200680050987.1 | Granted | 12/19/2026 | Apparatus and Method
China | Reconstruction of Images From An In Vivo Multi-Camera Capsule | ZL201480030874.X | Granted | 5/19/2034 | Method
China | In Vivo Camera With Multiple Sources To Illuminate Tissue At Different Distances | ZL201410532920.8 | Granted | 6/1/2029 | Apparatus and Method

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Jurisdiction | Title | Patent No. | Status | Date of Expiration | Type
China | In Vivo Camera With Multiple Sources To Illuminate Tissue At Different Distances | ZL201811307576.7 | Granted | 6/1/2029 | Apparatus and Method
China | Method of Overlap-Dependent Image Stitching for Images Captured Using a Capsule Camera | ZL201680020175.6 | Granted | 3/30/2036 | Method
China | Capsule Device Having Variable Specific Gravity | ZL201680016549.7 | Granted | 3/1/2036 | Apparatus
China | Reconstruction With Object Detection For Images Captured From A Capsule Camera | ZL201680047653.2 | Granted | 7/25/2036 | Method
China | Single Image Sensor for Capturing Mixed Structured-light Images and Regular Images | ZL201680059418.7 | Granted | 9/22/2036 | Apparatus and Method
China | Method and Apparatus for Gastric Examination Using a Capsule Camera | ZL201780097479.7 | Granted | 12/18/2037 | Apparatus and Method
China | Image Sensor with Integrated Power Conservation Control | ZL201580079351.9 | Granted | 4/28/2035 | Apparatus
China | Method and Apparatus of Lens Alignment for Capsule Camera | ZL201780036954.X | Granted | 6/1/2037 | Apparatus and Method
China | Method and Apparatus for Area or Volume of Object of Interest From Gastrointestinal Images | ZL201710768987.5 | Granted | 8/31/2037 | Apparatus and Method
China | De-ghosting of Images Captured Using a Capsule Camera | ZL201711016971.5 | Granted | 10/26/2037 | Apparatus and Method
China | Method and Apparatus for Image Stitching of Images Captured Using a Capsule Camera | ZL201680091275.8 | Granted | 11/30/2036 | Apparatus and Method
China | Method and Apparatus for Travelled Distance Measuring by a Capsule Camera in the Gastrointestinal Tract | ZL201910119473.6 | Granted | 2/18/2039 | Apparatus and Method
China | Endoscope Employing Structured Light Providing Physiological Feature Size Measurement | ZL201880045690.9 | Granted | 4/12/2038 | Apparatus and Method
China | Method of Image Processing and Display for Images Captured by a Capsule Camera | ZL201780089753.6 | Granted | 4/19/2037 | Apparatus and Method
China | Method and Apparatus for Capturing Images and Associated 3D Model Based on a Single Image Sensor and Structured-Light Patterns in the Visible Spectrum | ZL201910228496.0 | Granted | 3/25/2039 | Apparatus and Method
China | Method and Apparatus for Travelled Distance Measuring by a Capsule Camera in the Gastrointestinal Tract | ZL202210637502.X | Granted | 2/18/2039 | Apparatus and Method

In addition to patents, we also rely upon trademarks, trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position. We maintain and are seeking registered trademarks. We have certain know-how and trade secrets relating to our capsule camera and other technologies. We rely on trade secrets to protect certain aspects of our technology. See the section titled “Risk factors—Risks Relating to Our Intellectual Property” for a more comprehensive description of risks related to our intellectual property.
Employees and Human Capital Resources
As of December 31, 2025, we had approximately 99 full time employees. None of our employees are represented by a labor union or party to a collective bargaining agreement. We consider our relationship with our employees to be good.
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Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and additional employees.
Legal Proceedings
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Corporate Information
Our corporate headquarters is located at 18805 Cox Avenue, Suite 250, Saratoga, California 95070. Our telephone number is (408) 624-1488. We use our website at www.capsovision.com to communicate important information about our company, including news releases and financial information. We also make available on our investor relations webpage, free of charge, copies of our Securities and Exchange Commission (“SEC”) filings and submissions, which can be found at the SEC’s website, www.sec.gov, as soon as reasonably practicable after electronically filing or furnishing such documents with the SEC. Website references are provided throughout this document for convenience only. The contents of these websites do not constitute a part of this Annual Report and shall not be deemed incorporated by reference into this Annual Report unless expressly noted.
Available Information
Our Annual Report, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act are available on our website, free of charge, as soon as reasonably practicable after the reports are electronically filed or furnished to the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information that we file with the SEC electronically. We intend to announce material information to the public through filings with the SEC, the investor relations page on our website, which is located at www.capsovision.com, press releases, public conference calls, and public webcasts.
The information disclosed through the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels. The information we post through these channels is not a part of this Annual Report. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Item 1A. Risk Factors
You should carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report and in our other public filings, including in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our financial statements and the related notes appearing elsewhere in this Annual Report and in our other public filings, which could materially affect our business, financial condition or future results. The risks described below are not the only risks that we face. The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could materially and adversely affect our business, financial condition, results of operations and prospects. We may disclose changes to risk factors or additional risk factors from time to time in our future filings with the SEC.
Business and Industry Risk Factors
We have a history of net losses, and we expect to incur additional losses in the foreseeable future.
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We have incurred net losses since inception, and we expect to incur additional losses in the foreseeable future. For the years ended December 31, 2025 and December 31, 2024, we incurred net losses of $25.3 million and $19.9 million, respectively. As of December 31, 2025 we had an accumulated deficit of $155.7 million. Our accumulated deficit reflects significant front-end spending and investment related to both completed and ongoing key operational milestones, including: (i) the initial and continued development of CapsoCam Plus and CapsoCloud, our cloud-based platform; (ii) development of our next pipeline capsule endoscope, CapsoCam Colon; (iii) initial development and ongoing improvements to our AI assisted pathology detection tools and technologies; and (iv) funding of completed and ongoing related clinical and other studies. As we execute on our business strategy to grow our business and revenues (including seeking FDA 510(k) clearance for CapsoCam Colon), we will continue to incur development costs and clinical study expenses and will make additional investments. Additionally, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. Accordingly, we expect to continue to incur losses for at least the near-term and we may never achieve profitability or, if we do achieve profitability, sustain profitability. Our failure to achieve and sustain profitability in the future would make it more difficult to finance our business and accomplish our strategic objectives, which would have a material adverse effect on our business, financial condition and results of operations.
Our audited financial statements for the years ended December 31, 2025 and December 31, 2024 include a footnote raising substantial doubt about our ability to continue as a “going concern” and we will likely need to raise additional financing to fund our business and revenue growth plans.
Our 2025 and 2024 audited financial statements include a footnote raising substantial doubt about our ability to continue as a going concern. We have funded our historical net losses and negative cash flows through the issuance of convertible preferred stock and IPO common stock. As of December 31, 2024, we had cash of approximately $9.3 million, including $20.4 million raised in 2023 and $15.0 million raised in 2024 through the issuance of preferred stock to our investors. As of December 31, 2025, we had cash of approximately $10.1 million, including $23.4 million raised through the IPO.
Our ability to continue as a going concern depends on a number of factors including whether we can successfully implement our business and revenue growth plans to generate sufficient cash flow from operating activities, and our ability to raise as needed other equity financing or loan facilities. We closed a private placement on March 16, 2026, and raised $14.0 million from certain accredited investors. We will likely need to undertake additional capital-raising activities before the year-end of 2026 to fund our operations and planned clinical studies as contemplated by our growth strategy, such as the second arm pivotal study for the second generation CapsoCam Colon capsule and the planned study for early pancreatic cancer detection using the CapsoCam UGI system. There is no certainty regarding the occurrence, magnitude, or timing of these capital-raising activities. If we raise additional funds through the sale of equity, convertible debt, or other equity-linked securities, our stockholders’ ownership will be diluted. The inability to secure adequate financing on favorable terms, or at all, could have a material adverse effect on our financial position, results of operations, cash flows, and ability to achieve our intended business objectives. See the risk factor titled “We may require additional capital to support business growth, and this capital might not be available on terms favorable to us, or at all, and may dilute existing stockholders’ ownership of our common stock” below.
Given the substantial doubt about our ability to continue as a going concern, potential investors must exercise caution when evaluating our financial condition, results of operations, and business prospects. Our inability to raise sufficient financing or meet our strategic plans could result in a material adverse effect on our financial position, results of operations, cash flows, and ability to achieve our intended business objectives.
All of our revenues to date have been, and in the near-term will continue to be, generated from CapsoCam Plus related sales for the small bowel; and our ability to grow our small-bowel-related revenue is subject to our ability to successfully and timely execute related elements of our revenue growth strategy.
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Near term actions to grow our CapsoCam Plus small-bowel-related revenues include those set forth below. We may be unable to timely and effectively execute these or other activities designed to increase our small-bowel-related revenues.
•Leveraging the patient and provider benefits of CapsoCam Plus capsule endoscopy solution (which includes the associated software products, CapsoCloud and CapsoView) to effectively compete against competitors, such as (i) Medtronic, with its comparatively greater overall brand recognition, financial resources and other competitive advantages; and (ii) the U.S. subsidiary of a non-U.S. (Chinese) competitor who was the first to use AI-driven lesion detection software to support its small bowel capsule endoscopy system.
•Further penetrating the small bowel market in the U.S. and internationally, including by (i) increasing the size and effectiveness of our U.S. and international sales teams; (ii) pursuing the pediatric market (with children comprising a significant portion of the Crohn’s disease patient population) following FDA clearance in December 2024 for this newly indicated patient population; (iii) introducing complementary products such as our (a) capsule delivery device with full commercialization expected in the fourth quarter of 2026 and (b) patency capsule (for verifying a capsule endoscope can pass through the bowel without retention prior to an exam) with tentative FDA 510(k) submission planned by the end of the second quarter of 2026; and (iv) facilitating increased telemedicine adoption following FDA clearance in December 2024 of remote ingestion of our CapsoCam Plus, allowing patients to ingest our capsules in the comfort of their own homes with remote provider supervision.
•Incorporating our AI assisted pathology detection technology into our CapsoCam Plus capsule. We conducted related clinical studies to demonstrate the benefits of our AI technology as incorporated into CapsoCam Plus and submitted the related 510(k) application to the FDA in December 2025. We are targeting the related EU submission in the second quarter of 2026. We anticipate to obtain FDA clearance by the middle of 2026 and EU clearance in the third quarter of 2026 with commercialization planned to begin in US and EU shortly thereafter.
Each of these activities is subject to numerous risks. For example, (i) we may be unable to compete effectively against our competitors; (ii) the introduction of our capsule delivery device and patency capsule may be delayed or these products may not be sufficiently adopted by providers and patients initially or in the longer term; and (iii) we may fail to obtain all required FDA and EU approvals for incorporating our AI assisted pathology detection technology into our CapsoCam Plus solution.
For additional information, see the other risks set forth under this “Risk Factors” section including “We operate in a highly competitive industry, and competitive pressures could have a material adverse effect on our business, financial condition, results of operations, and prospects,” “Our longer term efforts to expand our GI-tract capsule endoscopy solution beyond small bowel and colon pathologies and medical conditions may not succeed,” and “We may face regulatory challenges and delays in obtaining 510(k) clearance for marketing of those CapsoCam capsules incorporating our self-developed AI technology, including our CapsoCam Colon capsule endoscopy solution and CapsoCam Plus capsule endoscopy solution (small bowel).”
CapsoCam Colon is our initial strategic effort to expand revenues for our GI-tract capsule endoscopy solution beyond small-bowel-related sales; we do not currently expect to generate CapsoCam Colon-related revenues until FDA clearance for the second generation of our CapsoCam Colon solution.
Our CapsoCam Colon capsule endoscopy solution (which includes associated software products, CapsoCloud and CapsoView) is our initial strategic effort to grow our revenues beyond small-bowel-related sales. We do not expect to generate CapsoCam Colon related sales in the U.S. or internationally until after (i) obtaining initial FDA 510(k) or EU clearance, as applicable, for our second generation of our CapsoCam Colon capsule for use by the indicated patients (who are a subset of the colorectal cancer screening and surveillance population) and (ii) satisfying the related conditions for obtaining these clearances.
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The second generation of our CapsoCam Colon solution incorporates our AI assisted pathology detection technology. The second-generation product will incorporate improvements—such as a new lens and illumination optics with an increased field of view and improved image quality—designed to increase the accuracy (measured in terms of polyp-detection sensitivity and specificity) and benefits of using our CapsoCam Colon solution to visualize the colon and detect and measure polyps. We plan to focus our regulatory efforts on first obtaining U.S. FDA clearance followed by obtaining EU clearance. We plan to use the clinical results of the second arm of our pivotal study to support submission to the FDA of a 510(k) application in the third quarter of 2026. FDA review of our 510(k) submissions may be delayed and we may not receive 510(k) clearances from the FDA on a timely basis or at all. Staff reductions in the FDA office charged with regulating devices may cause delay. Related risks with respect to, among other things, receiving requisite regulatory clearances and the timing thereof and commercializing our CapsoCam Colon capsule endoscopy solution are described further below in these “Risk Factors.”
Broad adoption of our CapsoCam Colon solution (once cleared) and growing related revenues depend on, among other things, expanding beyond CapsoCam Colon’s initial indicated patient population, increasing the accuracy of our initial CapsoCam Colon solution, and achieving and maintaining a satisfactory successful completion rate for capsule endoscopies using our CapsoCam Colon solution; and we may fail to successfully and timely execute related elements of our CapsoCam Colon adoption and revenue growth strategy.
Broader adoption of our CapsoCam Colon capsule endoscopy solution by providers and patients (once cleared) and growing related revenues would involve, among other things:
•increasing the indicated patient population for our CapsoCam Colon solution. The initial indicated patient population is a subset of the colorectal cancer screening and surveillance populations. More specifically, GI patients with (i) major risks for colonoscopy or moderate sedation coupled with evidence of GI bleeding of lower GI origin and (ii) an incomplete colonoscopy with adequate bowel preparation. As part of seeking FDA clearance for the planned second generation of our CapsoCam Colon solution, we plan to seek FDA clearance to remove the GI bleeding requirement. Successful removal of the GI bleeding requirement would significantly increase CapsoCam Colon’s addressable market. There is no assurance that the FDA will permit this request or any future request to expand the indicated patient population for our CapsoCam Colon solution on a timely basis or at all. Any such request would involve significant effort and require, among other things, related regulatory submissions and our conducting non-clinical and clinical studies to generate data and evidence to support the request;
•continued enhancements and improvements to our CapsoCam Colon solution to increase its accuracy (measured in terms of polyp-detection sensitivity and specificity) and benefits of using CapsoCam Colon to visualize the colon and detect and measure polyps. Our success in implementing these enhancements and improvements (including obtaining related FDA 510(k) and EU clearances) is critical to (i) our initial and ongoing commercialization efforts (including efforts to increase provider and patient acceptance of our solution); (ii) our ability to increase CapsoCam Colon’s indicated patient populations; and (iii) consequently, increasing that portion of the colorectal cancer screening, surveillance, and diagnostic patient populations for which our CapsoCam Colon may be used. We may be unable to successfully make continued enhancements and improvements to sufficiently increase the accuracy and benefits of using our CapsoCam Colon system on a timely basis or at all; and
•achieving and maintaining a satisfactory and successful examination completion rate for capsule endoscopy using CapsoCam Colon. A successful completion rate for CapsoCam Colon endoscopies much lower than that for traditional colonoscopies may (i) limit the patient population for whom CapsoCam Colon is deemed appropriate; (ii) limit its acceptance by providers and patients; and (iii) result in an unacceptable number of patients requiring a follow-on colonoscopy or other diagnostic test to confirm that they lack significant colon polyps or do not have cancer. A successful colon capsule endoscopy involves successful imaging of either (i) a patient’s entire colon without detecting significant polyps or (ii) a sufficient portion of the patient’s colon to identify the presence of one or more significant
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polyps (i.e., indicating preventative or treatment driven colonoscopy is recommended). Capsule colonoscopy procedures are unsuccessful most often due to inadequate bowel preparation and/or slow capsule transit through the colon. CapsoCam Colon’s successful completion rate (as demonstrated in our pivotal study) is supported by a physical design that encourages timely transit the GI-tract and a battery lifetime that is currently twice the competition’s. However, the bowel preparation, which is similar to that used for colonoscopy, produces a level of cleansing that is patient specific, and capsule endoscopy does not afford an opportunity, as colonoscopy does, for targeted additional cleansing by the physician during the exam. Although we are positioned to benefit from improvements in bowel preparation medications on the market, these developments are outside our business and difficult to predict.
We may be unable to timely and effectively drive broad provider and patient adoption of our CapsoCam Colon solution (once cleared) and grow related revenue. Each of the above activities is subject to numerous risks described above or elsewhere in these “Risk Factors.”
Our longer term efforts to expand our GI-tract capsule endoscopy solutions beyond small bowel and colon pathologies and medical conditions may not succeed.
We believe our CapsoCam Plus (small bowel) and CapsoCam Colon solutions, incorporating our panoramic imaging solution, can be adapted to address new GI medical indications. In connection with our efforts to address pancreatic cancer, we submitted an FDA “Breakthrough Device Designation” for our capsule endoscopy solution on November 6, 2025. A response from FDA in January 2026 determined that the CapsoCam UGI does allow for visualization of the papilla and its abnormalities, for both pre-cancerous and cancerous lesions. Due to the fact that the device does not specifically define diagnostic criteria, the application was not approved. The Company expects to resubmit the Breakthrough Device Designation application following the study, when additional data is available. The breakthrough designation is a part of the on-going project, potentially supplementing the regulatory pathway and approval for early pancreas cancer detection. However, additional research and studies to collect data may delay our anticipated timeline for obtaining the regulatory clearance (including obtaining the Breakthrough Device Designation) and may result in an increase in our research and development expenditures that exceed our current expectations. Starting with a planned study, we will build on established scientific literature and work with leading opinion leaders (including leadership on leading Societies in pancreatobiliary field) to define malignancy diagnosis with the device. We expect that the study will start in the second quarter of 2026, and enroll approximately 90 patients using the CapsoCam UGI system to define diagnosis criteria. However, there can be no assurance that our reshaped strategy will be successful. A Breakthrough Device Designation prioritizes a device in the FDA’s review queue for all future regulatory submissions and accelerates communications (i.e., negotiations and feedback) with the FDA, thereby expediting the marketing application process. However, our proposed capsule endoscopy solution may not meet the eligibility requirements for this designation and, even if a Breakthrough Device Designation is received, it may not receive the FDA authorization required to market the proposed capsule endoscopy solution.
We face significant competition in the capsule endoscopy market for our current and planned medical conditions. Our success in expanding our capsule endoscopy solution is contingent upon our ability to execute on our related strategies, differentiate our technology with initial or improved product accuracy (such as sensitivity and specificity) and features, and secure acceptance in the GI medical community. Any failure in these areas could significantly impede our growth prospects and adversely affect our financial performance. There is no assurance that our efforts will yield successful outcomes in addressing pancreatic cancer, esophageal medical conditions or other targeted medical conditions.
Any failure or defect in our GI-tract capsule endoscopy solution could harm our reputation, expose us to liability, and reduce our sales.
Our GI-tract capsule endoscopy solution comprises our CapsoCam capsules and the associated software (CapsoCloud and CapsoView), including their related components. We may encounter technical, operational, or regulatory challenges or limitations in developing, testing, validating, or implementing improvements to our GI-tract capsule endoscopy solution, which could delay or prevent us from achieving our desired outcomes.
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Moreover, related components (including the lens module, image sensor, processor and storage module) and incorporated AI technology may fail or malfunction due to defects, errors, bugs, viruses, cyberattacks, or other causes, which could compromise the quality, accuracy, or reliability of our products and the images and analyses they produce. Any failure or defect in our GI-tract capsule endoscopy solution (including capsule components and the associated software, CapsoCloud and CapsoView) could harm our reputation, expose us to liability, and reduce our sales. Any of these outcomes could have a material adverse effect on our business, financial condition, and results of operations.
We face substantial geopolitical and trade risks (including a possible trade war and imposition of tariffs and supply chain interruptions) and natural disaster risks associated with our business operations in Asia (particularly Taiwan and Japan).
We face substantial geopolitical risks due to our business operations in Asia (particularly Taiwan and Japan). Our major assembly manufacturers are located in Taiwan. Most of our single-source suppliers of critical components of our products are located primarily in Taiwan and Japan. Political events, trade and other international disputes, geopolitical tensions, conflict, terrorism, public health issues, industrial accidents and other business interruptions in these areas can have a material adverse effect on our business operations. Restrictions on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially adversely affect our business and supply chain. Restrictive measures can increase the cost of our products, and can require us to take various actions, including changing suppliers and restructuring our supply chain, business relationships and operations. Changing our business and supply chain in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to our operations. Such restrictions can be announced with little or no advance notice, which can create uncertainty, and we may not be able to effectively mitigate all adverse impacts from such measures. For example, an increase in the recent tensions between mainland China and Taiwan and the possibility of instability and uncertainty caused by prolonged or regular military drills in the Taiwan Strait may result in disruptions in the overall trading environment, and in turn result in higher transportation cost and interruption in delivery of our products or its critical components from our single-source suppliers in Taiwan, adversely affecting our business and financial condition. For additional information, see the risk factor titled “Changes to U.S. tariff measures and other political changes in international trade relations implemented by the U.S. could have a material adverse effect on our business, financial condition, cash flows and results of operations” below.
In addition to political risks, Taiwan and Japan are susceptible to natural disasters, such as earthquakes and typhoons, that could disrupt the normal operations of our business and adversely affect earnings. There can be no assurance that future natural disasters will not occur and result in major damages to our component suppliers and assembly manufacturers (many of whom are single-source and located in Taiwan and Japan), which could have a material adverse effect on our business, financial condition and results of operations.
We may face expansion risks when expanding in existing and entering into new foreign markets.
Our growth strategy includes increasing our international revenues and potential entry into new international markets (including through qualified exclusive distributors in targeted regions). In the years ended December 31, 2025 and 2024, international sales accounted for approximately 21% and 23% of our revenue, respectively. Our largest international shipping destinations in 2025 include France, Germany and Colombia. Some of our existing and new international markets may be highly regulated and competitive. However, we may face significant challenges and risks in expanding in existing and entering into new international markets (including risks related to expanding our market share and customer base), such as the following:
The need to grow our sales and marketing team (including potentially through qualified distributors) in these markets.
•The need to comply with complex and evolving regulatory requirements, quality standards, and post-market surveillance obligations, which may entail significant time, cost, and resources, and may subject us to regulatory actions, penalties, or product recalls if we fail to meet them.
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•The need to compete with established and emerging players in the capsule endoscopy market, which may have greater financial capabilities, brand recognition, market access, distribution networks, or technological capabilities, and which may offer lower prices, superior features, or better customer service.
•The need to secure adequate reimbursement and coverage policies from public and private payers, which may affect the affordability, accessibility, and adoption of our CapsoCam capsule endoscopy solution, and which may be subject to changes, limitations, or uncertainties due to budget constraints, policy reforms, or competitive pressures.
We may fail to successfully execute on our growth strategy, overcome these challenges and risks, or achieve our expected returns on our investments in these foreign markets. In addition, we may encounter unforeseen difficulties or liabilities related to our operations, supply chain, intellectual property, or litigation in these foreign markets. Any of these factors could negatively impact our sales, margins, reputation, or market position in new foreign markets, and as a result, our business, results of operations and financial condition.
The clinical results of our various clinical studies (including those for our CapsoCam Colon capsule) may not be released in any peer-reviewed publications.
On June 10, 2025, we submitted the results of the first arm of our pivotal study for CapsoCam Colon to the FDA as part of an initial 510(k) clearance submission for our “first generation” product. We received responses from the FDA in September 2025. During our meeting with the FDA in December 2025, the FDA raised inquiries on topics including panoramic image processing methodology, and the proposed study design, sample size and primary endpoint for an extended study. Based on our communications with the FDA, we have decided not to further pursue the first generation CapsoCam Colon capsule submission and approval, and to prioritize our resources for the development of our second generation CapsoCam Colon capsule, featuring improved imaging quality and increased field of review with use of AI and better lens.
From time to time, we may publicly disclose interim, top-line or preliminary data from our pivotal studies, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the pivotal study or additional data collected at a later time. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. The data from a study may not be released in any peer-reviewed publication, either initially or in the future. As a result, the interim, top-line, or preliminary results that we report may differ from future results of the same trial, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. The FDA may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of our study (including our CapsoCam Colon pivotal study), or potential for the regulatory approval or for commercialization.
We do not plan to release the clinical results from our various clinical studies (including the second arm of our CapsoCam Colon clinical study and our planned CapsoCam Plus clinical study (AI)) before submitting, as applicable, the related 510(k) clearance submission to the FDA. Typically, the submission of study results for publication in a peer-reviewed journal occurs after its use for an FDA submission. The initial or future absence of peer-reviewed research could hinder the acceptance of our GI-tract capsule endoscopy solution products within the medical community, potentially affecting its credibility and market adoption.
Furthermore, the results of the utilization of our GI-tract capsule endoscopy solution (including CapsoCam Colon) may not be accepted or replicated by the scientific or medical community, or may be challenged or disputed by our competitors or other third parties. Physicians and third-party payors may be skeptical of new technologies and may require substantial evidence of clinical efficacy and cost-effectiveness before adopting new products. If the results of our research and clinical studies and our sales and marketing activities relating to communication of these results do not convince thought-leading gastroenterologists, guidelines organizations, primary care physicians, third-party payors, and patients that our GI-tract capsule endoscopy solution (including CapsoCam Colon) is reliable, effective, and superior to existing screening methods, we may not achieve the necessary
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market acceptance. The publication of negative or inconclusive results, or the emergence of new or conflicting data, could undermine the validity or reliability of our study and our GI-tract capsule endoscopy solution, and could reduce the demand for or acceptance of our CapsoCam capsules by physicians, patients, payors, or other stakeholders. Any of these outcomes could have a material adverse effect on our business, financial condition, and results of operations.
We operate in a highly competitive industry, and competitive pressures could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We operate in a highly competitive industry, and competitive pressures could have a material adverse effect on our business, financial condition, results of operations, and prospects. The medical device market, particularly in the area of diagnostic imaging and endoscopic procedures, is characterized by rapid technological advancements and the continuous introduction of new products.
The competition that we face for our small bowel CapsoCam Plus is primarily from traditional enteroscopy procedures performed by trained physicians in hospital or clinical settings and other capsule-based imaging solutions manufactured by companies such as Medtronic, IntroMedic, JinShan and Ankon. Those competitors include well-established companies with significant resources and brand recognition such as Medtronic, that are constantly developing and marketing innovative products that may offer superior features or lower costs. With respect to Medtronic, it also enjoys other competitive advantages including (i) a “first mover advantage” as the first manufacturer of a small bowel capsule endoscopy and a colon capsule endoscopy (as described below); (ii) exclusive supply arrangements (sometimes up to three years) with some of the larger GI practices and hospitals (particularly in the Northeast region of the U.S.) which our sales team also targets; and (iii) greater brand recognition and financial resources.
Notably, one competitor, Ankon (through its affiliate AnX Robotics), has already established a market presence with their FDA-cleared AI product for the small bowel in the U.S. and various other markets outside the U.S. This puts us at a market disadvantage until we can launch our own AI product for the small bowel, subject to FDA clearance which is anticipated to occur by the middle of 2026. The delay in our product launch could result in a loss of market share and reduced revenue opportunities, as potential customers may opt for the already available and proven solutions from our competitors. Additionally, the competitive landscape is further impacted by the pricing strategies of Asia-based capsule endoscopy companies, such as Ankon (China), Jinshan (China) and IntroMedic (South Korea), who are offering their products at lower than average prices. This aggressive pricing approach could pressure us to lower our prices to remain competitive, potentially impacting our profit margins.
The competition that we face for CapsoCam Colon is primarily from (i) procedure-based detection technologies such as optical colonoscopy, flexible sigmoidoscopy and CTC (or “virtual” colonoscopy); (ii) stool- based DNA tests such as Cologuard (initial FDA clearance in 2014); and (iii) other capsule-based imaging solutions like PillCam COLON 2 (initial FDA clearance in 2014). Other sources of competition include (a) common CRC screening tests, such as the fecal occult blood test (“FOBT”) and the fecal immunochemical test (“FIT”), and (b) screening technologies including liquid biopsy tests, such as Epi proColon (FDA approval in 2016) and C-Scan (CE Mark obtained in 2019). Those competitors include well-established companies with significant resources and brand recognition such as Medtronic, that are constantly developing and marketing innovative products that may offer superior features or lower costs. For instance, the Medtronic PillCam COLON 2 is the only U.S. FDA approved colon capsule endoscopy and is prominent in the market outside the U.S.
The combination of these factors could significantly affect our ability to attract and retain customers, thereby adversely impacting our overall business performance and future growth prospects.
Cost-containment efforts of our customers and purchasing groups could have a material adverse effect on our sales and results of operations. Consolidation in the healthcare industry or group purchasing organizations could lead to demands for price concessions, which may affect our ability to sell our products at prices necessary to support our current business strategies.
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The cost-containment efforts of our customers and integrated group purchasing organizations (“GPOs”) have a material adverse effect on our sales and results of operations. In the United States, many clinics and hospitals, including some of our customers, are members of the GPOs, which are organizations that leverage the collective purchasing power of their members, such as hospitals, clinics, and other healthcare providers, to negotiate favorable pricing and terms for medical products and services. These entities negotiate pricing arrangements with medical device companies and distributors, offering these negotiated prices to affiliated hospitals and other members. GPOs typically award contracts on a category-by-category basis through a competitive bidding process, soliciting bids from multiple providers to drive down pricing or reduce the number of vendors. Due to the highly competitive nature of these contracting processes, we may face challenges in obtaining new or maintaining existing contract positions with major GPOs. The increasing leverage of the GPOs may reduce market prices for our products, thereby impacting our revenue and margins.
While securing a contract with a GPO can facilitate sales to their members and enhance our ability to meet the stringent requirements set by their members, it does not guarantee any level of sales, as purchases are typically made through individual purchase orders. Even as a sole contracted supplier for a certain product category, members of the GPO are generally free to purchase from other suppliers. Consequently, members of the GPOs may opt for alternative products based on price or quality offered by other companies, potentially leading to a decline in our sales volumes and revenue.
The rising healthcare costs over the past decade have led to numerous cost reform initiatives by legislators, regulators, and third-party payors, triggering a consolidation trend in the healthcare industry to aggregate purchasing power. This trend may result in more requests for pricing concessions in the future. We anticipate that market demand, government regulation, third-party coverage and reimbursement policies, and societal pressures will continue to evolve the healthcare industry, leading to further business consolidations and alliances among our customers. These changes may exert additional downward pressure on the prices of our products, affecting our results of operations and our ability to support our current business strategies.
The effectiveness of our CapsoCam capsules heavily relies on patients adhering to our use protocols. Other companies or institutions may develop and market novel or improved methods that may make our technologies less competitive or obsolete.
The effectiveness of our CapsoCam capsule endoscopy relies on patients adhering to proper dietary restriction and bowel cleansing protocols prior to the screening procedure. Inadequate preparation can result in suboptimal imaging, which may lead to missed screenings and diagnoses or the need for repeat procedures or alternative procedure such as colonoscopy. This dependence on patient compliance introduces a variable that is beyond our direct control, potentially impacting the reliability and accuracy of our diagnostic results. If patients do not follow the prescribed fasting and cleansing regimen, the performance of our CapsoCam capsules may be compromised, leading to decreased diagnostic accuracy and patient dissatisfaction.
The use of our CapsoCam capsule also requires manual retrieval of the capsule by the patient, who must send it back to our download center for data collection and analysis. This manual retrieval process, while designed to be as convenient as possible, may not meet the expectations of all patients and could lead to potential errors as patients are required to diligently monitor their bowel movements to ensure the capsule is retrieved, which may be inconvenient and burdensome for them. The capsules are transported by shipping companies. There have been instances where the shipping company has either lost or damaged the capsules, leading to the loss of critical patient data. This compromises the integrity of the patient data and disrupts the entire procedure.
If other companies or institutions develop or market methods that do not require fasting or bowel cleansing or require less stringent preparation, our products may become less attractive to patients. For example, non-invasive stool-based DNA tests generally requires no specific dietary restrictions or bowel preparation and enables patients to collect a stool sample at home using the provided kit and send it to the lab for analysis. Such test may be more attractive to low-risk or average-risk patients who require more convenient options for GI-tract screening. Also, recent advancements in medical research have opened up new possibilities for early detection and screening of colorectal cancer by leveraging key metabolites and early diagnostic biomarkers. Advances in technology or
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alternative screening methods that eliminate or reduce the need for fasting or bowel cleansing could provide a more convenient and patient-friendly option, potentially making our CapsoCam capsules less competitive. Should such alternatives gain acceptance in the market, we may experience a decline in demand for our products, which could materially and adversely affect our business, financial condition, and results of operations. Additionally, our ability to compete effectively may be further challenged if these new methods are protected by patents or other intellectual property rights that we cannot circumvent.
There are risks associated with use of our CapsoCam capsules, including capsule retention, component failures and aspiration.
Our CapsoCam capsule endoscopy is generally a safe procedure providing non-invasive visualization of the entire small bowel and colon (once cleared). However, there are risks associated with this procedure, including capsule retention, component failures and, in rare cases, aspiration.
For 2025, we recorded a provider complaint rate of approximately 2.5% (based on number of capsules sold in 2025). The bulk of recorded complaints related to patient failure to (i) timely retrieve the capsule following completion of the procedure and (ii) enter the correct serial number or use the correct shipping label when returning the capsule for download. Although small, these failures indicate potential issues with the usability or clarity of instructions provided to patients by providers or us and shipment and inventory management issues. These issues, in turn, can significantly impact customer and patient satisfaction and our reputation and potential sales.
Capsule retention by a patient refers to the capsule getting stuck in the GI tract, which can occur due to various reasons such as strictures, tumors, or inflammatory bowel diseases. We believe the industry retention rate may be as high as 2%. Based on (i) incidences reported to us for all CapsoCam capsule patients in the year ended December 31, 2025, and (ii) total CapsoCam capsules sold by us in 2025 and 2024 retention rate was less than 1/10 of 1%. However, we believe our retention rate is understated due to (i) underreporting by providers and patients and, relatedly, (ii) the fact that most retained capsules are eventually excreted without the need for invasive intervention and medication may be used to encourage this process. In some instances, endoscopic retrieval or surgical intervention may be necessary to remove the retained capsule. Aspiration is rare but potentially fatal where the capsule is accidentally inhaled into the respiratory tract instead of being swallowed into the esophagus. As of the date of this Annual Report, there has been one complaint regarding an aspiration incident involving a CapsoCam capsule, where the capsule went into the patient’s lungs and was later endoscopically removed and placed in the patient’s GI track. The capsule was retrieved, data downloaded and read by the customer.
While we strive to ensure the highest safety standards and patient experience for our CapsoCam capsule, we cannot guarantee that it is entirely free of safety issues, component failures or errors. Despite rigorous testing and quality control measures, unforeseen complications may arise during the use of our GI-tract capsule endoscopy solution. These could include, but are not limited to, adverse reactions, product malfunction, or unforeseen interactions with the patient’s medical condition.
We may need additional capital to execute our business plan, and we may be unable to raise additional capital on acceptable terms.
Executing our business plan will require additional capital. We may need to raise funds to support research and development, and expand our sales and marketing efforts. If we are unable to raise additional capital on acceptable terms, we may not be able to implement our business plan effectively, which could adversely affect our growth prospects and financial condition. Furthermore, market conditions and other factors outside our control could make it difficult to raise capital when needed. If we are unable to secure additional financing, we may have to delay, reduce, or eliminate certain aspects of our business plan, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
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Our existing sales and marketing team may face challenges in selling additional products and features added to our GI-tract capsule endoscopy solution.
We may face unique challenges in leveraging our existing sales channels to sell and market product and service additions to our GI-tract capsule endoscopy solution (including CapsoCam Colon once cleared). For example, the primary difference between small-bowel and colon diagnostic visualization lies in their distinct medical purposes, preparation requirements, and market dynamics. A small bowel capsule endoscopy is typically conducted to diagnose conditions such as OGIB, Crohn’s disease, or small bowel tumors and a different cleansing preparation compared to a colon capsule endoscopy which requires more rigorous bowel preparation. Additionally, the market for colorectal cancer screening is highly competitive, with established products such as traditional colonoscopies, other imaging technologies (mainly CT colonography and to a decreasing extent sigmoidoscopy) and stool-based screening products already in widespread use. These and other procedure and market differences and dynamics will require additional sales force training and may necessitate tailored marketing strategies and sales approaches, which could complicate our efforts to utilize our current sales teams for products beyond small bowel.
The success of our business is substantially dependent upon the efforts of our senior management team and certain other key personnel and our ability to retain these individuals and to attract additional key personnel.
Our success depends in large part on our ability to attract and retain managerial and key personnel, including our senior executive officers and various highly skilled employees. If we were to lose any of our senior management team or these key personnel, we may experience difficulties in competing effectively, developing our technologies, and implementing our business strategies. Competition for desirable personnel is intense, and there can be no assurance that we will be able to attract and retain the necessary staff. The failure to maintain management or to attract sales and key personnel as we move towards the commercialization of our CapsoCam capsules could materially adversely affect our business, financial condition, and results of operations.
Macroeconomic conditions could materially adversely affect our business, financial condition, results of operations, and prospects.
Macroeconomic conditions, such as high inflationary pressure, potential military conflicts, possible trade wars, introduction of or changes in tariffs or trade barriers, changes to monetary policy, high interest rates, volatile currency exchange rates, credit and debt concerns, decreasing consumer confidence and spending, including capital spending, concerns about the stability and liquidity of certain financial institutions, and global recessions can adversely impact demand for our products, which could negatively impact our business, financial condition, results of operations, and prospects. Recent macroeconomic conditions have been adversely impacted by geopolitical instability and military hostilities in multiple geographies and monetary and financial uncertainties.
The impacts of these macroeconomic conditions, and the actions taken by governments, central banks, companies, and consumers in response, have resulted in, and may continue to result in, higher inflation in the United States and globally, which is likely, in turn, to lead to an increase in costs and may cause changes in fiscal and monetary policy, including additional increases in interest rates. Other adverse impacts of recent macroeconomic conditions have been, and may continue to be, supply chain constraints, logistics challenges, liquidity concerns in the broader financial services industry, and fluctuations in labor availability. In a higher inflationary environment, we may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation.
Adverse developments affecting the financial services industry could adversely affect our current and projected business operations, financial condition and results of operations.
Adverse developments that affect financial institutions, such as events involving liquidity that are rumored or actual, have in the past and may in the future lead to bank failures and market-wide liquidity problems. We are exposed to concentrations of credit risk through our financial instruments, which primarily include demand deposits held at reputable financial institutions and accounts receivable. These financial instruments are subject
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to potential credit risk, as we rely on the financial stability and creditworthiness of these institutions and its customers. While we take measures to mitigate these risks, such as conducting thorough credit evaluations and maintaining relationships with well-established financial institutions, there remains an inherent risk of financial loss if these counterparties fail to meet their obligations.
Additionally, our cash deposits may occasionally exceed the limits insured by the U.S. Federal Deposit Insurance Corporation. This situation can arise during periods of high cash flow or when large payments are received. When cash deposits exceed FDIC insurance limits, we are exposed to the risk of loss in the event of a bank failure. Although we strive to manage this risk by spreading out our cash deposits in accounts with multiple reputable and financially stable banks, the potential for uninsured losses remains a significant risk factor that could adversely impact our financial position and operational stability.
Shutdowns of the U.S. federal government could materially adversely affect our business, financial condition, results of operations, and prospects.
The U.S. federal government has shut down multiple times in the past, and certain regulatory agencies, including the FDA, the CMS , the U.S. International Trade Commission, the U.S. Patent and Trademark Office (“USPTO”) , the U.S. Department of Defense, and the U.S. Department of Veterans Affairs, have had to furlough employees and suspend some of their activities. A prolonged shutdown could delay regulatory reviews and approvals, litigation proceedings, or government program implementations and could ultimately disrupt or delay our research and development, manufacturing, commercialization, or intellectual property enforcement activities. Any such delays or disruptions could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Risk Related to Regulatory Matters
We may not obtain or may experience delays in obtaining 510(k) clearance for our planned second generation of our CapsoCam Colon solution (with improved optics and other components), which would adversely impact our ability to commercialize this product and generate related revenue.
The 510(k) application process can be lengthy. There is no guarantee that the FDA will grant 510(k) clearance for our planned second generation CapsoCam Colon capsule endoscopy solution, and their timeline for doing so may not align with our planned commercialization schedule. Staff reductions in the FDA office charged with regulating devices may also cause delay. Similar consequences may result in the case of events which affect FDA operations, such as a federal government shutdown.
Although our CapsoCam Plus solution, which visualizes the small bowel, has been cleared by the FDA, the CapsoCam Colon capsule endoscopy solution will require a distinct, unrelated regulatory submission, as it is subject to different statutory requirements. This is due to its use in the colon (part of the lower GI-tract) and incorporation of new capabilities (including AI assisted pathology detection technology) to facilitate visualization of the colon and to identify and measure polyps, each of which introduces different safety and effectiveness considerations. As a part of the marketing submission review, the FDA may require additional analysis, data, studies, or modifications to our products or labeling, which could increase our costs, delay our launch, or limit our market opportunity. The FDA may also require other conditions on our products to achieve initial clearance, such as additional studies or clinical trials, labeling restrictions, or post-market surveillance commitments, which could increase our regulatory burden and liability. Risks related to the separate FDA clearance of the AI assisted pathology detection technology incorporated in our CapsoCam Colon capsule endoscopy solution and CapsoCam Plus capsule endoscopy solution are discussed in the risk factor titled “We may face regulatory challenges and delays in obtaining 510(k) clearance for marketing of those CapsoCam capsules incorporating our self-developed AI technology, including our CapsoCam Colon capsule endoscopy solution and CapsoCam Plus capsule endoscopy solution (small bowel)” below.
The FDA is required by statute to review 510(k) applications within defined timelines. For most 510(k) submissions, a 90-day maximum review period is mandated. While this requirement provides predictability for the
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review process, it also places constraints on available opportunities to address any questions posed by FDA. Factors critical to a timely review and clearance of our 510(k) applications include (i) the quality of our regulatory submission (including both in terms of clarity in presentation and the supportiveness of data) and (ii) the availability of qualified FDA review resources (i.e., individuals possessing relevant technical understanding and requiring a minimal “learning curve”). Although we have (x) engaged with the FDA in early communications (including several pre-submission meetings) regarding our CapsoCam Colon solution and (y) considered FDA feedback during product development, there is no guarantee that the FDA staff members involved in those discussions and/or who are familiar with the CapsoCam technology will be available to participate in the post-submission review of our 510(k) application. The involvement of less experienced FDA staff members may result in a “learning curve” potentially reducing the effective time available to the FDA to critically review our submissions. Likewise, changes in review staff levels or workload—possibly due to changes in FDA funding or operations, including as a result of a government shutdown, or the emergence of competing public health priorities (e.g., addressing a device shortage) may lead to review delay and an inability to complete the FDA review process within the statutorily mandated period, potentially leading to a longer review process for our applications.
Failure to obtain or delays in obtaining 510(k) clearance for our CapsoCam Colon capsule endoscopy solution could result in additional costs or liabilities and adversely impact our reputation, ability to sell our CapsoCam Plus capsule endoscopy solution, and our ability to compete effectively in this or other markets. Any of these outcomes could have a material adverse effect on our business, financial condition, and results of operations.
Our ability to capture the market opportunity for our GI-tract capsule endoscopy solution depends on several factors, including the following:
•acceptance in the GI medical community;
•the number of patients screened or tested for specific pathology or medical indication and the number of patients who use our CapsoCam capsules for that purpose;
•our ability to introduce enhancements and improvements aimed at increasing the value provided by our GI-tract capsule endoscopy solution;
•our ability to develop and commercialize our CapsoCam capsule endoscopy solution for new indications, patient populations and clinical use cases;
•our ability to successfully complete any required clinical or other studies and obtain and maintain any required regulatory approval or clearances;
•insurer and third-party reimbursement of the costs associated with our GI-tract capsule endoscopy solution (which may be adversely impacted by U.S. governmental budgetary and cost-cutting activity);
•successful management of our global supply chain including our component suppliers and assembly manufacturers for our CapsoCam solution, many of which are located in Asia (particularly Taiwan and Japan) and some of which are currently single-source suppliers;
•successful growth and leveraging of our global sales team (including, where appropriate, distributors) and marketing team to sell and market our GI-tract capsule endoscopy solution; and
•the amount and nature of competition from other GI-tract diagnostic products or procedures.
Our failure to effectively manage our business through the various challenges we face, may result in an inability to execute on our business plan and revenue growth strategies, respond to competitive pressures, take advantage
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of market opportunities, satisfy customer requirements, or maintain high-quality products, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We may face regulatory challenges and delays in obtaining 510(k) clearance for marketing of those CapsoCam capsules incorporating our self-developed AI technology, including our CapsoCam Colon capsule endoscopy solution and CapsoCam Plus capsule endoscopy solution (small bowel).
On June 10, 2025, we submitted to the FDA the clinical results of the first arm of our CapsoCam Colon pivotal study in a related 510(k) submission and it has been accepted for review. This submission seeks FDA clearance of our initial CapsoCam Colon capsule endoscopy solution which incorporates our self-developed AI technology. Following our decision not to further pursue the first generation CapsoCam Colon capsule submission and approval, and to prioritize its resources for the development of its second generation CapsoCam Colon capsule, the second generation also features improved imaging quality and increased field of review with use of AI and better lens. Our 510(k) submissions and FDA review thereof may be delayed and we may not receive 510(k) clearances from the FDA on a timely basis or at all.
The incorporation of AI technology into our GI-tract capsule endoscopy solution (including the associated software products, CapsoCloud and CapsoView) requires appropriate FDA regulatory authorization, supported by requisite clinical and other studies, prior to its commercialization in the U.S. Under the FDA’s current regulatory framework, our capsule endoscopy solution and the AI technology are assessed separately, with each component falling under a different regulatory classification and subject to distinct regulatory requirements. This bifurcated approach, set by precedent, ensures that each component meets the necessary safety, effectiveness, and performance expectations.
In the case of CapsoCam Colon, as of the date of this Annual Report, the FDA has only authorized one colon capsule imaging system, the Medtronic PillCam COLON 2, introduced in 2014, which does not include any AI-driven analytics; and one AI-driven capsule endoscopy analysis software, the AnX Robotics NaviCam ProScan, introduced in 2023, which exclusively supports AnX Robotics’ small bowel capsule system. These devices respectively serve as predicate devices for our planned second generation CapsoCam Colon 510(k) submission. In particular, to receive FDA clearance for our second generation CapsoCam Colon, the clinical results must demonstrate that:
•CapsoCam Colon, considered without the integration of AI, demonstrates a polyp-detection accuracy that is, at a minimum, comparable to the performance of the predicate device (i.e., Medtronic PillCam COLON 2); and
•our AI technology can (i) reliably and accurately identify and analyze images and video of the colon to detect abnormalities as quantified by diagnostic accuracy measures such as sensitivity and specificity, and, in doing so, (ii) aid qualified physicians in achieving improved diagnostic performance relative to not using AI.
Clearance of the incorporated AI technology is unlikely to occur if the CapsoCam Colon solution, absent AI, fails to meet the applicable regulatory requirements. In connection with FDA clearance of our planned second generation of CapsoCam Colon, which will incorporate various hardware and image processing improvements, we will need to demonstrate that the incorporated AI technology is not compromised by these modifications.
The FDA may not agree that our AI technology meets these evidentiary requirements, or it may require us to submit additional data or information over the course of regulatory review to support the safety and effectiveness of CapsoCam Colon (including the incorporated AI technology). Also, the FDA may determine that CapsoCam Colon (including the incorporated AI technology) is not eligible for the 510(k) pathway and that we must utilize a different, more rigorous and costly regulatory pathway, such as a PMA or a De Novo request, which could significantly delay our ability to market CapsoCam Colon (including the incorporated AI technology), increase our development costs and reduce our competitive advantage. The FDA recognizes that there are challenges within the current regulatory framework for medical devices incorporating artificial intelligence and is actively pursuing
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regulatory reforms to better foster innovation while maintaining patient safety. We proactively monitor new FDA policies and programs and will update our regulatory strategy to reduce regulatory uncertainty and burden where applicable.
In seeking 510(k) clearance for our AI technology as incorporated into CapsoCam Plus we are (i) utilizing the NaviCam ProScan as the predicate device (confirmed with the FDA) and (ii) currently conducting a retrospective clinical study of the CapsoCam Plus solution with the AI technology incorporated to analyze in vivo videos from completed, real-world clinical cases, to assess the performance of the AI technology for small bowel. Similar to the first arm of our CapsoCam Colon pivotal study, the study seeks to demonstrate that the AI technology can (i) reliably and accurately identify and analyze images and video of the small bowel to detect abnormalities as quantified by diagnostic accuracy measures such as sensitivity and specificity, and, in doing so, (ii) aid qualified physicians in achieving improved diagnostic performance relative to not using AI.
These regulatory considerations may apply to updates or improvements to previously cleared AI technology, such as major changes in algorithm design, significant changes in clinical performance, or the addition of new functions (e.g., detection of new types of abnormalities). In these scenarios, we will be expected to demonstrate the safety and performance of the updated technology through the appropriate studies and pursue regulatory clearance through additional FDA filings prior to commercial distribution. Also, changes to the device hardware or imaging processing methods contained in CapsoCam capsules incorporating our AI technology may affect the performance of the incorporated AI technology, even if the related algorithm is not directly changed. As a result, we may be required to demonstrate that performance of the incorporated AI technology is not degraded by those critical capsule component changes and obtain regulatory clearance prior to distribution.
If Medicare and other third-party payors, including managed care organizations, do not approve reimbursement for our products at adequate reimbursement rates, we may be unable to successfully commercialize our products which would likely have a material adverse effect on our business.
Our ability to increase sales of our products depends, in significant part, on the availability of adequate coverage and reimbursement from third-party payers, including governmental payers, managed care organizations, and private health insurers. If Medicare and other third-party payors do not approve reimbursement for our CapsoCam capsules at adequate reimbursement rates, we may be unable to successfully commercialize our products which would have a material adverse effect on our business.
In particular, we believe that obtaining a positive national coverage decision and favorable reimbursement rate from the Centers for Medicare and Medicaid Services (“CMS”) for our CapsoCam capsules will be a necessary element in achieving material commercial success. These third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for new healthcare products approved for marketing by the FDA. As a result, there is significant uncertainty surrounding whether the use of capsules will be eligible for coverage by third-party payors or, if eligible for coverage, what the reimbursement rates will be for those products.
CMS currently reimburses properly submitted reimbursement claims for most capsule endoscopies utilizing our small bowel CapsoCam Plus capsule. For CapsoCam Colon, we expect to qualify for CMS reimbursement for our initial indicated patient population. CMS currently provides reimbursement for capsule endoscopy procedures for patients with major risks for colonoscopy or moderate sedation with evidence of GI bleeding of lower GI origin and patients who have had an incomplete colonoscopy with adequate preparation. As a part of our 510(k) FDA application for our second generation CapsoCam Colon capsule and to increase the population of indicated patients, we intend to seek FDA clearance of expanded indications that remove the requirement for evidence of GI bleeding of lower GI origin for patients with major risks for colonoscopy or moderate sedation. Successfully growing our CapsoCam Colon revenues will depend on our success in timely securing CMS reimbursement for this and any newly indicated patient population.
Reimbursement of capsule endoscopy by a third-party payor may depend on a number of factors, including a payor’s determination that products using our technologies are: effective for detecting or diagnosing
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gastrointestinal disorders; not experimental or investigational; approved by the major guidelines organizations; reliable, safe and minimally invasive; medically necessary; appropriate for the specific patient; and cost-effective.
If we are unable to obtain positive policy decisions from third-party payors, including Medicare and managed care organizations, approving reimbursement for our CapsoCam capsules, including our CapsoCam Colon, at adequate levels, the commercial success of these products would be compromised and our revenues would be significantly limited. Moreover, coverage policies and reimbursement rates are subject to change and we cannot guarantee that even if we initially achieve adequate coverage and reimbursement rates that they will be applicable to our products in the future. Any failure to obtain or maintain favorable reimbursement could have a material adverse effect on our business, financial condition, results of operations, and prospects.
If we or our distributors fail to comply with regulatory requirements, we may be subject to stringent penalties and our business may be materially adversely affected.
The marketing and sale of our CapsoCam capsules are subject to various state, federal, and foreign regulations. Compliance with these regulatory requirements is essential to avoid significant penalties and ensure the continued commercialization of our products. However, the regulatory landscape is complex and constantly evolving, making it challenging to stay compliant. Any failure by us or our distributors to adhere to applicable regulations could result in substantial fines, sanctions, or other enforcement actions and damage to our reputation.
Healthcare policy changes and increased scrutiny of marketing practices in the medical device industry add another layer of risk. New regulations or changes to existing laws could impose additional burdens on our business, affecting our ability to operate effectively. Ensuring ongoing compliance with regulatory requirements is critical to maintaining our market position and avoiding adverse impacts on our business.
Healthcare policy and funding/budgetary changes could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In recent years, the healthcare industry in the United States has experienced significant legislative and regulatory changes aimed at reducing costs, increasing access to health insurance, and improving the overall efficiency of healthcare delivery. The Affordable Care Act (the “ACA”) has been a cornerstone of these efforts, expanding health insurance coverage through public program expansion and private sector reforms. Additionally, the American Rescue Plan Act and the Inflation Reduction Act have introduced enhanced subsidies to make health insurance more affordable. More recently, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law, which included significant reforms to Medicaid, including an estimated $1 trillion in reduced federal Medicaid spending from 2025 through 2034, the imposition of work requirements for certain adult enrollees, more frequent eligibility redeterminations and increased cost-sharing for beneficiaries. However, these changes bring uncertainty regarding the number of individuals who will obtain public or private health insurance and the scope of such coverage. This uncertainty can impact our business by potentially reducing the number of insured individuals or altering the scope of insurance coverage, which may affect our revenue streams and financial stability.
The ACA has been subject to continuous legislative, regulatory, and judicial challenges, creating an unpredictable environment for healthcare providers. Changes in the interpretation or implementation of the ACA could eliminate or modify provisions that are beneficial to our business while maintaining or introducing provisions that reduce our reimbursement rates or otherwise negatively impact our operations. For instance, if certain beneficial provisions are repealed or altered, we may face increased financial pressure due to reduced reimbursement rates or additional regulatory compliance costs. This uncertainty makes it challenging to plan for the future and could lead to financial instability if adverse changes are implemented.
Moreover, other health reform initiatives at both federal and state levels add another layer of complexity. These initiatives could result in funding and coverage reductions or decreased enrollment in Medicaid, further impacting our revenue. Additionally, recent reforms focused on price transparency and out-of-network charges, such as the No Surprises Act, may limit our ability to set and negotiate prices, affecting our relationships with insurers and
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patients. Further, the Trump administration has enacted several executive actions and the U.S. Congress is considering budget cuts that would adversely impact the U.S. federal government’s budget and potential changes in budgetary priorities and spending levels (including those related to Medicare and Medicaid). Such pressures and uncertainty could (i) result in a reduction in the market opportunity and demand for our current or future pipeline products and (ii) adversely affect staffing levels and the funding for the FDA and as a result, prevent or delay marketing approval of our current or future pipeline products, restrict or regulate post-approval activities and affect our ability to profitably sell any product for which we obtain marketing approval, each of which may negatively impact our business. These factors collectively create a challenging environment that could adversely affect our financial condition, results of operations, and cash flows.
Changes to U.S. tariff measures and other potential changes in international trade relations implemented by the U.S. could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Our supply chain is heavily reliant on products and components manufactured and assembled in various Asian countries (particularly Taiwan and Japan). These import operations are subject to tariff and other international trade regulations. When imported into the U.S., such products and components are subject to applicable rates of duty. The U.S. government has recently made statements and taken certain actions that have created significant uncertainty about the future relationship between the U.S. and various other countries, including Taiwan and Japan, with respect to trade policies, treaties, government regulations and tariffs, including implementing tariffs on certain countries and implementing and subsequently pausing such implementation of tariffs on certain other countries. As a result of these statements and actions, we are exposed to the risk of product supply disruption and increased costs and expenses. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. We cannot predict with certainty the future trade policy of the U.S. or other countries. We experienced an increase of customs and tariffs expenses as a result of the imposition of tariffs and keep evaluating measures that we might implement to address or mitigate the impact on our business. We cannot predict the likelihood, nature or extent of the potential impact or our ability to avoid the related adverse effects. Relevant factors include whether such tariffs are ultimately implemented, the timing and duration of implementation and the amount, scope and nature of such tariffs and potential exclusions from the application of those tariffs. These tariffs and other unfavorable government policies on international trade (such as export controls) may increase the cost of manufacturing our commercialized products or developing our pipeline products, affect the demand for our products (if and once approved), or restrict our access to raw materials and components used in the manufacture of our current products and the development of our future products, each of which could negatively impact our financial condition and results of operations. Further, such developments, or the perception that any such developments could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may have and could continue to significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity and adversely impact the price and demand for our products, increase our costs, and affect our customers and suppliers and have a material adverse effect on our business, financial condition and results of operations.
Changes in tax laws or tax rulings could adversely affect our effective tax rates, results of operations and financial condition.
The tax regimes we are subject to or operate under are unsettled and may be subject to significant change. This challenge will continue to increase as we expand our operations globally. Changes in tax laws, issuance of new tax rulings or changes in interpretations of existing laws could cause us to be subject to additional income-based taxes and non-income-based taxes, including payroll, sales, use, value-added, digital, net worth, property and goods and services taxes, which in turn could adversely affect our results of operations and financial condition. In particular, the U.S. government may enact significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income, significant changes to the taxation of income derived from international operations, and it may enact further limitations on the deductibility of business interest. For example, on August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law in the U.S. Among other changes, the IRA, along with
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subsequent regulations, imposes a minimum tax on certain corporations with book income of at least $1 billion, subject to certain adjustments, and a 1% excise tax on certain stock buybacks and similar corporate actions. Furthermore, on July 4, 2025, the OBBB Act was enacted, introducing amendments to U.S. tax laws with various effective dates from 2025 to 2027, including changes to the treatment of research and development expenses under Section 174 of the Internal Revenue Code of 1986, as amended, modifications to the global intangible low-taxed income regime, new minimum or book-based taxes, and limitations on interest deductibility.
In addition, many countries in the European Union, as well as a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could impact our tax obligations in the future. We are unable to predict what changes to the tax laws of the U.S. and other jurisdictions may be proposed or enacted in the future or what effect such changes would have on our business. Any of these or similar developments or changes to tax laws or rulings (which changes may have retroactive application) could adversely affect our effective tax rate and our results of operations and financial condition.
Our relationships with board-certified physicians are subject to various state laws and there is no assurance that our current practices will remain compliant.
We provide remote capsule endoscopy reading services through board-certified physicians to our customers with $295 and $232 thousand in revenue for the years ended December 31, 2025 and 2024, respectively. Our relationships with board-certified physicians are subject to various state laws including those with respect to physician licensing requirements. The interpretation and enforcement of these laws vary significantly across states, and there is no assurance that our current practices will remain compliant. If regulatory authorities determine that our arrangements with physicians violate these laws, we may be forced to restructure or terminate these relationships, leading to potential disciplinary actions, penalties, and a loss of revenue.
Our products must be manufactured in accordance with applicable laws and regulations, and we could be forced to recall our products or terminate production if we fail to comply with these regulations.
Our CapsoCam capsules are regulated as medical devices in the United States and must be manufactured in compliance with the FDA’s current good manufacturing practices (cGMPs) for medical devices, known as the QMSR. The FDA enforces the QMSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of subcontractors. Failure to comply with applicable FDA requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things, warning letters, fines, injunctions, civil penalties, suspension or withdrawal of marketing authorizations, product recalls, and total or partial suspension of production or distribution.
In addition, our products are subject to similar state regulations governing manufacturing. Our third-party manufacturers may not take the necessary steps to comply with applicable regulations, which could cause delays in the delivery of our medical devices. If we or our third-party manufacturers fail to comply with applicable laws and regulations, we could be forced to recall our products or terminate production, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Some of our activities may subject us to risks under federal and state laws prohibiting “kickbacks” and false or fraudulent claims.
Our business practices and relationships with healthcare providers are subject to scrutiny under various federal and state laws designed to prevent fraud and abuse, including the federal Physician Payments Sunshine Act, Anti-Kickback Statute and the False Claims Act. The Physician Payments Sunshine Act increases the transparency of financial relationships between medical device manufacturers and healthcare providers in order to uncover potential conflicts of interest that could compromise treatment decisions and medical research, or that could increase the cost of healthcare services billed to federal health programs. The Anti-Kickback Statute prohibits the exchange of remuneration to induce or reward the referral of business reimbursable under federal healthcare programs. The False Claims Act imposes liability on individuals and companies who submit false claims under
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federal health care programs. Violations of these laws can result in severe penalties, including criminal and civil fines, exclusion from participation in federal healthcare programs, and significant reputational harm.
Additionally, state laws often mirror or expand upon federal prohibitions, applying to all payers, not just federal programs. Compliance with these laws requires substantial resources and ongoing monitoring of our business practices. Any failure to comply with these laws, whether intentional or inadvertent, could lead to investigations, legal actions, and significant financial penalties, which could materially and adversely affect our business, financial condition, results of operations, and prospects.
Our independent sales representatives earn commissions for capsule sales in their territories, with potential additional commissions for reorders from new accounts and quarterly bonuses. Despite our efforts to provide compliance training and integrate some of them into our direct sales team to improve regulatory oversight, there remains a risk that they might inadvertently breach laws or ethical guidelines in their pursuit of higher earnings, which is not entirely within our control. Independent sales representatives, motivated by commissions and bonuses, might engage in practices that could be construed as kickbacks. If our independent sales representatives engage in unethical or illegal practices to boost sales, it could lead to the submission of false or fraudulent claims for payment submitted to the government. Their malfeasance may expose us to legal and financial liabilities under the federal and state laws.
Failure to comply with the Foreign Corrupt Practices Act (the “FCPA”), economic and trade sanctions regulations, and similar laws could subject us to penalties and other adverse consequences.
We are subject to the FCPA and other laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Our operations in countries with a high risk of corruption expose us to the risk that our employees, contractors, or agents may engage in activities that violate the FCPA or similar laws, despite our policies and procedures designed to prevent such conduct. Violations of these laws can result in severe penalties, including substantial fines, criminal sanctions, and reputational damage.
Additionally, we are subject to economic and trade sanctions regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), which restrict our ability to engage in transactions with certain countries, entities, and individuals. Non-compliance with these regulations can lead to significant financial penalties, restrictions on our business operations, and adverse effects on our reputation. Ensuring compliance with these complex and evolving regulations requires significant resources and ongoing vigilance.
We sell our GI-tract capsule endoscopy products in the international market through a combination of our direct sales team and third-party distributors. Additionally, the bulk of our component suppliers and assembly manufacturers are currently located outside the U.S., and we anticipate increasing our international activities in the future. Despite our implementation of policies, internal controls, and other measures designed to ensure compliance with applicable anti-corruption and anti-bribery laws and regulations, as well as U.S. trade sanctions laws, there remains a risk that our employees or agents may engage in improper conduct for which we could be held accountable. Any violations, or even allegations of violations, of these laws can result in investigations and enforcement actions that may disrupt our operations, divert significant management attention, and incur substantial costs and expenses, including legal fees. If we, our sales representatives or distributors are found to have violated these laws, we could face severe penalties, including fines, profit disgorgement, injunctions, securities litigation, bans on government business transactions, delisting from securities exchanges, and other consequences that could materially and adversely affect our business, financial condition, and results of operations. Furthermore, our reputation, net sales, or stock price could suffer if we become the subject of negative publicity related to actual or potential violations of anti-corruption, anti-bribery, or trade sanctions laws and regulations.
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Risks Related to Our Reliance on Third Parties
We rely on various suppliers to assist us in the assembly and manufacture of our GI-tract capsule endoscopy solution and sourcing of critical and other components and many of these suppliers are single source suppliers located in Asia (particularly Taiwan and Japan); any disruption in our supply chain could adversely affect our ability to meet the demand for our products and fulfil our orders.
To assist us in manufacturing our GI-tract capsule endoscopy products we rely on component suppliers and assembly manufacturers based in Asia (particularly Taiwan and Japan). Critical components found in our CapsoCam capsules include lens modules from Largan, complementary metal oxide semiconductor (“CMOS”) image sensors from Toshiba Corporation (“Toshiba”), and application-specific integrated circuits (“ASICs”) from Moai Electronics Corporation (“Moai”) / Speedbridge Technology Co. (“Speedbridge”). Many of our suppliers/manufacturers are single source and located in Asia. For example, the single source suppliers of our lens modules and ASICs are located in Taiwan and the single source supplier of our CMOS image sensors is located in Japan. Currently, assembled CapsoCam capsules are shipped by Largan from Taiwan to our U.S. facility where we complete the manufacturing process before distributing the capsules to our distribution network. Any disruption to our supply chain could significantly harm our ability to effectively manufacture and deliver our CapsoCam capsules and, in turn materially harm, our financial results.
The numerous supply chain related risks we face that could adversely impact our ability to manufacture and sell our CapsoCam capsules include:
•our supplier may be unable to meet our demand requirements, including demands for desired improvements or upgrades, or may prioritize the orders of its other customers;
•our supplier may be unable to meet our quality standards, specifications, or requirements for critical components, or may experience defects, errors, or failures in these components, which could compromise the quality, performance, or safety of our CapsoCam capsules and the images and analyses they produce;
•our supplier may increase or seek to increase prices, or impose unfavorable purchase terms or conditions, which could increase our costs and reduce our margins;
•our supplier may discontinue the production of critical components, or cease to do business with us, for any reason;
•it may be difficult for us to find an alternative or second supply source, which may not be available, affordable, or compatible with our CapsoCam capsules and, for commercial reasons, we may prefer or be required to work on an exclusive basis with our supplier; and
•supplier concentration in Asia (particularly Taiwan and Japan) subjects us to heightened risks related to geopolitical tensions (particularly between China and Taiwan), potential trade disputes, the imposition of new or increased tariffs or threats of tariffs, transportation interruptions, natural disasters, and manufacturing constraints, any of which can affect the manufacture and delivery of our CapsoCam capsules and lead to delays, increased costs, and potential shortages of our CapsoCam capsules and critical components. For additional information, see the risk factor titled “We face substantial geopolitical and trade risks (including a possible trade war and imposition of tariffs and supply chain interruptions) and natural disaster risks associated with our business operations in Asia (particularly Taiwan and Japan)” and “Changes to U.S. tariff measures and other political changes in international trade relations implemented by the U.S. could have a material adverse effect on our business, financial condition, cash flows and results of operations” below.
Although we are in the process of planning or implementing various mitigation measures to address supply chain risks (including qualifying a backup supplier for certain critical components and looking to build reserve supplies of
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capsules and critical components to address unanticipated delays), these efforts may not be successful. For example, implementation of mitigation measures to address the supply chain disruption of CMOS image sensors would be complicated, and resolving an industry-wide issue relating to CMOS image sensors would require a significant amount of time and coordinated efforts across multiple industry participants.
In addition, our operations depend heavily on expedited and reliable shipping services to ensure the secure and timely delivery of our products to customers. Any delivery performance issues, such as loss, damage, or destruction of our CapsoCam capsules or the components thereof, would incur substantial costs for timely replacement and could tarnish our reputation, leading to decreased demand for our products and increased operational expenses. Additionally, significant increases in shipping rates could negatively affect our operating margins and overall financial performance. Service interruptions caused by strikes, severe weather, natural disasters, or other disruptions could further impede our ability to process orders promptly. These factors collectively pose a risk to our business, financial condition, and operational results, and can potentially damage our reputation.
We depend on our authorized agent and importer for a significant portion of our revenue.
We depend on Aureliance, our authorized agent and importer in the EU and EEA for a significant portion of our revenue. It has historically contributed a significant percentage of our revenue generated from EU countries, such that if it were to materially reduce or terminate its business with us, our revenue generated from such countries would suffer. For the years ended and as of December 31, 2025 and December 31, 2024, Aureliance represented approximately 9% and 10% of our revenue, respectively, and 22% and 21% of our accounts receivable balance, respectively. The loss of it or a significant reduction in its business with us could have a material adverse effect on our financial condition and results of operations.
We rely on third parties to conduct and support our clinical trials. These third parties may not properly and successfully carry out their contractual duties or meet expected deadlines, which could harm our ability to obtain marketing authorization of or commercialize future products we develop.
We utilize and depend upon independent investigators and collaborators, such as third-party clinical institutions and hospitals to conduct and support portions of our clinical trials under agreements with us, and may in the future rely on CROs.
We have relied on these third parties for our clinical trials and expect to continue to do so, and we control only certain aspects of their activities. As a result, we have less direct control over the conduct, timing, and completion of these clinical trials and the management of data developed through clinical trials than would be the case if we were relying entirely upon our own staff. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with applicable protocol, legal and regulatory requirements, and scientific standards and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for medical devices in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites.
If we or any of these third parties fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or other bodies may require us to perform additional clinical trials. We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the GCP regulations. In addition, our investigational devices must be produced in accordance with cGMP requirements known as the QMSR. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the marketing authorization process. Moreover, our business may be implicated if any of these third parties violates federal, state or foreign fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
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Third parties conducting or supporting portions of our clinical trials are not our employees and, except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our investigational products. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other product development activities, which could affect their performance on our behalf. These third parties may not successfully carry out their contractual duties or obligations or meet expected deadlines. They may need to be replaced or the quality or accuracy of the clinical data they obtain may be compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons. Accordingly, our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain marketing authorizations for or successfully commercialize our future devices.
Switching or adding third parties to conduct or support portions of our clinical trials involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, delays may occur, which could have an adverse impact on our product development, results of operations, and prospects.
We rely on relationships with contracted physicians to provide reading services to certain customers.
We contract directly or indirectly with physicians to provide remote reading services to certain customers. If these physicians terminate their contracts, we or our partners may not be able to contract with alternative physicians to provide such services in a timely manner, or at all, which would impact our ability to provide services to certain customers and could adversely affect our business, financial condition, results of operations, and prospects.
Data Privacy Risk Factors
We may face risks associated with our use and development of artificial intelligence, including our AI technology.
Clinicians are subject to fatigue and distraction and have varying degrees of expertise in identifying GI-tract abnormalities. Our AI assisted pathology detection tool is designed to (i) reduce viewing times for clinicians by highlighting the areas of interest (via a bonding box placed around suspected abnormalities) and (ii) improve diagnostic yield and provide more consistent accuracy by providing suggestions or recommendations. However, risks related to the use of our AI technology include:
•our AI assisted pathology detection technology may fail to accurately identify all or a sufficient portion of the patient’s GI-tract abnormalities (measured in terms of sensitivity and specificity);
•a clinician may (i) place undue reliance on our AI assisted pathology detection technology to identify GI-tract abnormalities (e.g., polyps in colon) or (ii) fail to fully utilize product features designed to supplement a clinician’s review (such as the ability to review frames adjacent to an AI bonded frame identifying a suspected GI-tract abnormality or view the video in non-AI mode);
•our AI technology may not prevent or reduce the occurrence or impact of clinician alertness fatigue; and
•product enhancements and improvements (including improvements to our AI algorithms) may fail to deliver improved viewing, accuracy improvements (including as measured in terms of sensitivity and specificity) and other expected benefits.
We plan to further invest in AI to improve our products. However, we may not achieve the expected benefits from our AI investments, or we may face technical, regulatory, ethical or legal challenges that could limit or delay the development, deployment or adoption of our AI technology. Additionally, we may encounter difficulties in integrating our AI technology with our existing or future products, software or platforms, or in ensuring the compatibility, interoperability or reliability of our AI technology.
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Our AI technology may introduce errors or biases that could compromise the quality or validity of the clinician’s viewing. In particular, for data collected by CapsoCloud to serve as the clinically derived reference standard (“ground truth”) for enhancing AI capabilities, it is imperative that the collected data be meticulously labeled. This labeling process is resource-intensive and necessitates the involvement of qualified gastroenterologists who meticulously review and annotate the images. The accuracy of these labels is crucial, as it directly impacts the AI’s ability to make precise and reliable predictions based on the data. If the models underlying our AI technologies are incorrectly designed or implemented; trained or reliant on incomplete, inadequate, inaccurate, biased, or otherwise poor quality data (including as a result of the labeling process described above), or on data to which we do not have sufficient rights or in relation to which we and/or the providers of such data have not implemented sufficient legal compliance measures; used without sufficient oversight and governance to ensure their responsible use; misused or used outside of scope of applicable regulatory authorizations; and/or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats, or material performance issues, the performance of our products, as well as our reputation, could suffer or we could incur liability resulting from the violation of laws or contracts to which we are a party, regulatory enforcement actions, or civil claims.
The performance of any algorithm incorporated in our AI technology will generally be assessed by comparing the output of the algorithm against a ground truth for a specified dataset. This applies to internal evaluation of an algorithm’s performance, supporting external presentations and publications, and testing to support regulatory submissions. Our algorithm output will not always agree with the opinion of a qualified gastroenterologist, and in some cases multiple qualified gastroenterologists may not agree with each other. While we constantly work to improve our GI-tract capsule endoscopy solution, our AI technology is novel and complex, and our AI technology may not perform as intended under all circumstances.
CapsoCloud is designed to automatically accumulate patient data critical to develop and train AI-based GI-tract abnormality detection and classification capabilities. If we are unable to obtain sufficient rights to use such data under applicable regulatory frameworks or our patients were to withdraw or withhold their consent, our ability to continue to develop new or improved CapsoCam capsule endoscopy products, and our revenue prospects, could be materially adversely impacted.
The regulatory landscape for AI technologies is rapidly changing as various federal, state, and international government bodies introduce or consider new laws and regulations. The FDA has issued guidance on incorporating AI into medical devices, and existing laws may be interpreted in ways that impact AI operations or could be rescinded or amended as new administrations take differing approaches to evolving AI technologies. This creates uncertainty around implementation standards and enforcement practices, making it difficult to predict the future impact on businesses. In the U.S., the Trump administration rescinded an executive order relating to AI technologies that was previously implemented by the Biden administration. The Trump administration may continue to rescind other existing federal orders and/or administrative policies relating to AI technologies, or may implement new executive orders and/or other rule-making relating to AI technologies in the future. Any such changes at the federal level could require us to expend significant resources to modify our products, services, or operations to ensure compliance or remain competitive. U.S. legislation related to AI technologies has also been introduced at the federal level and is advancing at the state level. Such additional regulations may impact our ability to develop, use, and commercialize AI technologies in the future.
It is possible that further new laws and regulations will be adopted in the U.S. and other jurisdictions, potentially limiting the use of AI technologies or requiring changes that could negatively affect business performance. Compliance with these laws may necessitate significant resource expenditure, especially if regulations vary across jurisdictions. The cost of compliance could increase operating expenses due to additional reporting obligations. Any failure, actual or perceived, to comply with these laws and regulations could materially and adversely impact our business operations, financial condition, and future prospects.
Actual or perceived failures to comply with applicable data privacy and security laws, regulations, standards and other requirements could adversely affect our business, financial condition, results of operations, and prospects.
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We collect, store, process and analyze large amounts of data for GI tract from our products, customers, patients, hospitals and other sources, to support our AI technology. With CapsoCloud, we have access to a rich and growing source of clinical data from patients, which enables us to develop ever-improving automated detection and classification of GI-tract abnormalities. However, the collection and use of such data involves significant risks and challenges, such as data breaches, cyberattacks, unauthorized access, theft, loss, corruption, misuse, manipulation, infringement, disclosure or destruction. Any of these events could compromise the security, privacy, integrity, availability or accuracy of our data, and expose us to legal, regulatory, reputational or financial liabilities, as well as potential claims, fines, penalties, sanctions, litigation or investigations.
We must comply with various U.S. laws and regulations that protect personal information, especially health-related information, such as the Health Insurance Portability and Accountability Act (HIPAA), which imposes privacy, security, and breach notification obligations and penalties on entities that handle such information. Some states, such as California, have also enacted their own privacy and security laws, which may differ from or conflict with federal laws and require additional disclosures, responses, and contracts. These laws and regulations are subject to interpretation and change, and may increase our compliance costs and risks.
We may also face data protection laws and regulations in foreign jurisdictions, such as the General Data Protection Regulation, which applies to personal data of individuals in the European Economic Area and imposes stringent requirements and fines on data processors and controllers, including for transfers of such data to third countries like the U.S. These laws and regulations may affect how we conduct business, transfer data, and provide services, and may expose us to additional costs, complaints, investigations, or fines. The Federal Trade Commission may also take action against us for misleading, deceptive, or unfair practices related to privacy and data security.
Although we work to comply with applicable laws, regulations and standards, our contractual obligations, research protocols, and other obligations, any actual or perceived failure by us or our employees, representatives, contractors, consultants, or other third parties to comply with such requirements or adequately address data privacy and security concerns, even if unfounded, could result in, among other adverse impacts, damage to our reputation, loss of customer confidence in our security measures, withdrawal or withholding of customer consent for using patient data, government investigations, and enforcement actions and litigation and claims by third parties, any of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We leverage cloud-based CapsoCloud for easy access to patients’ in vivo videos, however use of CapsoCloud faces complicated compliance requirements.
Utilizing our cloud-based platform, CapsoCloud, physicians can remotely access and analyze their patients’ in vivo videos and other exam data. However, the regulatory environment for cloud-based platforms is complex and varies across different jurisdictions, and as described below, some states or countries may impose restrictions or prohibitions on the use of cloud-based platforms or the transmission of patient data across borders. Initially, following the commercial launch of our CapsoCam Colon solution, providers will utilize CapsoCloud to download in vivo videos for remote review. Within one year of commercial launch, we plan to introduce user-friendly streaming functions to facilitate via CapsoCloud remote in vivo video review, procedure report generation and image annotation.
Outside the U.S., CapsoCloud also faces significant operational and compliance issues due to stringent data privacy and security regulations in various countries. This necessitates the development of country-specific cloud infrastructures for CapsoCloud, which can lead to increased costs, complexity, and potential delays in service delivery. Additionally, for certain U.S. government-related customers, such as the U.S. Department of Defense and Veterans Administration associated hospitals, CapsoCloud must implement additional layers of IT security to meet their stringent security requirements before these customers can utilize CapsoCloud. This could further complicate our cloud infrastructure, increase the risk of security breaches if not properly managed, and require substantial investment in specialized security measures and compliance protocols.
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If we are unable to comply with these regulations or obtain the necessary approvals or licenses, we may face legal actions, fines, penalties, or loss of business, which could adversely affect our reputation, operations, and financial results. Additionally, we may incur significant costs and resources to adapt CapsoCloud to meet the changing regulatory requirements or customer preferences in different markets and countries.
Our business and operations may suffer in the event of information technology system failures, cyberattacks, or deficiencies in our cybersecurity.
We rely heavily on information technology systems and infrastructure to operate our business, including the collection, storage, and transmission of sensitive patient exam data. Our systems, including CapsoCloud, and those of our third-party service providers, are vulnerable to cyberattacks, data breaches, and other security incidents that could compromise the confidentiality, integrity, and availability of our data. Such incidents could result in significant disruptions to our operations, financial losses, and damage to our reputation.
We seek to protect against cybersecurity threats. Among other measures, our CapsoCloud systems are HIPAA-compliant and operate in an ISO 27001 certified cloud-computing environment, we have adopted various cybersecurity controls and procedures and we conduct cybersecurity related trainings. However, there is no guarantee that our systems will be immune to cyber threats. For example, in October 2019, we observed and investigated a cyberattack that breached our Amazon Web Services (AWS) account hosting the CapsoCloud service. In connection with this investigation, we determined no data was compromised during this incident and, in addition to related employee trainings, we adopted additional procedures and controls designed to protect against these types of incidents. Any failure to adequately protect our IT systems and sensitive patient exam data collected, stored and transmitted on or through our systems could lead to regulatory investigations, legal actions, and substantial costs associated with remediation and notification efforts, which could materially and adversely affect our business, financial condition, results of operations, and prospects.
Risks Relating to Our Intellectual Property
Our success will depend on our ability to obtain, maintain, enforce, and protect our intellectual property rights.
Our success and ability to compete depends in part on our ability to obtain, maintain, enforce, and protect issued patents, trademarks, trade secret, and other intellectual property rights and proprietary technology in the U.S. and elsewhere. If we cannot adequately obtain, maintain, and enforce our intellectual property rights and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have and our ability to compete, which could harm our business and ability to achieve profitability and/or cause us to incur significant expenses. We generally seek to protect our proprietary position by filing patent applications that are important to our business. We also seek to protect our proprietary position by acquiring or in-licensing relevant issued patents or pending patent applications or other intellectual property or proprietary rights from third parties. If we are unable to obtain or maintain patent protection with respect to any proprietary technology, our business, financial condition, results of operations, and prospects could be materially harmed.
We rely on a combination of contractual provisions, confidentiality procedures, and patent, trademark, copyright, trade secret and other intellectual property laws to protect the proprietary aspects of our brands, technologies, trade secrets, know-how, and data. These legal measures afford only limited protection, and competitors or others may gain access to or use our intellectual property rights and proprietary information. In addition, patents have a limited lifespan. In the U.S., for example, the natural expiration of a utility patent is generally 20 years from the earliest effective non-provisional filing date. Our success will depend, in part, on preserving our trade secrets, maintaining the security of our data and know-how, and obtaining, maintaining, and enforcing other intellectual property rights. We may not be able to obtain, maintain, and/or enforce our intellectual property or other proprietary rights necessary to our business or in a form that provides us with a competitive advantage.
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The patent prosecution process and enforcement of any resulting patents are expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, defend, or license all necessary or desirable patents or patent applications at a reasonable cost or in a timely manner, or in all jurisdictions. Moreover, pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover relevant product, service, or the technology. There can be no assurance that our current or future patent applications will result in patents being issued or that our issued patents will afford sufficient protection against competitors or other third parties with similar products, services or technologies competitive with ours, nor can there be any assurance that the patents issued will not be infringed, designed around, or invalidated by third parties.
Even our issued patents may later be found invalid or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. In addition, our issued patents may later be found to be unenforceable for a number of possible reasons, such as for a failure to properly identify material prior art or other references to the U.S. Patent and Trademark Office (the “USPTO”). The degree of future protection for our intellectual property or other proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. These uncertainties and/or limitations in our ability to properly protect or be able to enforce the intellectual property or other proprietary rights relating to our products, services and technologies could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We cannot be certain that the claims in our U.S. pending patent applications, corresponding international patent applications and patent applications in certain foreign territories will be considered patentable by the USPTO, courts in the U.S., or by the patent offices and courts in foreign countries, nor can we be certain that the claims in our future issued patents will not be found invalid or unenforceable if challenged. Our ability to obtain and maintain valid and enforceable patents depends in part on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. Additionally, regardless of when filed, we may fail to identify relevant third-party patents or patent applications, or we may incorrectly conclude that a third-party patent is invalid or not infringed by our products, services, technologies, or activities. Therefore, we cannot be certain that we were the first to make the inventions claimed in any of our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.
Failure to obtain, maintain, and/or enforce intellectual property rights necessary to our business and failure to protect, monitor and control the use of our intellectual property rights could negatively impact our ability to compete and cause us to incur significant expenses. The intellectual property laws and other statutory and contractual arrangements in the U.S. and other jurisdictions we depend upon may not provide sufficient protection in the future to prevent the infringement, use, violation or misappropriation of our patents, trademarks, data, technology, and other intellectual property rights by others, and may not provide an adequate remedy if our intellectual property rights are infringed, misappropriated, or otherwise violated by others.
The degree of future protection for our intellectual property rights is uncertain. Therefore, we cannot ensure that others will not develop, manufacture and/or commercialize similar or alternative products, services, or technologies that do not infringe, misappropriate, or violate any patents or other intellectual property rights that we own or have rights to. We cannot ensure that any patents issued to us will provide a basis for an exclusive market for our products, services, or technologies, will provide us with any competitive advantages or will not be challenged, invalidated, modified, revoked, or circumvented by third parties. We cannot ensure that any of our challenged patents will be found to ultimately be valid and enforceable. We cannot ensure that any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products, services, or technologies. We cannot ensure that any of our pending patent applications will issue as patents, or even if issued, will include claims with a scope sufficient to protect our products, services, or technologies. We cannot ensure that we will be able to successfully develop, manufacture, and commercialize our products, services, or technologies on a substantial scale before relevant patents we may have expire. We cannot ensure that we were the first to make the inventions covered by each of our patents and pending patent applications or we were the first to file patent applications for such inventions. We cannot ensure that we will
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develop additional proprietary inventions, products, services, or technologies that are separately patentable. In addition, we cannot ensure that our commercial activities, products, services, or technologies will not infringe upon the patents of others. Defending against any such infringement claims is also expensive, time-consuming, complex, and can distract us from pursuing commercial activities.
If we fail to identify our patentable inventions or adequately protect our patent rights, the commercial value of our products, services or technologies may be adversely affected and our competitive position may be harmed.
We rely in part on our portfolio of issued patents and pending patent applications in the U.S. and other countries to protect our intellectual property and competitive position. However, it is also possible that we may fail to identify patentable aspects of inventions made in the course of the development, manufacture, and commercial activities conducted by or on behalf of us before it is too late to obtain patent protection on such inventions. If we fail to timely file for patent protection in any jurisdiction, we may be precluded from doing so at a later date. Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, outside scientific collaborators, suppliers, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection, and any of these parties may decide to independently file for intellectual property without naming us as owners, inventors, or co-owners for the intellectual property. Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in any of our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Moreover, should we become a licensee or co-owner of a third party’s patents or patent applications, depending on the terms of any future in-licenses or co-ownership agreement to which we may become a party, we may not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain or enforce the patents, covering technology in-licensed from third parties. Therefore, these patents and patent applications may not be prosecuted, maintained, and/or enforced in a manner consistent with the best interests of our business. While we may apply for patents in some countries outside of the U.S., we may not accurately predict all of the countries where patent protection will ultimately be desirable. Furthermore, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from importing, using, manufacturing, and/or commercializing our own products or services, or otherwise practicing our own technology. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
The patent positions of companies, including our patent position, may involve complex legal and factual questions that have been the subject of much litigation in recent years, and, therefore, the scope of any patent claims that we have or may obtain cannot be predicted with certainty. Accordingly, we cannot provide any assurances about which of our patent applications will issue, the breadth of any resulting patent, whether any of the issued patents will be found to be infringed, invalid, or unenforceable or will be threatened or challenged by third parties, that any of our issued patents have, or that any of our currently pending or future patent applications that mature into issued patents will include claims with a scope sufficient to protect our products, services, or technology. Our pending and future patent applications may not result in the issuance of patents or, if issued, may not issue in a form that will be advantageous to us.
The coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. We cannot offer any assurances that the breadth of our issued patents will be sufficient to stop a competitor from developing, manufacturing, and commercializing one or more products, services, or technologies in a non-infringing manner that would be competitive with one or more of our products, services, or technologies, or otherwise provide us with any competitive advantage. Furthermore, any successful challenge to these patents or any other patents owned by us after patent issuance could deprive us of rights necessary for our commercial success. Further, there can be no assurance that we will have adequate resources to enforce our patents.
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Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products or services. Patents, if issued, may be challenged, deemed unenforceable, invalidated, narrowed, or circumvented. Proceedings challenging our patents or patent applications could result in either loss of the patent, or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. Any successful challenge to our patents and patent applications could deprive us of exclusive rights necessary for our commercial success. In addition, defending such challenges in such proceedings may be costly. Thus, any patents that we own may not provide the anticipated level of, or any, protection against competitors. Furthermore, an adverse decision may result in a third party receiving a patent right sought by us, which in turn could affect our ability to develop, manufacture, commercialize, import, or otherwise use our products, services, or technologies.
Some of our patents and patent applications are or may in the future be co-owned with third parties. If we are unable to obtain an exclusive license to any such third- party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products, services, or technologies. In addition, we may need the cooperation of any such co-owners of our patents to enforce such patents against third parties, and such cooperation may not be provided to us.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. In addition, periodic maintenance fees, renewal fees, annuity fees, and various other government fees on issued patents often must be paid to the USPTO and foreign patent agencies over the lifetime of the patent and/or applications and any patent rights we may obtain in the future. While an unintentional lapse of a patent or patent application can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. If we fail to maintain our patents and patent applications, we may not be able to stop a competitor from marketing products, services, or technologies that are the same as or similar to our products, services, or technologies, which would have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our patents will eventually expire, and our patent protection will be reduced or eliminated by expiration of patents in our patent portfolio.
We have prosecuted and obtained a variety of patents to protect the intellectual property rights to our products and services. These patents protect our inventions relating to camera, image sensor, display and imaging system, capsule detection, power source control, and other key and ancillary components of our products. We rely on these patents to prevent others from using, developing, manufacturing and selling competing products or solutions or infringing on our proprietary rights.
However, patents have a limited lifespan, with the term of individual patents depends upon the date of filing of the patent application, the date of patent issuance and the legal term of patents in jurisdictions in which they are obtained. In most countries, including the U.S., issued patents are granted a term of 20 years from the earliest effective non-provisional filing date. We have patents that are anticipated to expire. After patents in our portfolio begin to expire, we cannot guarantee that our remaining patents will be sufficient to maintain our competitive advantage or prevent competitors from developing similar or superior products. Once our patents expire, we may lose the exclusive right to prevent others from using, developing, manufacturing or selling products that
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incorporate our patented technology that are claimed in the expired patents. If third parties use our technology within the scope of such expired patents, we may not be able to sue them for infringement or recover any damages. This could result in increased competition, reduced market share, lower revenues and margins, and harm to our reputation and brand.
In certain instances, a patent term of a U.S. patent may be adjusted to recapture a portion of delay by the USPTO in examining the patent application or extended to account for term effectively lost as a result of the FDA regulatory review period, or both. While the adjustment of the patent term based upon delay by the USPTO is automatically calculated by the USPTO, it is possible that this patent term adjustment is improperly calculated by the USPTO and thus does not accurately reflect the true amount of adjustment that is entitled to a patent holder. Indeed, the USPTO has publicly acknowledged in 2024 that numerous errors have possibly occurred for patent term adjustments that have been calculated by the USPTO for previously issued patents. Moreover, it is possible that actions we have taken to prosecute a patent application will be considered applicant delay and will reduce the amount of patent term adjustment that is granted to a patent. For a patent term extension based upon the FDA regulatory review period, the period of extension may be up to five years, but cannot extend the remaining term of a patent beyond a total of 14 years from the date of approval. Only one patent among those eligible for an extension may be extended. However, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions may be less than the maximum extension available. In addition, this type of patent term extension will only be granted if requested within a designated timeframe after FDA approval. If the applicable authorities do not approve the extension or if we do not make a timely application for extension, then it is possible that a term extension will not be granted for a given patent in our patent portfolio, thereby reducing the amount of enforceable term for the patent.
Changes in U.S. or foreign patent laws or their interpretations could diminish the value of our patents in general, thereby impairing our ability to protect our current and future products, services, or technologies, and could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our current or future patents.
Our ability to obtain patents and the breadth of any patents obtained is uncertain in part because, to date, some legal principles remain unresolved, and there has not been a consistent policy regarding the breadth or interpretation of claims allowed in patents in the U.S. and other countries. Changes in either patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our intellectual property rights or narrow the scope of our patent protection, which in turn could diminish the commercial value of our products, services, and technologies.
Patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement, and defense of our patents and applications. Furthermore, the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the U.S. are interpreted. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we own or that we might obtain or license in the future. An inability to obtain, enforce, and defend patents covering our proprietary technologies would materially and adversely affect our business, financial condition, results of operations, and prospects.
Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. Changes in patent laws and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them, or changes in how the relevant governmental authority
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enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we own or may obtain in the future. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. In addition, any protection afforded by foreign patents may be more limited than that provided under U.S. patent and intellectual property laws. We may encounter significant problems in enforcing and defending our intellectual property both in the U.S. and abroad. For example, if the issuance in a given country of a patent covering an invention is not followed by the issuance in other countries of patents covering the same invention, or if any judicial interpretation of the validity, enforceability or scope of the claims or the written description or enablement in a patent issued in one country is not similar to the interpretation given to the corresponding patent issued in other countries, our ability to protect our intellectual property rights in those countries may be limited. We cannot predict future changes in the interpretation of patent laws in the U.S. and other countries or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
In June 2023, the European Unitary Patent system and the European Unified Patent Court (“UPC”) were launched. European patent applications now have the option, upon grant of a patent, of becoming a Unitary Patent which is subject to the jurisdiction of the UPC. In addition, conventional European patents, both already granted at the time the new system began and granted thereafter, are subject to the jurisdiction of the UPC, unless actively opted out. This was a significant change in European patent practice, and deciding whether to opt-in or opt-out of Unitary Patent practice entail strategic and cost considerations. The UPC provides third parties with a new forum to centrally revoke our European patents and makes it possible for a third party to obtain pan-European injunctions against us. It will be several years before we will understand the scope of patent rights that will be recognized and the strength of patent remedies that will be provided by the UPC. While we have the right to opt our patents out of the UPC over the first seven years of the court’s existence, doing so may preclude us from realizing the benefits of the UPC. Moreover, the decision whether to opt-in or opt-out of Unitary Patent status will require coordinating with co-applicants, if any, adding complexity to any such decision.
The legal systems in certain countries may also favor state-sponsored or companies headquartered in particular jurisdictions over our first-in-time patents and other intellectual property protection. We are aware of incidents where such entities have stolen the intellectual property of other companies in order to create competing products. For example, through its “Annual Special 301 Report on Intellectual Property,” the Office of the United States Trade Representative has been reporting on the adequacy and effectiveness of intellectual property protection in a number of foreign countries that are U.S. trading partners and their protection and enforcement of intellectual property rights. Placement of a country on the Priority Watch List indicates that particular problems exist in that country with respect to intellectual property protection, enforcement, or market access for persons relying on intellectual property rights. Countries placed on the Priority Watch List are the focus of increased bilateral attention concerning the specific problem areas. It is possible that we will not be able to enforce our intellectual property rights against third parties that misappropriate our proprietary technology in those countries.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, and defending patents on our products, services, and technologies in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the U.S. The requirements for patentability may differ in certain countries, particularly in developing countries. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently, we may not be able to prevent third-parties from practicing our inventions in all countries outside the U.S. or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, services, or technologies and, further, may export otherwise infringing products, services, or technologies to territories where we have patent protection, but enforcement is not as strong as that in the U.S. These products, services, or technologies may compete with our products, services, or technologies, and our patents or other intellectual property rights may not be effective or sufficient to prevent such competition.
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Various companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of certain countries may not favor the enforcement of patents and other intellectual property protection, particularly those relating to medical devices and related services and technologies, which could make it difficult for us to stop the infringement of our patents or marketing of competing products, services, and technologies in violation of our intellectual property and proprietary rights. In addition, some jurisdictions, such as Europe, Japan, and China, may have a higher standard for patentability than in the U.S., including, for example, imposing a high standard for making claim amendments and for the submission of supplemental experimental data during patent examination. Under those heightened patentability requirements, we may not be able to obtain sufficient patent protection in certain jurisdictions even though the same or similar patent protection can be secured in the U.S. and other jurisdictions.
Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patent rights at risk of being invalidated or interpreted narrowly, could put our owned patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop, own or license. Various countries outside the U.S., including certain countries in Europe, India, and China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected. In addition, many countries limit the enforceability of patents against government agencies or government contractors. As a result, a patent owner in such countries may have limited remedies in certain circumstances, which could materially diminish the value of such patent. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from our intellectual property.
Further, the standards applied by the USPTO and foreign patent offices in granting patents are not always applied predictably. As such, we do not know the degree of world-wide uniform protection that we will have on our technologies and products in the future.
If we cannot successfully enforce our intellectual property rights, the commercial value of our products, services, or technologies may be adversely affected and our competitive position may be harmed.
Third parties, including our competitors, may currently, or in the future, infringe, misappropriate, or otherwise violate our issued patents or other intellectual property rights, and we may file lawsuits or initiate other proceedings to protect or enforce our patents or other intellectual property rights, which could be expensive, time-consuming, and unsuccessful. We regularly monitor for unauthorized use of our intellectual property rights and, from time to time, analyze whether to seek to enforce our rights against potential infringement, misappropriation, or violation of our intellectual property rights. However, the steps we have taken, and are taking, to protect our proprietary rights may not be adequate to enforce our rights as against such infringement, misappropriation, or violation of our intellectual property rights. In certain circumstances it may not be practicable or cost-effective for us to enforce our intellectual property rights fully, particularly in certain developing countries or where the initiation of a claim might harm our business relationships. We may also be hindered or prevented from enforcing our rights with respect to a government entity or instrumentality because of the doctrine of sovereign immunity. Our ability to enforce our patent or other intellectual property rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components or methods that are used in connection with their products, services, or technologies. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product, services, or technologies. Thus, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and reduce demand for our products, services, and technologies. We may in the future become involved in lawsuits to protect or enforce our intellectual property rights. An adverse result in any litigation proceeding could harm our business. In any lawsuit
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we bring to enforce our intellectual property rights, a court may refuse to stop the other party from manufacturing, commercializing, using or importing the product, service, offering or technology at issue on grounds that our intellectual property rights do not cover, and the other party is not infringing, violating or otherwise misappropriating our intellectual property, through the manufacture, commercialization, use or importation of the product, service, offering or technology in question. Any claims we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate, or otherwise violate their intellectual property rights. If we initiate legal proceedings against a third party to enforce a patent covering a product, service, offering or technology, the defendant could counterclaim that such patent is invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability are common, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of patentable subject matter, novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from USPTO, or made a misleading statement, during prosecution. Mechanisms for such challenges include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). In a patent or other intellectual property proceeding, a court may decide that a patent or other intellectual property right of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims or other intellectual property narrowly or refuse to stop the other party from manufacturing, commercializing, using or importing the product, service, offering, or technology at issue on the grounds that our patents or other intellectual property do not cover the manufacture, commercialization, use, or importation of the product, service, offering, or technology in question. Furthermore, even if our patents or other intellectual property rights are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead grant us monetary damages and/or ongoing royalties. Such monetary compensation may be insufficient to adequately offset the damage to our business caused by the infringer’s competition in the market. An adverse result in any litigation or administrative proceeding could put one or more of our patents or other intellectual property rights at risk of being invalidated or interpreted narrowly, which could adversely affect our competitive business, financial condition, results of operations and prospects. Moreover, even if we are successful in any litigation, we may incur significant expense in connection with such proceedings, and the amount of any monetary damages may be inadequate to compensate us for damage as a result of the infringement and the proceedings.
We may become a party to intellectual property litigation or administrative proceedings that could be expensive, time-consuming, and unsuccessful, and could interfere with our ability to develop, manufacture, commercialize, import, or otherwise use our products, services, or technologies.
Our commercial success depends, in part, on our ability to develop, manufacture, commercialize, import, or use our products, services, and technologies without infringing, misappropriating, or otherwise violating the intellectual property rights of third parties. Our industry has been characterized by extensive litigation regarding patents, trademarks, trade secrets, and other intellectual property rights, and companies in the industry have used intellectual property litigation to gain a competitive advantage. While we do not intend to infringe upon, misappropriate, or otherwise violate the intellectual property rights of others, there may be pertinent rights of which we are presently unaware.
Third parties may initiate legal proceedings alleging that we are infringing, misappropriating, or otherwise violating their intellectual property rights. The outcomes of such proceedings are uncertain and could have a negative impact on the success of our business. It is possible that U.S. and foreign patents and pending patent applications controlled by third parties may be alleged to cover our products, services, and technologies, or that we may be accused of misappropriating third parties’ trade secrets or infringing third parties’ trademarks. We may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our products, services, or technologies, including interference proceedings, post grant review, and inter partes review before the USPTO or equivalent foreign regulatory authority. Furthermore, we may also become involved in other proceedings, such as reexamination, derivation, or opposition proceedings before the USPTO or other jurisdictional body relating to our intellectual property rights or the intellectual property rights of others. Third parties may assert infringement claims against us based on existing patents or patents that may
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be granted in the future, regardless of their merit. Because patent applications can take many years to issue and because publication schedules for pending applications vary by jurisdiction, there may be applications now pending of which we are unaware and which may result in issued patents, which our current or future products, services, or technologies infringe. Also, because the claims of published patent applications can change between publication and patent grant, there may be published patent applications that may ultimately issue with claims that we infringe. There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid and enforceable, and infringed by the use of our products, services, or technologies, which could have a negative impact on the commercial success of our current and any future products, services, or technologies. If we were to challenge the validity of any such third-party U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. We will have similar burdens to overcome in foreign courts in order to successfully challenge a third-party claim of patent infringement.
Our defense of any litigation or interference proceedings may fail and, even if successful, defending such claims brought against us would cause us to incur substantial expenses and distract our management and other employees. If such claims are successfully asserted against us, we could be forced to pay substantial damages. Further, if a patent infringement or other intellectual property rights-related lawsuit were brought against us, we could be forced, including by court order, to cease developing, manufacturing, commercializing, importing, or using the infringing product, service, or technology. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Although patent, trademark, trade secret, and other intellectual property disputes have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may not be able to obtain licenses on commercially reasonable terms or at all, in which event our business would be materially and adversely affected. Even if we were able to obtain a license, the rights may be non-exclusive, which could result in our competitors and other third parties gaining access to the same intellectual property. Ultimately, if we are unable to obtain such licenses or make any necessary changes to our products, services, or technologies, we could be forced to cease some aspect of our business operations, which could harm our business significantly.
A finding of infringement or an unfavorable interference or derivation proceedings outcome could prevent us from developing, manufacturing, commercializing, importing, or using our products, services, or technologies, or force us to cease some or all of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations, and prospects. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources and more mature and developed intellectual property portfolios. We could encounter delays in product introductions while we attempt to develop alternative products or technologies.
If third parties assert infringement, misappropriation, or other claims against our customers, these claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed or settle, we may be forced to pay damages or settlement payments on behalf of our customers or may be required to obtain licenses for the products, services, or technologies they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products, services, or technologies.
Our competitors may have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and competing technologies, and may have applied for or obtained, or may in the future apply for or obtain, patents or trademarks that will prevent, limit, or otherwise interfere with our ability to make, use, sell, import, and/or export our products, services, or technologies. As the number of competitors in our market grows and the number of patents issued in this area increases, the possibility of patent infringement
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claims against us may increase. Moreover, individuals and groups that are non-practicing entities, commonly referred to as “patent trolls,” purchase patents, and other intellectual property assets for the purpose of making claims of infringement in order to extract settlements. From time to time, we may receive threatening letters, notices or “invitations to license,” or may be the subject of claims that our products, services, or technologies and business operations infringe, misappropriate, or otherwise violate the intellectual property rights of others. These matters can be time-consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand, and cause us to incur significant expenses or make substantial payments. In addition, we purchase product components, including hardware and software, from suppliers, and the design of these components may be outside of our direct control. These suppliers may not indemnify us in the event that a third party alleges the use of such components infringes its intellectual property rights.
Any lawsuits relating to intellectual property rights could subject us to significant liability for damages and invalidate our intellectual property. Any potential intellectual property litigation also could force us to do one or more of the following: (a) stop developing, making, selling, importing, or using products, services, or technologies that allegedly infringe, misappropriate, or otherwise violate the asserted intellectual property right; (b) pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing, misappropriating, or otherwise violating; (c) redesign those products, services, or technologies that contain the allegedly infringing intellectual property, which could be costly, disruptive, and infeasible; and attempt to obtain a license to the relevant intellectual property rights from third parties, which may not be available on commercially reasonable terms or at all, or from third parties who may attempt to license rights that they do not have; (d) lose the opportunity to license our intellectual property rights to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; (e) incur significant legal expenses; or (f) pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing, misappropriating, or otherwise violating.
Third parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review, and equivalent proceedings in foreign jurisdictions (for example, opposition proceedings). Such proceedings could result in revocation of or amendment to our patents in such a way that they no longer cover our products, services, or technologies. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel, and the patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity and/or unenforceability, we may lose at least part, and perhaps all, of the patent protection on our products, services, or technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearing, motions, or other interim developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock. Even if we ultimately prevail, a court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may not be an adequate remedy. Furthermore, even if resolved in our favor, the monetary cost of such litigation and the diversion of the attention of our management could outweigh any benefit we receive as a result of the proceedings. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our business. Any of the foregoing may cause us to incur substantial costs and could place a significant strain on our financial resources, divert the attention of management from our core business, and harm our reputation.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property rights.
We may also be subject to claims that our current or former employees, contractors, partners, vendors or other third parties have an ownership interest in our current or future patents, patent applications, or other intellectual property rights, including as an inventor, co-inventor, or co-owner. We may be subject to ownership or
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inventorship disputes in the future arising, for example, from conflicting obligations of employees, consultants, partners, vendors, or others who were or are involved in developing our products, services, or technologies. Although it is our policy to require those who may be involved in the conception or development of inventions to execute agreements assigning such inventions and intellectual property rights therein to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops inventions that we regard as our own, and we cannot be certain that our agreements with such parties will be upheld in the face of a potential challenge, or that they will not be breached, for which we may not have an adequate remedy. The assignment of inventions may not be self-executing, or the assignment agreements may be breached, and litigation may be necessary to defend against these and other claims challenging inventorship or ownership of inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or the right to use, valuable intellectual property rights, and other owners may be able to license their interest in such intellectual property rights to other third parties, including our competitors. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
In addition, we may be subject to claims from third parties challenging inventorship or ownership of intellectual property rights we regard as our own, based on claims that our agreements with employees, consultants, partners, vendors, or others who were or are involved in developing our products, services, or technologies obligating them to assign their inventions and intellectual property rights therein to us are ineffective or in conflict with prior or competing contractual obligations to assign inventions and intellectual property rights therein to another employer, to a former employer, or to another person or entity. Many of our current and former employees and consultants were previously employed at or engaged by other medical device companies, including our competitors or potential competitors. Some of these employees and consultants have executed with such previous employment or engagements confidential information non-disclosure and non-use agreements and inventions assignment agreements, which may have included non-competition provisions. Although we try to ensure that such employees and consultants do not use or otherwise disclose confidential information or intellectual property rights of others in their work for us without such other person’s consent, we may be subject to claims that we or our current or former employees or consultants have, inadvertently or otherwise, infringed, violated, or otherwise misappropriated the confidential information or the intellectual property rights of these former employers, clients, or other third parties. To the extent that our current or former employees or consultants disclose or use confidential information or intellectual property rights owned by others in their work for us, disputes may arise as to the rights in any related or resulting inventions and litigation may be necessary to defend against these claims. It may also be necessary or we may desire to obtain a license to such third party’s intellectual property rights to settle any such claim; however, there can be no assurance that we would be able to obtain such license on commercially reasonable terms, if at all. If our defense to those claims fails, in addition to paying monetary damages or a settlement payment, a court could prohibit us from manufacturing, commercializing, using or importing the product, service, or technology features or practicing other intellectual property rights that are essential to our business, which could have a material adverse effect on our competitive position as well as our business, financial condition, results of operations, and prospects. In addition, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management and our employees. Any litigation or the threat thereof may adversely affect our ability to hire employees or contract with collaborators, partners, services provides, or contractors. A loss of key personnel or their work product could hamper or prevent our ability to develop, manufacture, commercialize, import, or use our products, services, or technologies, which could materially and adversely affect our business, financial condition, results of operations, and prospects.
If we are unable to protect the disclosure and use of our confidential information and trade secrets, the value of our products, services, and technologies and our business and competitive position could be harmed.
In addition to patent protection, we also rely on other intellectual property rights, including trade secrets, know-how, and/or other proprietary information that is not patentable or that we elect not to patent. However, trade secrets can be difficult to protect, and some courts are less willing or unwilling to protect trade secrets. To protect
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and maintain the confidentiality of our trade secrets and other proprietary information, we rely heavily on confidentiality provisions that we have in contracts with our employees, consultants, collaborators, and other third parties. We generally enter into confidentiality and inventions assignment agreements with our employees, consultants, and applicable third parties upon their commencement of a relationship with us. However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes, and we may not enter into such agreements with all employees, consultants, and third parties who have been involved in the development of our inventions. Although we generally require all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets.
In addition, despite the protections we place on our intellectual property and our other proprietary rights, monitoring unauthorized use and disclosure by employees, consultants, and other third parties who have access to such intellectual property or other proprietary rights is difficult, and we do not know whether the steps we have taken to protect our intellectual property or other proprietary rights will be adequate. Therefore, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by such employees, consultants, advisors, or third parties, despite the existence of our protections, including non-disclosure and use restrictions. These agreements may not provide meaningful protection against the unauthorized disclosure or use or of our trade secrets, know-how, or other proprietary information in the event the unwanted use is outside the scope of the provisions of the contracts or in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how or other proprietary information that we fail to detect. There can be no assurances that such employees, consultants, advisors, or third parties will not intentionally or unintentionally breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by third parties, including our competitors. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that information to compete with us. In addition to contractual measures, we try to protect the confidential nature of our proprietary information by maintaining physical security of our premises and electronic security of our information technology systems. Such security measures may not, for example, in the case of misappropriation of a trade secret by an employee, consultant or other third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee, consultant, or other third party from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. The exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have a material adverse effect on our business, financial condition, results of operations, and prospects. In particular, a failure to protect our proprietary rights may allow competitors to copy our products, services, or technologies, which could adversely affect our pricing and market share. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products, services, or technologies that we consider proprietary. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality, non-disclosure, and non-use provisions, and outcomes of such litigation are unpredictable. Enforcing a claim that a party illegally disclosed, used or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. While we use commonly accepted security measures, trade secret violations are often a combination of federal and state law in the U.S., and the criteria for protection of trade secrets can vary among different jurisdictions. If the steps we have taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. In addition, some courts are less willing or unwilling to protect trade secrets and agreement terms that address non-competition are difficult to enforce in many jurisdictions and might not be enforceable in certain cases. Finally, even if we were to be successful on the enforcement of our claims, we may not be able to obtain adequate remedies.
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It is also possible that others may independently develop information or technologies that are the same as or similar to our trade secrets or other proprietary technologies and develop products, services, or technologies without obtaining access to our trade secrets or other proprietary information in which case we could not assert any intellectual property rights, including trade secret rights, against such parties in a manner that could prevent legal recourse by us. If we fail to obtain or maintain trade secret protection, or if any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or used by others without our consent or otherwise misappropriated, or if any such information was independently developed by a competitor, or if our competitors obtain our trade secrets or independently develop products, services, or technologies that are the same as or similar to ours, our competitive market position could be materially and adversely harmed.
If our trademarks and trade names are not adequately protected, we may not be able to build brand name recognition in our markets of interest and our competitive position may be harmed.
Our trademarks could be challenged, opposed, invalidated, infringed, and circumvented by third parties, and our trademarks could also be diluted, declared generic or descriptive, or found to be infringing on other marks. If any of the foregoing occurs, we could be forced to re-brand our Company, products, services, or technologies, resulting in loss of brand recognition and requiring us to devote resources to advertising and marketing new brands, and suffer other competitive harm. Third parties may also adopt trademarks similar to ours, which could harm our brand identity and lead to market confusion. Further, there can be no assurance that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. Certain of our current or future trademarks may become so well known by the public that their use becomes generic and they lose trademark protection. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
We rely on our trademarks, trade names, and brand names to distinguish our products, services, and technologies from the products, services, and technologies of our competitors, and have registered or applied to register many of these trademarks in the U.S. and certain countries outside the U.S.; however, we have not yet registered all of our trademarks in all of our current and potential markets. There can be no assurance that all of our trademark applications will be approved for registration. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in proceedings before the USPTO and comparable agencies in many foreign jurisdictions, third parties have opposed and may oppose in the future further our trademark applications and may seek to cancel trademark registrations or otherwise challenge our use of the trademarks. Opposition or cancellation proceedings may be filed against our trademark filings in these agencies, and such filings may not survive such proceedings. While we may be able to continue the use of our trademarks in the event registration is not available, particularly in the U.S., where trademark rights are acquired based on use and not registration, third parties may be able to enjoin the continued use of our trademarks if such parties are able to successfully claim infringement in court. In addition, opposition or cancellation proceedings may be filed against our trademark applications and registrations and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. Our trademarks or trade names may be infringed, circumvented, declared generic, or determined to be violating or infringing on other marks.
Our products contain third-party open source software components and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products, affect our ability to protect our proprietary information, and subject us to possible litigation.
Our products contain software tools licensed by third parties under open source software licenses. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source software licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open source software licenses contain requirements that the
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licensee make its source code publicly available if the licensee creates modifications or derivative works using such open source software, depending on the type of open source software the licensee uses and how the licensee uses it. If we combine our proprietary software with open source software in a certain manner, we could, under certain open source software licenses, be required to make available the source code of certain of our proprietary software to the public for free. This could allow our competitors to create similar products with less development effort and time and ultimately could result in a loss of product sales and revenue. In addition, some companies that use third-party open source software have faced claims challenging their use of such open source software and their compliance with the terms of the applicable open source license. We may be subject to suits by third parties claiming ownership of what we believe to be open source software or claiming non-compliance with the applicable open source licensing terms. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to compromise or attempt to compromise our technology platform and systems.
Although we typically review our use of open source software to avoid subjecting our products, services or technology to conditions we do not intend, the terms of many open source software licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products, services or technology. Moreover, our processes for monitoring and controlling our use of open source software in our products, services or technology may not be effective. If we are held to have breached the terms of an open source software license, we could be required to seek licenses from third parties to continue offering our solutions on terms that are not economically feasible, to re-engineer our products, services, or technology, to discontinue the sale of our products, services, or technology if re-engineering could not be accomplished on a timely basis, to pay statutory or other damages to the license holder, or to make generally available, in source code form, our proprietary code, any of which could materially adversely affect our business, financial condition, results of operations, and prospects.
Risks Relating to Financial and Accounting Matters
Our ability to utilize our net operating loss carryforwards and research and development tax credits may be limited.
We have experienced net operating losses (“NOLs”) for tax purposes since our inception. As of December 31, 2025, we have total available gross (pre-tax) Federal and U.S. state NOL carryforwards of $126 million and $93 million, respectively. Under the Federal Tax Cuts and Jobs Act of 2017, NOLs incurred in tax years beginning on or after January 1, 2018, are carried forward indefinitely and are subject to a usage limitation of 80% of taxable income. NOLs incurred in tax years prior to January 1, 2018, are subject to a twenty-year carryforward period before expiring but are not subject to a usage limitation based on taxable income.
Utilization of NOL carryforwards and research and development tax credit carryforwards may be subject to substantial annual limitations under Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), or, for states, under state laws, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. We have not conducted a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since inception. If we have experienced an ownership change, as defined by Section 382, at any time since inception, utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in the expiration of a portion of the NOL carryforwards or research and development tax credit carryforwards before utilization.
The inability to fully utilize the NOL carryforwards and research and development tax credits could adversely affect our financial position and results of operations. If we are unable to generate sufficient taxable income in future periods to utilize the NOL carryforwards and research and development tax credit carryforwards before they
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expire, we may incur higher tax liabilities, which could have a material adverse effect on our business, financial condition, and results of operations.
We have identified two material weaknesses in our internal control over financial reporting. These material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We identified two material weaknesses in our internal control over financial reporting.
The first material weakness relates to our failure to design or maintain sufficient controls over implementation of information technology general controls or complementary user entity controls for applications (such as our enterprise resource planning (“ERP”), payroll and stock option management IT systems) used in the preparation of our financial statements. More specifically, we did not design or maintain sufficient controls related to user access provisioning and monitoring, change management, program development and data management.
The second material weakness relates to a lack of segregation of duties in the financial reporting function due to a limited number of staff performing the financial reporting function. More specifically, there is a limited level of multiple reviews among those tasked with preparing our financial records and with respect to our existing ERP system proper segregation of duties was not enforced (i.e., for journal entries we did not always different individuals responsible for the entry process and another approving the journal entry).
Any failure to remediate these material weaknesses could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. Either of the foregoing could have a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities.
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
We may face litigation and other risks as a result of the material weaknesses in our internal control over financial reporting.
As a result of such material weaknesses and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weaknesses in our internal control over financial reporting and the preparation of our financial statements. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.
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Risks Relating to Our Common Stock
We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” until the earliest to occur of:
•the last day of the fiscal year during which our total annual revenue equals or exceeds $1.235 billion (subject to adjustment for inflation);
•the last day of the fiscal year following the fifth anniversary of our IPO;
•the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or
•the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.
As a result of our “emerging growth company” status, we may take advantage of exemptions from various reporting requirements that would otherwise be applicable to public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the aggregate amount of gross proceeds to us as a result our IPO is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million.
If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our annual report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. Investors may find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the market price of our common stock may be adversely affected and more volatile.
We will incur increased costs and are subject to additional regulations and requirements as a result of operating as a public company, which could lower our profits or make it more difficult to run our business.
As a public company, we will incur significant legal, accounting, and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We will also incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the SEC and The Nasdaq Stock Market, LLC. The expenses generally incurred by public companies for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may
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be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory action, and potentially civil litigation.
If we are unable to design, implement, and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. In addition, beginning with our second annual report on Form 10-K, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting, pursuant to the rules and regulations of the SEC regarding compliance with Section 404 of the Sarbanes-Oxley Act. The process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation is time consuming, costly and complicated. See the risk factor titled “We have identified two material weaknesses in our internal control over financial reporting. These material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.” Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations, or cash flows.
Further, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we or, if required, our auditors, are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decline, and we could also become subject to investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities, which could require additional financial and management resources. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
In addition, as we continue to scale and improve our operations, including our internal systems and processes, we are currently evaluating the implementation of a variety of critical systems, such as supply chain management, customer relationship management, billing, human resource information systems and accounting systems. We cannot assure you that new systems, including any increases in scale or related improvements, will be successfully implemented or that appropriate personnel will be available to facilitate and manage these processes. Failure to implement necessary systems and procedures, transition to new systems and processes or hire the necessary personnel could result in higher costs, compromised internal reporting and processes and system errors or failures. For example, we are evaluating an upgrade to or replacement of our existing ERP system that facilitates orderly maintenance of books and records and the preparation of financial statements. ERP system implementations are complex projects that require significant investment of capital and human resources, the reengineering of many business processes and the attention of many employees who would otherwise be focused on other aspects of our business. The implementation and transition to any new critical system, including a new ERP system, may be disruptive to our business if they do not work as planned or if we experience issues related to such implementation or transition, which could have a material adverse effect on our operations.
We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the market price of our common stock.
We have never declared or paid cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination related to dividend policy will be made at the discretion of our board of directors, subject to applicable laws, and will depend
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upon, among other factors, our results of operations, prospects, financial condition, contractual restrictions and capital requirements. In addition, our ability to pay cash dividends on our capital stock may be limited by the terms of any future debt or preferred securities we issue or any future credit facilities we enter into.
Accordingly, investors must for the foreseeable future rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
We may require additional capital to support business growth, and this capital might not be available on terms favorable to us, or at all, and may dilute existing stockholders’ ownership of our common stock.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges and opportunities, including the need to advance clinical studies and pursue regulatory clearances for new or next-generation product pipeline. The scope, cost, timeline of these clinical development efforts are inherently uncertain, there can be no assurance that such efforts will yield successful outcomes or that the capital resources required to fund them will not exceed our current expectations. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. In addition, the incurrence of indebtedness would increase our fixed obligations and include covenants or other restrictions that would impede our ability to manage our operations. Further, if additional financing is needed, we may not be able to obtain additional financing on terms favorable to us or at all. Our inability to obtain adequate financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue supporting our business growth and advancing our new or next-generation product pipeline.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. Lock-up agreements covering approximately 41.1 million pre-IPO shares of our outstanding common stock entered into in connection with our initial public offering expired in early January 2026 and these shares may now be sold, subject to any applicable volume limitations under federal securities laws, at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly and impair our ability to raise adequate capital through the sale of additional equity or equity-linked securities at a time and price that we deem appropriate. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market , the trading price of our common stock could decline.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions include the following:
•A classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;
•No cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•The exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
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•The ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;
•The ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;
•The required approval of at least 66 2⁄3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or to repeal certain provisions of our amended and restated certificate of incorporation;
•A prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
•The requirement that a special meeting of stockholders may be called only by our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
•Advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”). Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.
Claims for indemnification by our directors, officers, and other employees or agents may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our amended and restated certificate of incorporation and amended and restated bylaws will provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors, officers and certain other employees provide that:
•We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
•We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.
•We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
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•We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.
The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees, and agents and to obtain insurance to indemnify such persons.
•We may not retroactively amend our amended and restated bylaws provisions to reduce our indemnification obligations to directors, officers, employees, and agents.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers, or stockholders to us or to our stockholders, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws (as either may be amended from time to time), or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation also provides that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees, or agents and arising under the Securities Act. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
If any action the subject matter of which is within the scope described above is filed in a court other than a court located within the State of Delaware (a “Foreign Action”), in the name of any stockholder, such stockholder shall be deemed to have consented to the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the applicable provisions of our amended and restated certificate of incorporation and having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Although our amended and restated certificate of incorporation contains the choice of forum provision described above, it is possible that a court could find that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums, and protection against the burdens of multi-forum litigation. However, this choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees, or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. In addition, this choice of forum provision may result in increased costs for stockholders to bring a claim. Furthermore, the enforceability of similar choice of forum provisions in other
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companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
The market price of our common stock may be volatile, which could cause the value of your investment to decline.
The market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of our common stock regardless of our operating performance. In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, data privacy and security-related events, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors, adverse publicity about the medical device industry, or individual scandals, and, in response, the market price of our common stock could decrease significantly.
Stock markets experience extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the market price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our results of operations fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
General Risk Factors
Product and professional liability suits against us could result in expensive and time-consuming litigation, payment of substantial damages and increases in our insurance rates.
Our CapsoCam capsules are cleared or authorized by the FDA for specific intended uses. However, if physicians elect to use our products in manners outside of these intended uses, such use may result in adverse outcomes and may pose significant risks, especially for individuals with known or suspected gastrointestinal obstructions, strictures, or fistulas, as the capsule may become lodged, potentially leading to an obstruction that requires urgent medical or surgical intervention. We cannot prevent physicians from using our products off-label or from using non-our products in conjunction with our products. The risk of injury to patients may increase if physicians attempt off-label use. Additionally, we cannot guarantee that physicians are adequately trained by us or their peers before using our products. Complications from off-label use or use by untrained physicians may not effectively treat conditions and may expose us to product liability claims or litigation, harming our reputation.
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The sale and use of our CapsoCam capsules could lead to product or professional liability claims based on allegations that one of our CapsoCam capsules contained a design or manufacturing defect, which resulted in the failure to detect the disease for which it was designed. A product or professional liability claim could result in substantial damages and be costly and time-consuming to defend, either of which could materially harm our business or financial condition. We cannot assure you that our liability insurance would protect our assets from the financial impact of defending a liability claim.
Any claim brought against us, with or without merit, could increase our liability insurance rates or prevent us from securing insurance coverage in the future. Furthermore, product liability claims could result in negative publicity, injury to our reputation, and loss of revenue. Even successful defense would require significant financial and management resources, which could adversely affect our business, financial condition, results of operations, and prospects.
We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders and reduce our financial resources.
In the future, we may enter into transactions to acquire other businesses, products, or technologies. Because we have not made any acquisitions to date, our ability to do so successfully is unproven. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms or at all. Any acquisitions we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors.
We may decide to incur debt in connection with an acquisition or issue our common stock or other securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies, and operations into our existing business in an effective, timely, and non-disruptive manner.
We or the third parties we depend on may be adversely affected by natural disasters and other catastrophic events, and our business continuity and disaster recovery plans may not adequately protect us from a serious natural disaster or other catastrophic event. Any interruption in our operations or the operations of third parties who supply components or other materials for our products may have a material adverse effect on our business, financial condition, results of operations, and prospects.
Severe weather, natural disasters and other catastrophic events, including pandemics or other public health crises (such as the COVID-19 pandemic), earthquakes, tsunamis, hurricanes, floods, fires, explosions, accidents, power outages, cyber attacks, telecommunications failures, mechanical failures, unscheduled downtimes, civil unrest, strikes, transportation interruptions, unpermitted discharges or releases of toxic or hazardous substances, other environmental risks, wars or other conflicts (including wars in Ukraine and the Middle East), sabotage, terrorist attacks, or other intentional acts of vandalism or misconduct could severely disrupt our operations, or the operations of third parties who manufacture or supply components or other materials for our products, and have a material adverse effect on our business, financial condition, results of operations, and prospects.
If a natural disaster or other catastrophic event occurs that prevents us or third-party suppliers or manufacturers from using all or a significant portion of our or their headquarters or other facilities, that damages critical infrastructure or that otherwise disrupts operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar catastrophic event. The potential impact of any disruption would depend on the nature and extent of the damage caused by a disaster. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business, financial condition, results of operations, and prospects.
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In addition, our corporate headquarters and manufacturing facilities are located in Saratoga, California, near major earthquake faults and fire zones. We do not carry earthquake insurance. Furthermore, integral parties in our supply chain are similarly vulnerable to natural disasters or other sudden, unforeseen, and severe adverse events. If such an event were to affect our supply chain, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program designed to protect the confidentiality, integrity, and availability of our critical systems and information. Our strategy utilizes on a “Defense in Depth” architecture that is aligned with the international standard ISO/IEC 27001:2022, and adheres to the regulatory requirements under HIPAA, FDA cybersecurity guidance, GDPR and Sarbanes-Oxley IT General Controls (SOX ITGC). We employ a multi-layered approach to assess, identify and manage material cybersecurity risks relevant to our business.
Key elements of the cybersecurity risk management program include:
•Continuous Risk Assessment: Periodic risk assessment and treatment across critical systems and information, including corporate networks and third-party managed services.
•Threat Management: Utilization of advanced security software for real-time threat detection and response, patch management and behavior data analysis and monitoring.
•Vulnerability Validation: Internal and external testing to identify vulnerabilities, including vulnerability scan and penetration testing, to proactively identify security gaps.
•Compliance Auditing: Regular internal and external audits to ensure the implementation of our cybersecurity program is compliant with the international standards and regulatory frameworks.
•Incident Response: A formalized process that includes procedures for identifying, containment, eradication and recovery from cybersecurity incidents.
•Data Protection: Encryption of critical data at rest and in transit to ensure personal health information and financial data are protected.
•Resiliency and Recovery: Disaster recovery and business continuity plans designed to maintain critical operations and minimize the downtime.
•Security Culture: Mandatory cybersecurity awareness training for our employees, incident response personnel, and senior management.
•Supply Chain Security: Vendor risk assessment for key service providers and partners.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition. We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See the risk
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factor titled, “Our business and operations may suffer in the event of information technology system failures, cyber attacks, or deficiencies in our cybersecurity.” for additional information.
Cybersecurity Governance
The Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity risks, including responsibility for our controls and procedures for mitigating cybersecurity and other information technology risks, and our plans to respond to data breaches.
The Audit Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.
The internal security team, led by the Senior Director of Information Technology, exercises oversight through a multi-faceted monitoring approach, which integrates threat intelligence from security communities, guidance from external advisors and governmental agencies, and aggregated analytics produced by security technologies deployed in our IT environment.
The Senior Director of Information Technology oversees the daily assessment and management of material risks arising from cybersecurity threats, and reports on the company’s cybersecurity posture during semi-annual management review meetings. The reviews evaluate the achievement of security objectives, risk management and mitigation, personnel and access control change, resource allocation, key performance metrics, and opportunities for continuous improvement.
Item 2. Properties
Our principal office is located at 18805 Cox Avenue, Suite 250, Saratoga, California 95070, where we lease 14,058 square feet of space to house our principal office, manufacturing and warehouse facilities to support our business operations and clinical trial supply. This lease will expire in 2027, subject to our option to an additional three-year term. We lease two office facilities in Taiwan, where a small group of our employees are stationed, pursuant to two lease agreements: (i) a lease agreement for 12 months that commenced on February 15, 2025 and was renewed on the original expiration date of February 14, 2026 for another year until February 14, 2027, and (ii) a lease agreement for 12 months which commenced on May 16, 2025 and will expire on May 15, 2026.
Our existing facilities will continue to support our research and development, finance, marketing, and administrative teams. We believe that our facilities are adequate to support our expansion through the end of the facilities’ lease periods. We believe that suitable additional or alternative space would be available in the future as required on commercially reasonable terms.
Item 3. Legal Proceedings
From time to time, we may become involved in various legal proceedings arising from the normal course of business activities. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together, materially and adversely affect our business, financial condition, or results of operations. Future litigation may be necessary to defend ourselves, our partners, and our customers by determining the scope, enforceability, and validity of third-party proprietary rights, to establish our proprietary rights or for other matters. Involvement in such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of legal expenses and settlement costs, diversion of management attention, and resources and other factors.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock has been listed on the Nasdaq Global Select Market under the symbol “CV” since July 2, 2025. Prior to this date, there was no public market for our common stock.
Holders of Records
As of March 25, 2026, there were approximately 340 registered holders of record of our common stock. The actual number of holders is greater than this number and includes stockholders who are beneficial owners but whose shares are held in “street name” by banks, brokers, and other financial institutions. This number of record holders also does not include stockholders whose shares may be held in trust by other entities.
Dividend Policy
We have never declared or paid cash dividends on our capital stock. We do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings, if any, will be used for the operation and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our Board of Directors and would depend upon various factors, including our results of operations, financial condition and capital requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
See Item 12 of Part III of this Annual Report for information about our equity compensation plans which is incorporated by reference herein.
Recent Sales of Unregistered Securities
During the six months ended June 30, 2025 we granted stock options under the 2005 Plan to purchase an aggregate of 171,171 shares of our common stock at a weighted average price of $2.63 per share to a total of 5 employees and contractors. During the six months ended June 30, 2025 we issued shares in connection with the exercise previously granted stock options under the 2005 Plan and sold an aggregate of 353,223 shares of our common stock at a weighted average price of $0.37 per share to a total of 70 employees and contractors. During the six months ended June 30, 2025 we issued shares in connection with the exercise previously granted warrant and sold an aggregate of 15,015 shares of our common stock at a weighted average price of $4.83 per share to one contractor. During the six months ended June 30, 2025, stock options under the 2005 Plan for an aggregate of 72,999 shares of our common stock at a weighted average price of $0.32 per share were forfeited, cancelled or expired. The issuances and sales of the foregoing securities were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701.
In July 2025, immediately prior to the completion of our initial public offering (the IPO), 38,665,477 outstanding shares of convertible preferred stock converted into 38,665,477 shares of common stock. Immediately prior to the completion of the IPO, we filed an Amended and Restated Certificate of Incorporation, which authorized a total of 300,000,000 shares of common stock and 10,000,000 shares of preferred stock. Upon the filing of the Amended and Restated Certificate of Incorporation, 38,665,477 shares of our convertible preferred stock then outstanding were automatically converted into 38,665,477 shares of our common stock. Due to such conversion, the issuance of such shares of our common stock was exempt from registration under Section 3(a)(9) or Section 4(a)(2) of the Securities Act.
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On July 7, 2025, in connection with the repayment of a promissory note in a principal amount of $1 million provided to us by an investor prior to our IPO, we issued to the investor 7,508 shares of common stock pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 as a transaction not involving a public offering. This loan was repaid in full with interest on July 11, 2025.
Use of Proceeds from our Initial Public Offering
In July 2025, we completed our IPO, in which we issued and sold 5,629,978 shares of our common stock (including 129,978 shares of common stock issued in connection with the partial exercise by the underwriters of their option to purchase up to an additional 825,000 shares) each at a price to the public of $5.00 per share. The net proceeds to the Company from the IPO were approximately $23.4 million after deducting underwriting discounts and commissions and offering expenses payable by the Company. None of the expenses associated with the IPO were paid to directors, officers, persons owning 10% or more of any class of equity securities. There has been no material change in the planned use of proceeds from the IPO from that described in our Final Prospectus dated and filed with the SEC pursuant to Rule 424(b)(4) on July 3, 2025.
Issuer Repurchases of Equity Securities
None.
Item 6. [ Reserved ]
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report, particularly in “Risk Factors” and “Special Note Regarding Forward-Looking Statements”.
Overview
We are a global medical technology company that develops advanced imaging and AI technologies, deployed in our capsule endoscopy solutions to identify abnormalities of the GI tract for diagnostic and screening purposes. Our capsule endoscope system, currently comprising the CapsoCam Plus single-use capsule and the CapsoCloud and CapsoView software, including 360 degree panoramic visualization of the small-bowel mucosa to investigate abnormalities such as obscure GI bleeding and Crohn’s disease, while our AI assisted pathology detection tools detect and highlight suspected abnormalities for a clinician, reducing their time to review the video and making capsule endoscopy more financially attractive to their practice. Our cloud-based solution enables medical professionals to access their patients’ videos and review those videos anytime, anywhere, 24/7, without a need to have an on-site server and maintain it, while accumulating an immense data trove on the cloud storage for AI training.
We were founded in 2005 and are headquartered in Saratoga, California. We sell our small bowel capsule system to our provider customers (i.e., primarily gastroenterologists practicing in clinics and/or hospitals) both internationally and in the U.S. through our global sales and marketing team. In the U.S., we sell to customers directly. Internationally, we sell both directly and through qualified exclusive distributors in specified regions. Our largest international shipping destinations in 2025 include France, Germany, and Columbia. We currently manufacture and intend to continue manufacturing our CapsoCam capsules included in our GI-tract capsule endoscopy solution (including CapsoCam Colon capsules). To assist us in manufacturing our GI-tract capsule endoscopy products, we rely on component suppliers and assembly manufacturers based in Asia (particularly Taiwan and Japan).
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As part of our effort to expand and grow our revenues beyond small-bowel-related, we are developing our next pipeline capsule endoscope product, CapsoCam Colon. Our CapsoCam Colon capsule (i) leverages CapsoCam Plus’s existing capsule design with its panoramic view and (ii) incorporates both our self-developed AI to automatically detect polyps and polyp-size measurement tool enabled by a 3D sensor in the capsule (polyp size being highly correlated with a polyp’s risk of becoming cancer).
In the second quarter of 2025 we filed our 510(k) submission to the FDA for our initial CapsoCam Colon capsule endoscopy solution (the "First-Generation Product”). We received responses from the FDA in September 2025. During our meeting with the FDA in December 2025, the FDA raised inquiries on topics including panoramic image processing methodology, and the proposed study design, sample size and primary endpoint for an extended study. Based on our communications with the FDA, we have decided not to further pursue the submission and approval for the First-Generation Product, and to prioritize our resources for the development of our second-generation of CapsoCam Colon capsule (the "Second-Generation Product"),which features improved imaging quality and increased field of review with use of AI and better lens. We also expanded a second arm pivotal study to enroll approximately 800 patients at up to 20 sites in the U.S. in preparation for submitting a new 510(k) application for the Second-Generation Product. As of the date of this Annual Report, over 500 patients have been enrolled for the second arm pivotal study. We currently expects to submit the 510(k) application for the Second-Generation Product in the third quarter of 2026.
Since we continue to invest in AI to improve our existing products, we completed a clinical study to demonstrate the benefits of our incorporation of AI technology into CapsoCam Plus, our existing product for the small bowel. We submitted the related 510(k) application to the FDA in December 2025. We expect that it will take approximately six months for the FDA to review our application, and issue their pending clearance. The commercialization is planned to begin shortly thereafter.
Longer term, we believe our CapsoCam family of products, incorporating our panoramic imaging solution, can be adapted to address new GI medical indications. Potential new medical indications include esophageal medical conditions (such as esophageal varices) and pancreatic cancer. In connection with our efforts to address pancreatic cancer, we submitted an FDA “Breakthrough Device Designation” application for our capsule endoscopy solution on November 6, 2025. A response from FDA in January 2026 determined that the CapsoCam UGI does allow for visualization of the papilla and its abnormalities, for both pre-cancerous and cancerous lesions. Due to the fact that the device does not specifically define diagnostic criteria, the application was not approved. The Company expects to resubmit the Breakthrough Device Designation application following the study, when additional data is available. The breakthrough designation is a part of the on-going project, potentially supplementing the regulatory pathway and approval for early pancreas cancer detection. However, additional research and studies to collect data may delay our anticipated timeline for obtaining the regulatory clearance (including obtaining the Breakthrough Device Designation) and may increase our research and development costs.
On July 15, 2025, the Company entered into a development agreement with Canon Inc, for the development of complementary metal-oxide-semiconductor (“CMOS”) image sensor samples with higher resolution and higher dynamic range to allow the Company to evaluate functionality and performance, conduct clinical evaluation of capsule endoscopies that incorporate Canon image sensors and obtain FDA 510(k) clearance thereof. The image sensors developed under this Agreement will be incorporated in future versions of the Company’s capsule endoscopies.
We have incurred a net loss of $25.3 million and $19.9 million during the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $155.7 million, cash and cash equivalents of $10.1 million. To date, we have funded our operations primarily through proceeds from the sale of shares of our convertible preferred stock, IPO proceeds and cash generated from the sale of CapsoCam capsules and the use of CapsoCloud or CapsoView, CapsoCloud data access, and capsule video reading service. We expect to continue to incur significant losses for the foreseeable future as we continue to build our operations and transition to operating as a public company, as well as advance our current and future products through clinical development.
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Our mission is to transform lives through innovative medical solutions that improve the health of patients around the world. When used in this Annual Report on Form 10-K, the terms "we," "us," "our" and "the Company" mean CapsoVision.
Our Business Model
Key Factors Affecting Our Results of Operations and Performance
We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations for the foreseeable future. These factors include:
Success in further penetrating the small bowel capsule endoscopy market. Until commercialization of our CapsoCam Colon capsule (targeted for middle of 2027), to grow our revenues (and, in turn, reduce our expected losses and negative cash flows), we intend to grow our small-bowel-related revenues by, among other things: (i) retaining and growing our customer base; (ii) cost-effectively increasing the size and effectiveness of our U.S. and international sales teams and our customer-support function; (iii) pursuing the pediatric market (with children comprising a significant portion of the Crohn’s disease patient population); (iv) introducing complementary products such as our (a) capsule delivery device with full commercialization expected the fourth quarter of 2026, and (b) patency capsule (for verifying a capsule endoscope can pass through the bowel without retention prior to an exam) with tentative FDA 510(k) submission planned by the end of the second quarter of 2026; (v) facilitating increased telemedicine adoption following recent FDA clearance of remote ingestion of our CapsoCam Plus, allowing patients to ingest our capsules in the comfort of their own homes with remote provider supervision; and (vi) following related FDA 510(k) clearance (expected by the middle of 2026), commercializing our updated CapsoCam Plus which incorporates our AI assisted pathology detection technology.
Success in our clinical development efforts and managing related costs. Prior FDA, EU and other regulatory clearances are required (as applicable) to, among other things, (i) commercialize our GI-tract capsule endoscopy solution (including newly developed capsules or major hardware or software enhancements and improvements to a previously approved capsule or related product), (ii) target a new or expanded indicated patient population for our solution or (iii) target new medical conditions. These clearances must be supported by satisfactory clinical study data, among other things. By their nature, clinical development and related expenses often require significant upfront investment in terms of time and cost before revenue generation is ensured. Consequently, to generate or achieve and maintain revenue, we must effectively manage our planned clinical development efforts in terms of successful results and time and costs expended. In particular, our clinical study expenses may fluctuate significantly due to numerous factors, including the nature of a clinical study and relatedly, the study’s protocols, size in terms of patients and clinical sites and duration and the ability to timely enroll sufficient qualified patients (which may be impacted by competing clinical trials). We may also be required to conduct additional clinical trials or other testing of any of our products beyond those that are contemplated or if we experience significant delays in enrollment in any clinical trials, we could incur significant additional costs and the clinical development timeline for our products may be delayed.
Success in our research and development efforts. We plan to continue investing in research and development to build upon and expand our GI-tract capsule endoscopy solution. Our research and development initiatives are focused on introducing new capsule products and enhancements and improvements to existing products, aimed at increasing the value provided by our GI-tract capsule endoscopy solution to patients and providers. We plan to appropriately modify our combined CapsoCam capsule and CapsoCloud and/or CapsoView solution to address new GI indications, for which we have begun and/or expect to soon begin the technical validation process for several additional indications and clinical-use cases beyond the small bowel.
Success in further developing our AI product features. We plan to continue investing to (i) improve the pathology-detection and classification accuracy and the scope of our AI algorithms and (ii) apply AI, including large language models, to streamline the diagnostic and medical-report-generation processes, which in turn improves the efficiency and effectiveness of our healthcare provider customers. Our CapsoCloud platform in the ordinary course collects patient videos and physician diagnostic reports that, with patient consent, we can utilize
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as a dataset for training and validating our AI algorithms. This ever-expanding patient pathology dataset is unique among capsule endoscopy companies, and together with our in-house team of AI experts, provides a competitive advantage. Ongoing investment is required to apply expert labels to the accumulated image data and to modify, train, and test the algorithms on this labeled data to expand applications beyond the current horizon.
Components of our Results of Operations
Revenue
We generate (i) product revenue from the sale of CapsoCam capsules, (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 (CapsoCloud or CapsoView). The customer’s delivery options include (1) CapsoCam capsules shipped to the customer which works together with downloadable software (CapsoView) 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 (CapsoCloud) 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). We recognize revenue for our 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.
Fees paid to group purchasing organizations (GPOs) that act as procurement agents for their underlying medical practice, clinic, or hospital members are deducted from revenue in the period the related revenue is recognized.
Our revenue fluctuates primarily based on the number of CapsoCam capsules sold.
Costs of Revenue
We currently manufacture and intend to continue manufacturing our CapsoCam capsules included in our GI-tract capsule endoscopy solution. To assist us in doing so, we rely on component suppliers and assembly manufacturers based in Asia (particularly Taiwan and Japan).
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 physicians for providing reading services, and the costs of operating CapsoCloud as a software-as-a-service offering for video delivery of capsule videos such as shipping costs, processing costs, and data storage costs. All shipping and handling costs directly related to bringing products to their final point of sale are included in costs of revenue. As we expand our product offerings, acquire new customers and existing customers increase their use of our CapsoCam solutions, we expect that our costs of revenue will continue to increase in absolute terms in line with increased revenues.
The U.S. government recently announced changes to its trade policies, including increasing tariffs on imports. Such changes could pose a risk to our business that could adversely affect our revenue, cost of revenue, gross profit, and gross margin. We will continue to evaluate the potential impact of tariffs on our business and results of operations and mitigating actions we might consider implementing.
Gross Profit and Gross Margin
We calculate gross profit as revenue less costs of revenue. Gross margin represents gross profit as a percentage of revenue. We expect gross profit and gross margin to change and be affected by various factors going forward, including selling prices, product costs, customer mix and production volumes as well as product mix once sale of
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CapsoCam Colon capsules begin with CapsoCam Colon capsules expected to have a higher sales price and related costs of revenue as compared to CapsoCam Plus, given the additional optics and other features incorporated into the capsule.
Due to the potential increase in cost of revenue, expected as a result of U.S. trade policies changes, including increasing tariffs on imports, our gross profit/gross margin may be adversely impacted.
Operating Expenses
Selling and Marketing
Selling and marketing expenses include costs directly attributable to actively marketing our products and services using both direct employees and outside contractors or vendors. These costs include salaries, bonuses, benefits, and stock-based compensation, sales commissions, travel costs and expense reimbursements, and the costs to increase market awareness of our technology and our product advantages, including expenses related to sponsoring programs, events, conferences and consulting services.
We expect our selling and marketing expenses to increase in the foreseeable future as we continue to increase the size of our in-house sales organization and market penetration in the U.S. and internationally, and expand indications. However, we expect selling and marketing expenses to decrease as a percentage of revenue primarily as our revenue grows.
Research and Development
Research and development costs are expensed as incurred in accordance with ASC 730. See Note 3 to our financial statements included elsewhere in this Annual Report for further details. Our research and development team includes hardware and software engineers with deep expertise in medical technology, optics, data science, AI, and cloud-based data and security architecture and individuals with extensive clinical development expertise.
Our GI-tract capsule endoscopy solution research and development activities include both (i) activities focused on increasing the value of our solution (such as developing new capsule products, including the associated software component, and new enhancements and features) and (ii) related clinical trial development efforts. Related research and development expenses include salaries, bonuses, benefits, and stock-based compensation for our employees focused on research and development, including engineering for our AI technology and hardware development, clinical trials, or regulatory clearance, costs of independent contractors and outside vendors, costs of supplies consumed in or product inventory utilized in clinical trials, and the costs of the clinical trials themselves as charged within the negotiated budgets by trial sites or vendors responsible for multiple trial sites.
In the near term, we expect our clinical development expenses to vary as, among others, we (i) finalized the first arm of our CapsoCam Colon large-scale pivotal study and began the second arm of our CapsoCam Colon pivotal study involving the second generation of that capsule (incorporating further advanced features designed to improve the accuracy of CapsoCam Colon) with the second arm expected to involve approximately 800 patients enrolled at up to 20 sites in the U.S. and plan to refine the study based on the FDA comments to the first arm pivotal study, (ii) continued clinical development of our updated small bowel CapsoCam Plus capsule incorporating our AI assisted pathology detection technology and (iii) conducted additional research and studies to collect data for the development of CapsoCam UGI.
In addition to clinical trials costs, our research and development costs also includes engineering for our AI technology, hardware development, and regulatory personnel.
General and Administrative
General and administrative expenses consist primarily of personnel expenses, including salaries, bonuses, benefits, and stock-based compensation expense for personnel in executive, administrative, finance, human
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resources, and other supporting functions. General and administrative expenses also include professional fees for legal services, consulting services, tax matters and audits, as well as information technology expenses, office expenses, rent, insurance, and foreign exchange gains (losses).
We expect that our general and administrative expenses will increase in the foreseeable future as we increase our headcount to support the continued growth of our business. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, compliance, director and officer insurance, investor and public relations, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange. However, we expect general and administrative expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.
Results of Operations for the Years ended December 31, 2025 and 2024
The following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

| Years Ended December 31, |  |  |  |
| 2025 |  | 2024 |  | $ Change |  | % Change |  |  |  |
| (in thousands, except for percentages and per share amount) |  |  |  |
Revenue | $ | 13,554 |  |  | $ | 11,756 |  |  | $ | 1,798 |  |  | 15 | % |  |  |  |
Costs of revenue | 6,381 |  |  | $ | 5,379 |  |  | 1,002 |  |  | 19 | % |  |  |  |
Gross profit | 7,173 |  |  | 6,377 |  |  | 796 |  |  | 12 | % |  |  |  |
Gross margin | 53 | % |  | 54 | % |  |  |  | (1) | % |  |  |  |
OPERATING EXPENSES |  |  |  |  |  |  |  |  |  |  |
Selling and marketing | 7,530 |  |  | 6,967 |  |  | 563 |  |  | 8 | % |  |  |  |
Research and development | 18,310 |  |  | 15,120 |  |  | 3,190 |  |  | 21 | % |  |  |  |
General and administrative | 6,849 |  |  | 4,207 |  |  | 2,642 |  |  | 63 | % |  |  |  |
Total operating expenses | 32,689 |  |  | 26,294 |  |  | 6,395 |  |  | 24 | % |  |  |  |
Operating loss | (25,516) |  |  | (19,917) |  |  | (5,599) |  |  | 28 | % |  |  |  |
Total non-operating income, net | 225 |  |  | 30 |  |  | 195 |  |  | 650 | % |  |  |  |
Loss before income taxes | (25,291) |  |  | (19,887) |  |  | (5,404) |  |  | 27 | % |  |  |  |
Provision for income taxes | 24 |  |  | 11 |  |  | 13 |  |  | 118 | % |  |  |  |
Net loss and comprehensive loss | $ | (25,315) |  |  | $ | (19,898) |  |  | $ | (5,417) |  |  | 27 | % |  |  |  |
Net loss per share – basic and diluted | $ | (1.03) |  |  | $ | (9.85) |  |  | $ | 8.82 |  |  | (90) | % |  |  |  |

Revenue
Our revenue has increased in each year since we began U.S. direct sales in 2020. Our revenues for the years ended December 31, 2025 and 2024 were $13.6 million and $11.8 million, respectively, representing a period-over-period growth $1.8 million or approximately 15% (17% in the U.S. and 8% internationally). The primary driver for our revenue growth was an increase in the number of CapsoCam Plus capsules sold: a period-over-period increase of 15% for the years ended December 31, 2025 and 2024.
For the years ended December 31, 2025 and 2024, international sales accounted for 21% and 23% of total revenue.
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Costs of Revenue
As we continued to scale our business, costs of revenue increased $1.0 million, or 19%, for the year ended December 31, 2025, compared to the year ended December 31, 2024 from $5.4 million to $6.4 million. The increased costs of revenue was attributable to increased unit sales of CapsoCam Plus for the small-bowel and the related services and to increased customs and tariffs due to the change in U.S. trade policy.
Gross Profit and Gross Margin
Gross profit increased $0.8 million, or 12%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, from $6.4 million to $7.2 million. For the years ended December 31, 2025 and 2024, the gross margin was 53% and 54%, respectively. The increase in gross profit was a result of increased CapsoCam Plus unit sales and the related software component, while the decline of the gross margin is due to changes the U.S. government made to the trade policies and tariffs at the beginning of the year resulting in increase of expenses for customs and tariffs.
Operating Expenses
The following tables provide a summary for our key operating expenses for the years ended December 31, 2025 and 2024.

| Years Ended December 31, |  |  |  |
| 2025 |  | 2024 |  | $ Change |  | % Change |  |  |  |
| (in thousands, except percentages) |  |  |  |
Selling and marketing | $ | 7,530 |  |  | $ | 6,967 |  |  | $ | 563 |  |  | 8 | % |  |  |  |
Research and development | $ | 18,310 |  |  | $ | 15,120 |  |  | $ | 3,190 |  |  | 21 | % |  |  |  |
General and administrative | $ | 6,849 |  |  | $ | 4,207 |  |  | $ | 2,642 |  |  | 63 | % |  |  |  |
Total operating expenses | $ | 32,689 |  |  | $ | 26,294 |  |  | $ | 6,395 |  |  | 24 | % |  |  |  |

Selling and Marketing Expenses
Selling and marketing expenses increased $0.6 million, or 8%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, from $7.0 million to $7.5 million. The increase was due to the addition to the sales force headcount and an increase in commission payouts in response to revenue growth.
Research and Development Expenses
Research and development expenses increased $3.2 million, or 21%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, from $15.1 million to $18.3 million. The increase was primarily due to the design development of the new CMOS under the development agreement with Canon Inc. as described in Note 9. COMMITMENTS AND CONTINGENCIES and the design development of the new ASIC under the development agreement with an R&D and manufacturing services vendor as described in Note 16. RELATED PARTIES.
General and Administrative Expenses
General and administrative expenses increased $2.6 million, or 63%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, from $4.2 million to $6.8 million. Of the total increase, approximately $0.9 million was attributable to higher professional service expenses, including audit, legal and consulting fees, $0.5 million was attributable to stock-based compensation expenses primarily due to new stock options granted at the end of 2024 and April 2025, as well as acceleration of stock option awards associated with
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the executive officer departure, $1.1 million was associated with higher payroll and benefits expenses due to hiring employees at the executive level, $0.3 million was attributable to higher corporate insurance expenses due to operating as a public company from July 2025, $0.2 million associated with a higher software expenses, and $0.1 million was associated with non-employee Board of Director's compensation for the second part of 2025, offset by $0.2 million due to receipt of refundable payroll tax credits from the U.S. Federal government and by $0.3 million due to foreign exchange gains of $0.2 million for the year ended December 31, 2025 compared to foreign exchange loss of $0.1 million for the year ended December 31, 2024.
Net Loss
Our reported net loss attributable to CapsoVision common stockholders for the years ended December 31, 2025 and 2024 was $25.3 million and $19.9 million, respectively, representing a period-over-period increase of $5.4 million or 27%.
Liquidity and Capital Resources
Overview
To date, we have financed our operations primarily through the net proceeds we have received from the sales of our convertible preferred stock and IPO common stock as well as cash generated from sales of our CapsoCam Plus capsule endoscopy solution. We have generated losses from our operations as reflected in our accumulated deficit of $155.7 million as of December 31, 2025. Net cash used in operating activities was $22.9 million and $20.1 million for the years ended December 31, 2025 and 2024, respectively.
Our losses primarily resulted from the costs incurred in the development and sales and marketing of our products and providing general and administrative support for our operations. We expect to continue to incur losses in the foreseeable future and to expend significant amounts of cash as we continue to scale our business, invest in research and development activities, increase sales and marketing expenses to support commercial expansion, and increase general and administrative expenses to support being a publicly-traded company.
Our annual financial statements for the year ended December 31, 2025 included in this Annual Report note that there is substantial doubt about our ability to continue as a going concern within one year after the date of issuance of the financial statements (see Note 2. GOING CONCERN). This means that we have expressed substantial doubt about our ability to continue our operations without an additional infusion of capital from external sources. Our annual financial statements have been prepared on a going concern basis and do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may be necessary should we be unable to continue as a going concern. If we are unable to finance our operations, our business would be in jeopardy and we might not be able to continue operations and might have to liquidate our assets. In that case, investors might receive less than the value at which those assets are carried on our annual financial statements for the year ended December 31, 2025, and it is likely that investors would lose all or a part of their investment. See “Risk Factors—Risks Relating to Our Business and Industry—Our annual financial statements for the year ended December 31, 2025 include a footnote raising substantial doubt about our ability to continue as a 'going concern' and we will likely need to raise additional financing to fund our business and revenue growth plans."
We have lease obligations and other contractual obligations and commitments as part of our ordinary course of business. See Note 8. LEASES to our financial statements included elsewhere in this Annual Report for information about our lease obligations. In addition, see Note 9. COMMITMENTS AND CONTINGENCIES to our financial statements included elsewhere in this Annual Report for information about our other commitments and contingencies.
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Source of Liquidity
As of December 31, 2025, we had approximately $10.1 million in cash and cash equivalents. From our inception through December 31, 2025, we have received aggregate gross proceeds of $143.6 million from sales of our convertible preferred stock, which were automatically converted into shares of our common stock in connection with the completion of our IPO. On July 3, 2025 we completed our IPO from which we received the net proceeds in the amount of $23.4 million. To provide for additional liquidity prior to the completion of our IPO, on May 28, 2025 we received $1 million as a note payable from an existing investor. The note payable, together with interest thereon (at 1% per month) was repaid shortly after completion of our IPO. In consideration for providing the note, we issued the investor 7,508 shares of our common stock.
Funding Requirements
As of December 31, 2025, we had an accumulated deficit of $155.7 million and cash and cash equivalents of $10.1 million. On July 3, 2025, we completed our IPO with the net proceeds to us of approximately $23.4 million after deducting underwriting discounts and commissions, and offering expenses payable by us. On March 16, 2026, we completed the private placement further discussed in 17. SUBSEQUENT EVENTS. Based on our current operating plan, even after this private placement of equity, we believe that our existing cash balances will not be sufficient to fund our operations for at least the next 12 months after the date of issuance of these financial statements.
We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. We may experience lower than expected cash generated from operating activities or greater than expected costs of revenue or operating expenses, and may need to raise additional capital to fund operations.
Our future capital needs will depend upon our ability to execute our revenue growth plans and many factors, including:
•the cost and pace of developing new products, enhancements to existing products and our research and development activities;
•the market acceptance of our products;
•our ability to develop and commercialize our CapsoCam capsule endoscopy solution for new indications, patient populations and clinical use cases;
•our ability to successfully complete any required clinical or other studies and timely obtain and maintain any required regulatory approval or clearances;
•insurer and third-party reimbursement of the costs associated with our GI-tract capsule endoscopy solution;
•successful management of our global supply chain including our component suppliers and assembly manufacturers for our CapsoCam solution, many of which are located in Asia (particularly Taiwan and Japan) and some of which are currently single-source suppliers;
•successful growth and leveraging of our global sales team (including, where appropriate, distributors) and marketing team to sell and market our GI-tract capsule endoscopy solution;
•the costs of attaining, defending, and enforcing our intellectual property rights;
•whether we acquire third-party products or technologies;
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•the amount and nature of competition from other GI-tract diagnostic products or procedures;
•our ability to raise additional funds to finance our operations; and
•the costs associated with being a public company.
If the sources of cash together with expected cash generated from operating activities are insufficient to satisfy our liquidity requirements, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. In addition, the undertaking of indebtedness would increase our fixed obligations and include covenants or other restrictions that could impede our ability to manage our operations. Our ability to raise additional funds may be adversely impacted by deteriorating global economic conditions and the disruptions to and volatility in the credit and financial markets in the U.S. and fluctuations in interest rates, resulting from factors that include but are not limited to, inflation, the conflict between Russia and Ukraine, political tensions between China and Taiwan and other factors, diminished liquidity and credit availability, tariffs, declines in consumer confidence, declines in economic growth, increases in unemployment rates and interest rates, and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Further, if additional financing is needed, we may not be able to obtain additional financing on terms favorable to us or at all. Our inability to obtain adequate financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue supporting our business growth and responding to business challenges and opportunities.
If we are unable to obtain additional funding on a timely basis, we will be required to scale back our plans and place certain activities on hold. We currently do not have any commitments to obtain additional funds. Our management continues to evaluate different strategies to obtain the required funding for future operations. These strategies may include public and private placements of equity and/or debt securities.
Cash Flows
The following table shows a summary of our cash flows for each of the periods presented:

| Year ended December 31,
| 2025 |  | 2024
| (in thousands)
Net cash used in operating activities | $ | (22,864) |  |  | $ | (20,091) |
Net cash used in investing activities | $ | (90) |  |  | $ | (153) |
Net cash provided by financing activities | $ | 23,604 |  |  | $ | 15,074 |
Net increase (decrease) in cash and cash equivalents | $ | 650 |  |  | $ | (5,170) |

Net Cash Used in Operating Activities
For the year ended December 31, 2025, net cash used in operating activities totaled $22.9 million, primarily driven by the net loss of $25.3 million for the period. Additional contributing factors included a $0.4 million increase in inventory to support increasing demand, offset by a $2.1 million increase in accrued expenses and other current liabilities, mainly due to research and development expenses, as well as $0.8 million increase in stock-based compensation expenses due to new grants and stock option accelerations.
For the year ended December 31, 2024, net cash used in operating activities was $20.1 million, primarily attributable to the net loss of $19.9 million. Cash outflows were further impacted by a $0.4 million increase in inventory to meet increased demand, as well as 0.2 million increase in stock-based compensation expenses due to new grants.
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Net Cash Used in Investing Activities
Net cash used in investing activities during the years ended December 31, 2025 and 2024 was $0.1 million and $0.2 million, respectively, and consisted of purchases of property and equipment.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the year ended December 31, 2025 consisted primarily of $23.4 million in net proceeds from the IPO, and $0.2 million in proceeds from the exercise of options on common stock and warrants. For the year ended December 31, 2024, net cash provided by financing activities was $15.1 million, which consisted of $15.0 million proceeds from the sales of our preferred stocks, and $0.1 million in proceeds from the exercise of options on common stock.
Contractual Obligations and Commitments
Our contractual obligations at December 31, 2025 include operating lease payments of $1.0 million due within 24 months and $2.7 million in outstanding purchase commitment for the development agreement with Canon Inc. due in 15 months, which takes into account an increase of $1.0 million due to the increased features in the specification pursuant to an amendment to the original development agreement with Canon, Inc. executed in March 2026. We expect to fund these obligations through our existing cash balances and cash flows from operations.
The Company had no off-balance-sheet arrangements that have or are reasonably likely to have a material effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. GAAP. Preparation thereof requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and certain items included in the footnotes to our financial statements. See Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES to our financial statements included elsewhere in this Annual Report for information about our significant accounting policies. While we believe the processes used in developing our estimates to be reasonable, actual amounts may differ from estimates. The following reflects the critical accounting estimates used in the preparation of our financial statements. The term “critical accounting estimates” refers to those estimates that involve a significant level of estimation uncertainty that have had, or are reasonably likely to have, a material impact on our financial condition or results of operations.
Research and Development Expenses (including Clinical Trial Expenses)
Research and development expenses, generally expensed as incurred, include 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, costs of the clinical trials themselves as charged within the negotiated budgets by trial sites or vendors responsible for multiple trial sites, and purchased or in-licensed intellectual property used in new product development where there is no alternative future use. We capitalize prepayments for goods or services, including trial device inventory or pre-paid clinical trial amounts, that will be used, consumed, or rendered for future research and development activities and recognize expense as the related goods are delivered or services are performed. We also record expenses and accruals for estimated costs of research and development activities that have not yet been billed to us, including services for clinical trials.
Research and development expenses possess significant estimation uncertainty that have been, or are reasonably likely to be, material and include costs incurred with clinical trial sites and related vendors.
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Such estimation uncertainty arises because: (i) the total time periods over which costs are expected to be incurred, and attributed to, may contract or expand based upon difficult-to-predict outcomes such as better than expected progress in, or delays in, clinical trials (including due to study protocol amendments); (ii) the costs’ behavior may be variable, or fixed, requiring judgments regarding proper attribution methodologies; and (iii) visibility of the precision of the exact progress of a particular study subject through the phases of the trial may be very limited, directly implicating necessary assumptions regarding informed consent, enrollment, or completion and speed of progress.
Revenue Recognition
We recognize revenue using a five-step model prescribed by U.S. GAAP resulting in revenue being recognized as performance obligations within a contract are satisfied. Judgment is required to apply the principles-based, five-step model for revenue recognition. Management is required to make certain estimates and assumptions about our contracts with our customers. To date, with limited exception for capsule video reading service revenues, all our revenue is generated from the sale of our CapsoCam Plus capsules to our customers (classified as product revenue) and the use of CapsoCloud or CapsoAccess (together with CapsoView) as the customer selected capsule video delivery option for (i) streaming the capsule videos (via CapsoCloud) for clinician review (classified as service revenue) or (ii) downloading the capsule videos (via CapsoAccess and CapsoView) for clinician review (classified as product revenue).
Those aspects of the five-step revenue recognition model prescribed by U.S. GAAP that give rise to significant levels of estimation uncertainty and have been, or are reasonably likely to be, material to our financial condition or results of operations include (i) the estimation of stand-alone selling prices for performance obligations that are not, or are rarely, sold separately or possess a wide range of observed historical selling prices and (ii) the measurement of applicable time periods to be used for recognition of revenue which is initially deferred at the time of sale and subsequently recognized over time or at a point in time. The estimation of stand-alone selling prices, where we rely upon a cost-plus-expected margin approach, variability in our expected profit margin assumptions can, in turn, cause variation in estimated stand-alone selling prices and therefore the amounts of revenue allocated to different performance obligations.
For the estimation of applicable time periods impacting recognition of revenue deferrals, estimates are determined using historical customer behavior and deliverable timing data. Usage of historical data requires consideration of trends, patterns, and changes in the underlying data, judgments regarding sampling, and judgments as to whether historical data needs to be adjusted for future expectations. Changes in these underlying inputs have not significantly impacted service revenues or deferrals in the most recent period.
For more information, please, refer to Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES and Note 6. REVENUE AND DEFERRED REVENUE.
Stock-Based Compensation
We maintain equity incentive plans to provide long-term incentives for employees, consultants and members of our board of directors. These plans allow for the issuance of non-statutory and incentive stock options to employees, non-statutory stock options to consultants and restricted stock units to non-employee directors. We are required to determine the fair value of equity incentive awards and recognize compensation expense for all equity incentive awards granted.
We account for stock-based compensation awards, including stock options to employees and non-employees, based on their estimated grant date fair value. We recognize the fair value of stock options, which vest based on continued service, on a straight-line basis over the requisite service period, which is generally four years. As described in detail in Note 12. STOCK-BASED COMPENSATION to our financial statements included elsewhere in this Annual Report, determining the fair value of stock-based compensation to be recorded typically involves the use of an option-pricing model (which, for our Company, is the Black-Scholes option-pricing model).
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A significant level of estimation uncertainty arises from certain inputs to the Black-Scholes model. Those inputs include (i) the fair value of the underlying common stock and (ii) the volatility of that fair value.
Common Stock Valuation
We are required to estimate the fair value of the common stock underlying our stock-based awards when performing fair value calculations using the Black-Scholes option pricing model. Prior to the IPO, the fair value of the common stock underlying our stock-based awards was determined on each grant date by our board of directors or our compensation committee, with input from management, considering our most recently available third-party valuation of common shares. All options to purchase shares of our common stock were intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant.
Our determination of the value of our common stock was performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants (AICPA), Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation (the AICPA Practice Aid). In addition, our board of directors considered various objective and subjective factors to determine the fair value of our common stock, including:
•valuations of our common stock performed by independent third-party valuation specialists;
•the anticipated capital structure that will directly impact the value of the currently outstanding securities;
•our results of operations and financial position;
•the status of our research and development efforts;
•the composition of, and changes to, our management team and board of directors;
•the lack of liquidity of our common stock as a private company;
•our stage of development and business strategy and the material risks related to our business and industry;
•external market conditions affecting the life sciences and biotechnology industry sectors;
•U.S. and global economic conditions;
•the likelihood of achieving a liquidity event for the holders of our common stock, such as an IPO or a sale of our company, given prevailing market conditions; and
•the market value and volatility of comparable companies
The AICPA Practice Aid prescribes several valuation approaches for setting the value of an enterprise, such as the cost, income and market approaches, and various methodologies for allocating the value of an enterprise to its common stock. The cost approach establishes the value of an enterprise based on the cost of reproducing or replacing the property less depreciation and functional or economic obsolescence, if present. The income approach establishes the value of an enterprise based on the present value of future cash flows that are reasonably reflective of our future operations, discounting to the present value with an appropriate risk adjusted discount rate or capitalization rate. The market approach is based on the assumption that the value of an asset is equal to the value of a substitute asset with the same characteristics.
Our Board of Directors determined the income approach and market approach, including the back-solve method, were the most appropriate methods for estimating our enterprise value. Under the income approach, we
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estimated the value based upon our projected financial performance. Under the back-solve method in the market approach, we estimated the value based upon our prior sales of redeemable convertible preferred stock to unrelated third parties, as well as secondary transactions undertaken in our preferred securities, using the option pricing method (the “OPM”). The back-solve analysis considered the post-transaction liquidation preferences, participation caps, dividends, conversion features, and our capital structure immediately following the closing of each financing round. Other market approaches included analyses based on the valuation of comparable publicly traded companies and mergers and acquisitions observed in related industries. We then applied these derived multiples or values to our financial metrics to estimate our market value.
For valuations performed prior to December 31, 2024, the allocation of these enterprise values to each part of our capital structure, including our common stock and redeemable convertible preferred stock, was done utilizing the OPM. The OPM treats the rights of the holders of redeemable convertible preferred and common stock as equivalent to call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of redeemable convertible preferred stock, as well as their rights to participation and conversion. Thus, the estimated value of the common stock can be determined by estimating the value of its portion of each of these call option rights. The OPM back-solve derives the implied equity value of a company from a recent transaction involving our own securities issued on an arms-length basis.
For our valuations performed on or after December 31, 2024, the allocation of these enterprise values to each our share classes was done utilizing the hybrid method. The hybrid method is a hybrid between the probability-weighted expected returns method (the “PWERM”) and the OPM. The PWERM considers the enterprise value under various exit scenarios including an initial public offering (the “IPO Scenario”) and staying private, our estimate of the timing of each scenario and weightings based on our estimate of the probability of each event occurring. Our equity value under the IPO Scenario was estimated based on benchmarking analyses performed by the company and its bankers using market data observed for companies with recent IPOs. The equity value under the IPO Scenario was allocated to our capital stock using an IPO scenario analysis that contemplates the timing, size, valuation, and probability of an IPO event in the future. The stay private scenario estimated our equity value using an income approach based on our financial projections and market approaches based on the valuation of comparable publicly traded companies and mergers and acquisitions observed in related industries. Further, we used the OPM back-solve method and market indexing valuation method under the market approach with respect to the secondary transactions in our redeemable convertible preferred stock. The equity value was then allocated to our capital stock based on the OPM.
After the equity value is determined and allocated to the various share classes, a discount for lack of marketability (“DLOM”) is applied to arrive at the fair value of the common stock. A DLOM is meant to account for the lack of marketability of a stock that is not traded on public exchanges. For financial reporting purposes, we considered the amount of time between the valuation date and the grant date of our stock options to determine whether to use the latest common stock valuation or a straight-line interpolation between the two valuation dates. This determination included an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grant date.
For valuations after the completion of our IPO, the fair value of each share of underlying common stock is based on the closing price of our common stock as reported on the date of grant on the Nasdaq stock exchange.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company under the Jumpstart Our Business Startups Act (JOBS Act). Under the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. However, we may elect to early adopt any new or revised accounting standards whenever such early adoption is permitted for
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non-public companies. We may take advantage of these exemptions up until the time that we are no longer an emerging growth company.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a smaller reporting company as defined by Rule 12b-2 of the Exchange Act because both the market value of our stock held by non-affiliates is less than $700 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recently Issued Accounting Pronouncements
See Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES to our financial statements included elsewhere in this Annual Report for a description of recent accounting pronouncements applicable to our financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934, as amended and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.
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Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements |
Report of Independent Registered Public Accounting Firm (PCAOB ID: 23) | 114
Balance Sheets | 115
Statements of Operations and Comprehensive Loss | 117
Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) | 118
Statements of Cash Flows | 120
Notes to Financial Statements | 121

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CapsoVision, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of CapsoVision, Inc. (the “Company”) as of December 31, 2025 and 2024, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses and negative cash outflows from operations. These matters raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Baker Tilly US, LLP
Santa Clara, California
March 26, 2026
We have served as the Company’s auditor since 2024.
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CAPSOVISION, INC.
BALANCE SHEETS
(in thousands, except par value and share amounts)

| December 31, 2025 |  | December 31, 2024
ASSETS |  |  |
Current Assets |  |  |
Cash and cash equivalents | $ | 10,112 |  |  | $ | 9,319 |
Accounts receivable, net | 2,498 |  |  | 2,001 |
Inventory | 2,987 |  |  | 2,629 |
Prepaid expenses and other current assets | 1,072 |  |  | 898 |
Total current assets | 16,669 |  |  | 14,847 |
Property and equipment, net | 611 |  |  | 720 |
Operating lease right-of-use assets | 843 |  |  | 1,195 |
Other long-term assets | 41 |  |  | 41 |
TOTAL ASSETS | $ | 18,164 |  |  | $ | 16,803 |
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT) |  |  |
Current Liabilities |  |  |
Accounts payable | $ | 1,143 |  |  | $ | 749 |
Accrued expenses and other current liabilities | 2,697 |  |  | 569 |
Deferred revenue | 177 |  |  | 132 |
Operating lease liabilities – current | 410 |  |  | 351 |
Total current liabilities | 4,427 |  |  | 1,801 |
Operating lease liabilities – long-term | 477 |  |  | 887 |
Total liabilities | 4,904 |  |  | 2,688 |
Commitments and contingencies - Note 9 |  |  |
Convertible Preferred Stock (each Series: $0.001 par value) |  |  |
Series A, B, C, C-1, D, D-1, D-2, E, F-1, F-2, G, G-1, H: none and 153,682,280 shares authorized, none and 38,665,583 issued and outstanding, and liquidation preference of none and $152,378 as of December 31, 2025 and December 31, 2024, respectively | — |  |  | 143,625 |

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CAPSOVISION, INC.
BALANCE SHEETS (continued)
(in thousands, except par value and share amounts)

| December 31, 2025 |  | December 31, 2024
Convertible Preferred Stock (each Series: $0.001 par value) (continued) |  |  |
Total convertible preferred stock | — |  |  | 143,625 |
Stockholders’ Equity |  |  |
Common stock, $0.001 par value: 300,000,000 and 190,000,000 shares authorized; 46,865,051 and 2,090,945 issued and outstanding as of December 31, 2025 and December 31, 2024, respectively | 47 |  |  | 2 |
Additional paid-in capital | 168,878 |  |  | 838 |
Accumulated deficit | (155,665) |  |  | (130,350) |
Total stockholders’ equity (deficit) | 13,260 |  |  | (129,510) |
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 18,164 |  |  | $ | 16,803 |

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

| Years Ended December 31, |  |
| 2025 |  | 2024 |  |  |  |
Net revenue | $ | 13,554 |  |  | $ | 11,756 |  |  |  |  |
Costs of revenue | 6,381 |  |  | $ | 5,379 |  |  |  |  |
Gross profit | 7,173 |  |  | 6,377 |  |  |  |  |
OPERATING EXPENSES |  |  |  |  |  |  |
Selling and marketing | 7,530 |  |  | 6,967 |  |  |  |  |
Research and development | 18,310 |  |  | 15,120 |  |  |  |  |
General and administrative | 6,849 |  |  | 4,207 |  |  |  |  |
Total operating expenses | 32,689 |  |  | 26,294 |  |  |  |  |
Operating loss | (25,516) |  |  | (19,917) |  |  |  |  |
NON-OPERATING INCOME |  |  |  |  |  |  |
Interest income, net | 269 |  |  | 26 |  |  |  |  |
Other non-operating income (expense), net | (44) |  |  | 4 |  |  |  |  |
Total non-operating income, net | 225 |  |  | 30 |  |  |  |  |
Loss before income taxes | (25,291) |  |  | (19,887) |  |  |  |  |
Provision for income taxes | 24 |  |  | 11 |  |  |  |  |
Net loss and comprehensive loss | $ | (25,315) |  |  | $ | (19,898) |  |  |  |  |
Net loss per share – basic and diluted | $ | (1.03) |  |  | $ | (9.85) |  |  |  |  |
Weighted average common shares outstanding – basic and diluted | 24,555,381 |  |  | 2,020,077 |  |  |  |  |

117

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

| Convertible Preferred Stock | Common Stock |  |  |  |  |  |
| Shares |  | Amount | Shares |  | Par Value |  | Additional Paid-in-Capital |  | Accumulated Deficit |  | Total Stockholders’ Equity (Deficit)
December 31, 2023 | 35,559,025 |  | $ | 128,625 |  | 1,837,036 |  | $ | 2 |  |  | $ | 607 |  |  | $ | (110,452) |  |  | $ | (109,843) |
Issuance of Series H convertible preferred stock | 3,106,558 |  |  | 15,000 |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of common stock upon exercises of stock options | — |  | — |  | 253,909 |  | — |  |  | 75 |  |  | — |  |  | 75 |
Stock-based compensation | — |  | — |  | — |  | — |  |  | 156 |  |  | — |  |  | 156 |
Net loss | — |  | — |  | — |  | — |  |  | — |  |  | (19,898) |  |  | (19,898) |
December 31, 2024 | 38,665,583 |  | $ | 143,625 |  | 2,090,945 |  | $ | 2 |  |  | $ | 838 |  |  | $ | (130,350) |  |  | $ | (129,510) |
Conversion of all convertible preferred stock to common stock - initial public offering | (38,665,583) |  |  | (143,625) |  | 38,665,583 |  |  | 39 |  |  | 143,586 |  |  | — |  |  | 143,625 |
Issuance of common stock in initial public offering, net of issuance costs | — |  |  | — |  | 5,629,978 |  |  | 6 |  |  | 22,848 |  |  | — |  |  | 22,854 |
Issuance of Underwriters Warrants | — |  |  | — |  | — |  |  | — |  |  | 519 |  |  | — |  |  | 519 |
Issuance of common stock upon promissory note repayment | — |  |  | — |  | 7,508 |  |  | — |  |  | 31 |  |  | — |  |  | 31 |
Reverse stock split rounddown and cash in lieu payment | — |  |  | — |  | (108) |  |  | — |  |  | (1) |  |  | — |  |  | (1) |
Issuance of common stock upon exercises of stock options | — |  |  | — |  | 438,808 |  |  | — |  |  | 158 |  |  | — |  |  | 158 |

| The accompanying notes are an integral part of these financial statements. | 118

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

Issuance of common stock upon exercises of warrants | — |  |  | — |  | 15,015 |  |  | — |  |  | 73 |  |  | — |  |  | 73 |
Issuance of common stock upon vesting of restricted stock units | — |  |  | — |  | 17,322 |  |  | — |  |  | — |  |  | — |  |  | — |
Stock-based compensation | — |  |  | — |  | — |  |  | — |  |  | 826 |  |  | — |  |  | 826 |
Net loss | — |  |  | — |  | — |  |  | — |  |  | — |  |  | (25,315) |  |  | (25,315) |
December 31, 2025 | — |  |  | $ | — |  | 46,865,051 |  |  | $ | 47 |  |  | $ | 168,878 |  |  | $ | (155,665) |  |  | $ | 13,260 |

| The accompanying notes are an integral part of these financial statements. | 119

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

| Year ended December 31,
| 2025 |  | 2024
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |
Net loss | $ | (25,315) |  |  | $ | (19,898) |
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
Depreciation and amortization | 216 |  |  | 206 |
Loss on disposal of property and equipment | 1 |  |  | — |
Amortization of operating lease right-of-use assets | 351 |  |  | 315 |
Unrealized foreign exchange (gains) losses | (173) |  |  | 103 |
Stock in lieu of debt repayment | 31 |  |  | — |
Stock-based compensation | 826 |  |  | 156 |
Bad debt expense | 11 |  |  | 8 |
Changes in operating assets and liabilities: |  |  |
Accounts receivable | (478) |  |  | (176) |
Inventory | (358) |  |  | (434) |
Prepaid expenses and other current assets | (174) |  |  | (316) |
Other long-term assets | — |  |  | 1 |
Accounts payable | 376 |  |  | 388 |
Accrued expenses and other current liabilities | 2,128 |  |  | (204) |
Deferred revenue | 45 |  |  | 36 |
Operating lease liabilities | (351) |  |  | (276) |
Net cash used in operating activities | $ | (22,864) |  |  | $ | (20,091) |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |
Purchases of property and equipment | (90) |  |  | (153) |
Net cash used in investing activities | $ | (90) |  |  | $ | (153) |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |
Proceeds from issuance of Series H convertible preferred stock | — |  |  | 15,000 |
Proceeds from IPO, net of commissions | 26,557 |  |  | — |
Payment of IPO offering costs | (3,184) |  |  | — |
Proceeds from promissory note issuance | 1,000 |  |  | — |
Repayment of promissory note | (1,000) |  |  | — |
Proceeds from exercises of options on common stock and warrants | 231 |  |  | 74 |
Net cash provided by financing activities | $ | 23,604 |  |  | $ | 15,074 |
Net increase (decrease) in cash and cash equivalents | 650 |  |  | (5,170) |
Effect of exchange rate changes on cash and cash equivalents | 143 |  |  | (70) |
Cash and cash equivalents at beginning of period | 9,319 |  |  | 14,559 |
Cash and cash equivalents at end of year | $ | 10,112 |  |  | $ | 9,319 |
SUPPLEMENTAL CASH FLOW DISCLOSURES |  |  |
Cash paid for income taxes | $ | 9 |  |  | $ | 6 |
Cash paid for interest | 15 |  |  | — |
NON-CASH FINANCING AND INVESTING ACTIVITIES |  |  |

| The accompanying notes are an integral part of these financial statements. | 120

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

Underwriters warrants issued in connection with the IPO | $ | 519 |  |  | — |
Conversion of convertible preferred stock into common stock upon initial public offering | $ | 143,625 |  |  | — |

CAPSOVISION, INC.
NOTES TO FINANCIAL STATEMENTS
(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.
The Company’s core technology platform is an orally ingestable 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.
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.
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 & 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.
Initial Public Offering
On July 3, 2025, the Company completed its initial public offering ("IPO") of 5,500,000 shares of its common stock, that was followed by the issuance of 129,978 shares of common stock on July 18, 2025 in connection with the partial exercise by the underwriters of their option to purchase up to an additional 825,000 shares (the “Over-allotment Exercise”) as further described in Note 11. COMMON STOCK), each at a price to the public of $5.00 per share. The Company received net proceeds of approximately $23.37 million after deducting underwriting

| The accompanying notes are an integral part of these financial statements. | 121

discounts and commissions of approximately $1.59 million and offering expenses of approximately $3.18 million which were recognized in additional paid-in capital as a reduction of the proceeds generated from the offering.
The gross proceeds to the Company from the IPO was approximately $28.14 million, before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
In connection to the IPO, the Company amended and restated its certificate of incorporation (the “Restated Certificate”), under which authorized capital stock consists of 300,000,000 and 190,000,000 shares of common stock as of December 31, 2025 and December 31, 2024, respectively. Authorized common stock is reserved for future issuance, including pursuant to outstanding equity awards and future equity awards under the 2005 Plan and the 2025 Plan as further described in Note 11. COMMON STOCK.
On July 2, 2025, immediately prior to the completion of the Company’s IPO and upon the receipt by the Company of a written request consented to by holders of a majority of the Preferred Stock, all shares of the Company’s convertible preferred stock converted into shares of the Company’s common stock.
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 December 31, 2025, the Company had cash and cash equivalents of $10,112. For the year then ended December 31, 2025, the Company had an operating loss of $25,516, a net loss and comprehensive loss of $25,315, and net cash used in operating activities of $22,864. 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 completed the IPO in July 2025 and raised approximately $23.4 million in net proceeds, as well as subsequent private placement further discussed in 17. SUBSEQUENT EVENTS, 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
The accompanying 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”).
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.
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.

| The accompanying notes are an integral part of these financial statements. | 122

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. In lieu of fractional shares, the Company rounded down to the next whole share and made a cash-in-lieu payment of $1 for 108 shares.
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 years ended December 31, 2025 and 2024, the Company recorded $193 and $(93), 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 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

| The accompanying notes are an integral part of these financial statements. | 123

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. With respect to customers, for the year ended December 31, 2025, the same customer represented 9% of our revenue and 22% of our accounts receivable as of December 31, 2025. For the year ended December 31, 2024, that same customer represented 10% of our revenue and 21% of our accounts receivable as of December 31, 2024.
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

| The accompanying notes are an integral part of these financial statements. | 124

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 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.

| The accompanying notes are an integral part of these financial statements. | 125

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 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 $117 and $51 for the years ended December 31, 2025 and 2024, 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 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 accompanying notes are an integral part of these financial statements. | 126

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.
For the years ended December 31, 2025 and 2024, the Company incurred $6,391 and $7,647, 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.
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

| The accompanying notes are an integral part of these financial statements. | 127

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 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.
Convertible Preferred Stock
The Company’s primary means of financing from start-up through development and into the commercial stage has historically been the issuance of convertible preferred stock in various series; these series share similar rights and obligations and contain similar qualifications as to the requirements an equity initial public offering would have to meet in order for the stock to convert to common stock. Convertible preferred stock is recorded at fair value on the date of issuance (historically, the same as the issue price), net of issuance costs. Application of the guidance contained in ASC 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities has led the Company to present each of the series of convertible preferred stock as mezzanine equity due to the similar features of the series concerning liquidation preferences and other rights and privileges inuring to the respective series’ holders, one or more of which may result in a settlement in cash not entirely within the Company’s control.
On July 2, 2025, immediately prior to the completion of the Company’s IPO and upon the receipt by the Company of a written request consented to by holders of a majority of the Preferred Stock, all shares of the Company’s convertible preferred stock converted into shares of the Company’s common stock.
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

| The accompanying notes are an integral part of these financial statements. | 128

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 December 31, 2025 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 12. 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 11. COMMON STOCK) for services provided during the IPO to purchase 168,898 shares of common stock. The Underwriters Warrants are 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.

| The accompanying notes are an integral part of these financial statements. | 129

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 December 31, 2025 and 2024 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 Standards Issued and Recently Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This guidance requires disclosure on an annual and interim basis of the following: (i) significant segment expenses regularly provided to the chief operating decision maker ("CODM") and a measure of segment profit or loss; (ii) an amount for other segment items by reportable segment and a description of its composition; (iii) all annual disclosures about a reportable segment's profit and loss and assets as currently required by ASC Topic 280; (iv) clarifying if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources; and (v) disclosing the title and position of the CODM and how the CODM uses the reported measures. Public entities with a single reportable segment are required to provide all the disclosures required by this amendment. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and for quarters in the years beginning after December 15, 2024; early adoption is permitted. The Company, a single reportable segment entity, early adopted ASU 2023-07 with effect from January 1, 2023; the related disclosures are included in Note 13. SEGMENTS.
In June 2024, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures ("ASU 2023-09"). The new guidance provides for disclosure on an annual basis of the following: (i) specific categories in the rate reconciliation, and (ii) additional information for reconciling items that meet a quantitative threshold of greater than 5% of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024; early adoption is permitted. The Company adopted this standard for the fiscal year 2025 annual financial statements and has applied this standard prospectively which had a disclosure only impact on its financial statements. See Note 14. 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

| The accompanying notes are an integral part of these financial statements. | 130

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 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:

| December 31, 2025 |  | December 31, 2024
Finished goods | $ | 107 |  |  | $ | 176 |
Work in process | 994 |  |  | 897 |
Raw materials | 1,886 |  |  | 1,556 |
Inventory | $ | 2,987 |  |  | $ | 2,629 |

| The accompanying notes are an integral part of these financial statements. | 131

For the years ended December 31, 2025 and December 31, 2024, there were no provisions to write down inventories.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets comprised the following amounts:

| December 31, 2025 |  | December 31, 2024
Prepayment for insurance | $ | 324 |  |  | $ | 64 |
Advance payments for inventory purchases | $ | 300 |  |  | $ | 349 |
Deferred initial public offering costs | — |  |  | 225 |
Other | 448 |  |  | 260 |
Prepaid expenses and other current assets | $ | 1,072 |  |  | $ | 898 |

Deferred initial public offering costs are specific incremental costs directly attributable to an initial public offering of equity securities that were reclassified from current assets to stockholders' equity and recorded as reductions to the gross proceeds from the offering.
Property and Equipment, Net
Property and equipment comprised the following amounts:

| December 31, 2025 |  | December 31, 2024
Machinery and equipment | $ | 928 |  |  | $ | 821 |
Computer equipment, office equipment, and purchased software | 101 |  |  | 101 |
Leasehold improvements | 157 |  |  | 157 |
Accumulated depreciation and amortization | (575) |  |  | (359) |
Property and equipment, net | $ | 611 |  |  | $ | 720 |

Depreciation and amortization expenses of $216 and $206 for the years ended December 31, 2025 and 2024, respectively, were recorded within costs of revenue and components of operating expenses.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities comprised the following:

| December 31, 2025 |  | December 31, 2024
Accrued compensation | $ | 568 |  |  | $ | 349 |
Accrued clinical trial expenses | 83 |  |  | 13 |
Accrued R&D expenses | 1,448 |  |  | — |
Accrued sales taxes | 79 |  |  | 67 |
Other | 519 |  |  | 140 |
Accrued expenses and other current liabilities | $ | 2,697 |  |  | $ | 569 |

| The accompanying notes are an integral part of these financial statements. | 132

6. REVENUE AND DEFERRED REVENUE
Total revenue disaggregated by geographic source, type of customer, and products or services was as follows.

| Years Ended December 31,
| 2025 |  | 2024
United States (medical practice, clinic, and hospital customers): |  |  |
Products (capsules and capsule reading devices) | $ | 9,741 |  |  | $ | 8,302 |
Services (cloud-based video delivery and reading services) | 916 |  |  | 780 |
Outside United States (distributor customers): |  |  |
Products (capsules and capsule reading devices) | 2,897 |  |  | 2,674 |
Total revenue | $ | 13,554 |  |  | $ | 11,756 |

For the years ended December 31, 2025 and 2024, U.S. service revenues included (i) $621 and $548, respectively, from the Company’s cloud-based software-as-a-service video delivery offering (recognized over time commencing with the shipment of capsules) and (ii) $295 and $232, respectively, of revenue from the provision of video reading to customers (recognized at a point in time upon provision of deliverables).
Product revenues outside the United States are attributable to individual foreign countries based upon shipment destination. The Company’s distributor customers outside the United States typically serve the countries in which they are domiciled (and may distribute to adjacent countries or territories). Outside the United States, for the year ended December 31, 2025, product revenues included $1,248 and $598 attributable to France and Germany, respectively, with the balance attributable to other countries; for the year ended December 31, 2024 product revenues included $1,160 and $565 attributable to France and Germany, respectively, with the balance attributable to other countries.
Deferred revenue (contract liabilities, all of which are current in nature) consists of upfront purchases by customers related to the cloud-based software-as-a-service video delivery offering and prepaid video reading services. Deferred revenue represents the excess of amounts invoiced over amounts recognized as revenues. For each component of deferred revenue, the recognition of deferrals as revenue occurred within three months.
The Company's deferred revenue balance was $177, $132 and $96 as of December 31, 2025, December 31, 2024 and December 31, 2023, respectively. During the year ended December 31, 2025, the Company recognized $132 of revenue that was included in deferred revenue as of December 31, 2024. During the year ended December 31, 2024, the Company recognized $96 of revenue that was included in deferred revenue as of December 31, 2023.
Fees paid to group purchasing organizations and recorded as reductions to revenue were $110 and $103 for the years ended December 31, 2025 and 2024, respectively.
7. NOTE PAYABLE
On May 27, 2025, the Company entered into a promissory note with Ching-Hang Shen, one of the beneficial owners of more than 5% of the Company's outstanding common stock, pursuant to which Mr. Shen provided to the Company a promissory note in a principal amount of $1,000 (such note, the “Investor Loan”) on May 28, 2025. The Investor Loan (i) had an interest rate equal to one percent (1%) per month, assuming a month of thirty (30) days and (ii) had maturity not later than ten (10) business days following the IPO, which was completed on July 3, 2025.
On July 7, 2025, in connection with the repayment of the promissory note, the Company issued to Mr. Shen 7,508 shares of common stock at a fair value of $31 on the date of issuance pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 as a transaction not involving a public offering. The promissory note principal amount of

| The accompanying notes are an integral part of these financial statements. | 133

$1,000 and accrued interest were repaid in cash on July 11, 2025. After repayment, there were no outstanding liabilities or obligations in connection with the promissory note.
8. LEASES
The Company has operating leases for office and manufacturing space in California and office space in Taiwan, Republic of China, with remaining lease terms ranging from under one year to approximately two years as of December 31, 2025.
Leases with an initial term of twelve months or less are not accounted for in the balance sheet; these are limited to minor leases in Taiwan, which are excluded from amounts presented in the following tables. The operating leases include certain variable payments related to operating expenses, which are billed by the landlord, as is customary with these types of charges for office space.
The Company’s existing leases contain escalation clauses and renewal options. The Company has evaluated several factors in assessing whether it is reasonably certain that the Company will exercise a contractual renewal option. For leases with renewal options that are reasonably certain to be exercised, the Company includes the renewal term in the total lease term used in deriving the right-of-use asset and lease liability. The Company’s main office lease includes a renewal option of three years, which was excluded after evaluation of those factors.
Amounts comprising total lease expense, reflected in general and administrative expenses and costs of revenue (including amounts capitalized as overhead to inventory), were as follows.

| Years Ended December 31,
| 2025 |  | 2024
Operating lease expense | $ | 474 |  |  | $ | 476 |
Short-term lease expense | 37 |  |  | 34 |
Total lease expense | $ | 511 |  |  | $ | 510 |

Lease-related amounts reflected in the balance sheet and data related thereto were as follows.

| December 31, 2025 |  | December 31, 2024
Operating lease right-of-use assets | $ | 843 |  |  | $ | 1,195 |
Operating lease liabilities - current | $ | 410 |  |  | $ | 351 |
Operating lease liabilities – long-term | 477 |  |  | 887 |
Total operating lease liabilities | $ | 887 |  |  | $ | 1,238 |
Weighted average remaining lease term | 2.0 years |  | 3.0 years
Weighted average discount rate | 11.8 | % |  | 11.8 | %

| Years Ended December 31,
| 2025 |  | 2024
Variable lease payments related to operating leases | $ | — |  |  | $ | 39 |
Cash payments related to operating leases | $ | 474 |  |  | $ | 437 |

| The accompanying notes are an integral part of these financial statements. | 134

Future minimum lease payments under non-cancellable leases are as follows as of December 31, 2025.

2026 | 488 |
2027 | 503 |
Less: interest | (104) |
Total operating lease liabilities | $ | 887 |

9. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
The Company, post-acquisition of raw materials, relies significantly upon third-party contract manufacturers located in Taiwan. Management believes that supply risks related to dependence on fewer key suppliers or contract manufacturers, and political risk, can potentially be hedged with the use of more than one supplier and a readiness to quickly adjust the supply chain (and geographic sourcing within Asia).
On July 15, 2025, the Company entered into a development agreement with Canon Inc., a Japanese corporation, for the development of complementary metal-oxide-semiconductor (“CMOS”) image sensor samples to allow the Company to evaluate functionality and performance, conduct clinical evaluation of capsule endoscopies that incorporate Canon image sensors and obtain FDA 510(k) clearance thereof. Under the Agreement, the Company agreed to pay Canon a fee of approximately $4.1 million for Canon’s development efforts, which is comprised of (a) an initial fee of $1.0 million that was paid in cash on July 31, 2025 upon the Agreement’s effectiveness, and (b) following delivery of a specified number of CMOS image sensors meeting agreed specifications within the required timeframe, a remaining development fee of approximately $3.1 million. Additionally, due to the changes in the development scope by the end of fiscal year 2025, Canon and the Company agreed to increase the development fee by $1.0 million and executed an amendment to the original development agreement in March 2026. For the year ended December 31, 2025 we recognized $2.4 million in R&D expenses. The outstanding balance due to Canon was $1.4 million and included in Accrued Expenses and Other Current Liabilities in the balance sheet as of December 31, 2025. The outstanding purchase commitment for this agreement as of December 31, 2025 is $2.7 million.
Receipt of Federal Government Assistance
In April 2025, the Company received cash related to refundable payroll tax credits from the U.S. Federal government in the amount of $208 reflecting receipt of credit claims related to calendar 2020 and 2021 remitted to the U.S. Internal Revenue Service under the Employee Retention Credit program, a source of COVID-19 pandemic era Federal relief. This amount, due to the uncertainty of eventual receipt following claims made, was not recognized until receipt in the year ended December 31, 2025 and was reflected within general and administrative expenses given its relationship to payroll taxes reflected as operating expenses. There can be no assurance that the Company’s program benefit received may not be examined, and if examined, possibly challenged as to a portion or all of the benefit received which, if required to be returned, would have an adverse impact on the Company’s liquidity.
Litigation and Legal Matters
The Company may be the subject of adverse litigation as a defendant, arbitration, claims, or proceedings related to things such as intellectual property infringement or disputes, commercial contract breaches or disputes, employment matters, or other matters in the ordinary course of business. Such matters are subject to many uncertainties and outcomes may be unpredictable. Such matters may be fully or partially mitigated by the effect of insurance coverage in place or counter-party indemnitors. The Company provides for liabilities via a charge to operating expenses when it is both probable that a liability has been incurred and the amount of the loss can be

| The accompanying notes are an integral part of these financial statements. | 135

reasonably estimated. The Company is not a party to any material litigation, arbitration, claims or proceedings and therefore did not have any contingency-related liabilities as of December 31, 2025 and December 31, 2024.
10. PREFERRED STOCK
Convertible Preferred Stock – Financing History
Historically, the Company has issued several Series of convertible preferred stock to investors (A, B, C, C-1, D, D-1, D-2, E, F-1, F-2, G, G-1, and H) as its primary financing vehicle to fund research and development and commercial stage maturity. For descriptions and discussion of Series preceding Series H, refer to the Capital Stock footnote in the Company's annual financial statements for the year ended December 31, 2024 contained in the prospectus filed on July 3, 2025 with the Securities and Exchange Commission, as part of the Company's Registration Statement (File No. 333-287148).
As of December 31, 2024, the Company had 14,461,804 shares of Series H Preferred Stock (“Series H”), par value $0.001 per share, for an original issue price of $4.83 per share. These shares were issued to various investors in the period of November 2019 to December 31, 2024 pursuant to the original financing round and subsequent extensions thereof, resulting in proceeds of $69,829 (net of issuance costs of zero) as of December 31, 2024. There were no issuances of Series H in the year ended December 31, 2025.
Immediately prior to the closing of the Company’s IPO on July 3, 2025 and upon the receipt by the Company of a written request consented to by holders of a majority of the Preferred Stock on July 2, 2025, all shares of the Company’s then-outstanding convertible preferred stock converted into shares of the Company’s common stock. Under the Company’s Amended and Restated Certificate of Incorporation, the Company is authorized to issue none and 153,682,280 shares of $0.001 par value convertible preferred stock as of December 31, 2025, and December 31, 2024, respectively.
Convertible preferred stock outstanding as of December 31, 2024 consisted of the following (in thousands, except share amounts.)

Series |  | Year |  | Shares |  | Liquidation |  | Carrying
Preferred |  | Issued |  | Authorized |  | Outstanding |  | Amount |  | Value
Series A |  | 2006 |  | 17,962,675 |  | 5,394,197 |  | $ | 4,850 |  |  | $ | 4,850 |
Series B |  | 2008 |  | 6,000,000 |  | 1,801,802 |  | $ | 4,319 |  |  | $ | 4,319 |
Series C |  | 2010 |  | 5,747,127 |  | 880,187 |  | $ | 2,550 |  |  | $ | 2,550 |
Series C-1 |  | 2011 |  | 3,876,405 |  | 848,599 |  | $ | 2,515 |  |  | $ | 2,515 |
Series D |  | 2011 |  | 2,222,222 |  | 520,519 |  | $ | 1,560 |  |  | $ | 1,560 |
Series D-1 |  | 2012 |  | 6,766,666 |  | 166,833 |  | $ | 500 |  |  | $ | 500 |
Series D-2* |  | 2012 |  | 11,083,333 |  | 2,920,649 |  | $ | 17,506 |  |  | $ | 8,753 |
Series E |  | 2014 |  | 14,000,000 |  | 4,151,977 |  | $ | 15,900 |  |  | $ | 15,900 |
Series F-1 |  | 2016 |  | 13,043,479 |  | 1,201,203 |  | $ | 4,600 |  |  | $ | 4,600 |
Series F-2 |  | 2016 |  | 12,000,000 |  | 2,498,498 |  | $ | 10,400 |  |  | $ | 10,400 |
Series G |  | 2018 |  | 5,926,000 |  | 1,779,559 |  | $ | 8,000 |  |  | $ | 8,000 |
Series G-1 |  | 2018 |  | 6,896,552 |  | 2,039,756 |  | $ | 9,849 |  |  | $ | 9,849 |
Series H |  | 2019 |  | 48,157,821 |  | 14,461,804 |  | $ | 69,829 |  |  | $ | 69,829 |
|  |  |  | 153,682,280 |  |  | 38,665,583 |  |  | $ | 152,378 |  |  | $ | 143,625 |

* Liquidation preference includes two times the original issue price per share.
All Series of preferred stock are collectively referred to as the “Preferred Stock”.

| The accompanying notes are an integral part of these financial statements. | 136

Convertible Preferred Stock - Conversion Rights
Preferred Stock shares might be converted into shares of common stock at a ratio determined by dividing the original issuance price by the conversion price (the “Conversion Rate”). The conversion price was initially set at the original issuance price and might be adjusted downward, or upward, thereby reciprocally adjusting the Conversion Rate, for capital stock events such as stock splits, stock dividends, reorganizations, or other events where the consideration received relative to the number of shares issued would imperil or dilute holders of Preferred Stock. Thus, the Conversion Rate was 1:1 at original issuance. As further described in Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, under the caption "Reverse Stock Split", the Company effectuated a reverse split of its issued and outstanding common stock which resulted in an automatic adjustment (reduction) to the Conversion Rates on all Series of Preferred Stock; there were no adjustments to Conversion Rates on any Series of Preferred Stock since original issuance and prior to the Reverse Stock Split.
Preferred Stock shares converted to shares of common stock (i) electively, upon the receipt by the Company of a written request consented to by holders of at least a majority of the Preferred Stock then outstanding at the effective date specified in the request (provided further that such conversion should not occur for either of Series G-1 and Series H unless a majority of holders within each of those series so consents), or (ii) automatically, upon the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, provided that the offering price per share of common stock is not less than $9.66 or $9.99, depending on the Series (as adjusted for recapitalizations) and the aggregate gross proceeds to the Company are $25 million or greater. In connection with and prior to the amendment and restatement of the Company's amended and restated certificate of incorporation described in Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, under the caption "Reverse Stock Split", the holders of all Series of the Company's Preferred Stock elected, via written action, to convert all issued and outstanding Preferred Stock to common stock contingent upon the Company completing a planned initial public offering of its common stock.
Convertible Preferred Stock - Liquidation Preferences
Liquidation, for purposes of liquidation preferences that favor holders of Preferred Stock, meant a liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, an acquisition of the Company by another entity (other than a transaction which does not result in a change in the holders of at least 50% of voting stock outstanding before and after the transaction), or the sale, lease, exclusive license, or conveyance of all or substantially all of the Company’s assets.
The liquidation preference for each series of Preferred Stock was the sum of (i) the original issuance price per share (as adjusted for recapitalizations) – that is, one times the original issue price, and (ii) all declared but unpaid dividends, with the exception of Series D-2, where the liquidation preference includes two times the original issue price per share.
Liquidation preferences were rank-ordered by priority group - first: Series E, F-1, F-2, G, G-1 and H; second: Series D-2; third: Series D and D-1; fourth and last: Series A, B, C, and C-1. Should distributable assets upon liquidation be insufficient to satisfy respective liquidation preferences within a priority group, the distributable assets were to be distributed to the stockholders within the priority group pro rata and in relationship to the proportion of available distributable assets to the full liquidation preferences that would otherwise be due. When distributable assets were sufficient for a priority group, the remaining distributable assets cascaded to the next priority group, and so on and so forth in descending order of priority group. Should remaining distributable assets exist, after satisfying the liquidation preferences of all Preferred Stock, such remainder were distributable to the holders of the Preferred Stock and common stock in proportion to the number of shares of common stock held by them on a combined basis, with the shares of Preferred Stock being treated as if converted.

| The accompanying notes are an integral part of these financial statements. | 137

Convertible Preferred Stock – Dividends
Outstanding shares of Preferred Stock were entitled to receive dividends, when, as and if declared by the Board of Directors at a dividend rate of 8.00% payable in preference and priority to any declaration or payment of any distribution related to common stock. The dividends were not cumulative and Preferred Stockholders did not acquire rights to dividends because they were not declared or paid in any given year. The Company has never declared or paid any dividends.
Convertible Preferred Stock - Voting Rights
The holders of Preferred Stock had the same voting rights as the holders of common stock, on an as-converted basis at the then-prevailing Conversion Rate.
As of December 31, 2024, the Board of Directors of the Company comprised eight members. Each holder of convertible preferred stock was entitled to the number of votes equal to the number of common stock shares into which the referred shares held by such holder converted. The holders of a majority of the voting shares were able to elect all of the directors.
Convertible Preferred Stock - Protective Provisions
As long as any Preferred Stock was issued and outstanding, the Company should not, without first obtaining the approval (by vote or written consent) of the holders of a majority of outstanding shares of Preferred Stock, voting together as a single class:
•Amend, alter or repeal any provision of the certificate of incorporation or bylaws (including pursuant to a merger) if such action would adversely affect the Preferred Stock;
•Increase or decrease the authorized number of shares of Preferred Stock (including any series thereof) or common stock;
•Authorize or create any new class or series of shares having rights, preferences or privileges senior to or on parity with any series of Preferred Stock;
•Voluntarily liquidate or dissolve, or enter into any transaction or series of related transactions deemed to be a liquidation, dissolution or any disposition of the Company’s property;
•Effect a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933;
•Enter into any transaction (other than customary service or employment agreements) with any officer or director of the Company, or any party related thereto or affiliated therewith, unless approved by a majority of the Board of Directors;
•Issue any indebtedness that is convertible into any equity security, or incur any other indebtedness other than loans, leases and similar transactions in the ordinary course of business; and
•Redeem, repurchase or otherwise acquire any shares of Preferred Stock or common stock, except for the repurchase of shares of common stock from employees, officers, directors, consultants or other persons performing services pursuant to agreements granting the Company option or repurchase rights upon the occurrence of certain events.
11. COMMON STOCK
Historically and prior to the IPO, the Company had several Series of Preferred stock (A, B, C, C-1, D, D-1, D-2, E, F-1, F-2, G, G-1, and H) issued to investors as its primary financing vehicle to fund research and development and commercial stage maturity. For detailed information of the Company’s Preferred stock, please see Note 10. PREFERRED STOCK. Immediately prior to the closing of the Company’s IPO on July 3, 2025 and upon the receipt by the Company of a written request consented to by holders of a majority of the Preferred Stock on July 2, 2025, all shares of the Company’s then-outstanding convertible preferred stock converted into shares of the Company’s common stock.

| The accompanying notes are an integral part of these financial statements. | 138

On July 3, 2025, the Company completed its IPO of 5,500,000 shares of its common stock at a price to the public of $5.00 per share.
The Company granted to the IPO underwriters an overallotment option (the “Over-Allotment Option”) to purchase up to an additional 825,000 shares of Common Stock, which is equal to 15% of the number of shares of Common Stock sold in the Public Offering. Under the Over-Allotment Option the underwriters had the right to exercise this option, in whole or in part, for our common stock, any time during the 30-day period from the date of the closing of the IPO.
On July 18, 2025, a total of 129,978 shares of common stock were issued in connection with the partial exercise by the IPO underwriters of their Over-Allotment Option at a price to the public of $5.00 per share.
Common Stock Warrants
In connection with the IPO share issuances, the Company issued to the IPO underwriters warrants to purchase an aggregate of 168,898 shares of Common Stock (including 3,898 shares of Common Stock issued in connection with the Over-allotment Exercise (the "Over-allotment Exercise Underwriters' Warrants"), collectively referred to as the “Underwriters' Warrants”. The Underwriters' Warrants are exercisable at a per share exercise price equal to $6.25 and are exercisable at any time and from time to time, in whole or in part, for a term of five years commencing from the first day of the seventh month after July 3, 2025 (the “Original Closing Date”), and terminating on July 1, 2030.
All of the Underwriters’ Warrants were outstanding as of December 31, 2025. The warrants were classified as equity and the fair value of $519 is reflected as additional paid-in capital. The Black-Scholes option-pricing model was used to estimate the fair value of the warrants with the following assumptions:

| Initial Placement Underwriters' Warrants |  | Over-allotment exercise Underwriters' Warrants
Risk-free interest rate | 3.94 | % |  | 3.96 | %
Expected term | 5 years |  | 4.96 years
Volatility of common stock | 78.83 | % |  | 78.94 | %
Expected dividend rate | — | % |  | — | %

The fair value of the underlying common stock for the valuation of the Initial Placement Underwriters' Warrants was equal to the IPO price of $5.00 per share as of July 1, 2025, when the Company’s registration statement related to the IPO was declared effective. The fair value of the underlying common stock for the valuation of the Over-allotment exercise Underwriters' Warrants is based on the Company’s closing stock price on July 18, 2025.
Common Stock
Pursuant to the Company’s certificate of incorporation, as amended and restated, for its $0.001 par value common stock, the Company had 300,000,000 authorized shares at December 31, 2025 and 190,000,000 authorized shares at December 31, 2024, and had 46,865,051 and 2,090,945 issued and outstanding shares, as of December 31, 2025 and December 31, 2024, respectively.
Authorized common stock was reserved for future issuance as follows, including pursuant to outstanding equity awards and future equity awards under the 2005 Plan and the 2025 Plan.

| The accompanying notes are an integral part of these financial statements. | 139

| December 31, 2025 |  | December 31, 2024
Conversion of preferred stock | — |  |  | 38,665,583 |
Exercises of stock options under 2005 Plan | 1,627,097 |  |  | 2,298,947 |
Exercises of stock options under 2025 Plan | 348,551 |  |  | — |
Exercises of warrants | 168,898 |  |  | 15,015 |
Reserved for future grants under 2005 Plan | — |  |  | 880,007 |
Reserved for future grants under 2025 Plan | 3,838,331 |  |  | — |
Total reserved shares of common stock | 5,982,877 |  |  | 41,859,552 |

12. STOCK-BASED COMPENSATION
2025 Stock Plan
The 2025 Plan, which was adopted by the Company's Board of Directors in May 2025 and approved by the Company's stockholders in June 2025, became effective upon the consummation of the IPO. Upon the effectiveness of the 2025 Plan, the 2005 Plan was terminated and no further grants may be made under the 2005 Plan. The Company's 2025 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards to its officers, directors, employees, consultants and advisors of the Company.
A total of 4,204,204 shares of the Company’s common stock were initially authorized for issuance with respect to awards granted under the 2025 Plan. Shares subject to outstanding awards granted under the 2005 Plan that are not paid, delivered or exercised before they expire or are canceled or terminated will be available for award grants under the 2025 Plan. In addition, the share limit will automatically increase on the first trading day in January of each year (commencing with 2026) by an amount equal to (1) 4% of the total number of shares of our common stock that are issued and outstanding on the last trading day in December in the prior year, or (2) lesser number as determined by the Company’s Board of Directors. Any shares subject to awards granted under the 2025 Plan that are not paid, delivered or exercised before they expire or are canceled or terminated, fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for new award grants under the 2025 Plan. As of December 31, 2025, a total of 3,838,331 shares is available for award purposes under the 2025 Plan.
Amended and Restated 2005 Stock Plan
Pursuant to the 2005 Plan, the Company granted equity-based incentive awards prior to the IPO to the Company’s employees, directors, and consultants. The 2005 Plan permitted the grant of stock options (either Incentive Stock Options (“ISO” – employees only) or Non-Qualified Stock Options (“NQSO”)) and restricted stock awards (“RSA”); only ISOs and NQSOs were outstanding during the periods presented. Under the 2005 Plan, 880,007 shares of common stock were reserved for issuance at December 31, 2024. Upon the effectiveness of the 2025 Plan, the 2005 Plan was terminated and no new awards were granted under the 2005 Plan after the IPO, and there were no shares of common stock available for new award grants as of December 31, 2025 under the 2005 Plan.
Options granted to employees and non-employees contain only service vesting conditions, with typical grants vesting over a four-years period (vesting 25% on the first anniversary of the award and 1/48 th each month thereafter) but may be granted with different vesting profiles, including options that are vested-at-grant (immediate vesting) and that are subject to different vesting schedules. Options granted to employees and non-employees expire no more than 10 years from the date of grant.
The Company, outside of the 2005 Plan, previously issued an insignificant number of warrants to purchase its common stock; of these, all have expired or been exercised with no shares remaining outstanding at December 31, 2025 and 15,015 warranted common shares remaining outstanding at December 31, 2024. Being

| The accompanying notes are an integral part of these financial statements. | 140

outside of the 2005 Plan, they are excluded from the stock option award activity and stock-based compensation presentations which follow. The Company previously recognized immaterial warrant-related expense.
Stock Option Modification
Effective August 27, 2025, the Company's Chief Financial Officer (the "Former Executive") stepped down from his position with the Company. As part of the termination of employment of the Former Executive, there were certain supplementary modifications to the Former Executive's non-vested stock option awards including acceleration of some non-vested shares and extension of their post-termination exercise period, and voluntary forfeiture of the remaining non-vested stock option awards. During the year ended December 31, 2025, the Company recorded a one-time, noncash incremental stock-based compensation expense net of required reversal of previously recognized compensation in the amount of $159 related to these stock option award modifications which was included in General and administrative expenses in the condensed statement of operations. The Company accounted for the resulting net incremental stock option award modification compensation in accordance with ASC Topic 718, Compensation - Stock Compensation.
Stock Options
Stock option activity for the year ended December 31, 2025 was as follows.

|  | Options on Common Stock |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (years) |  | Aggregate Intrinsic Value
Outstanding (vested and expected to vest) as of December 31, 2024 |  | 2,298,905 |  |  | $ | 0.47 |  |  | 7.5 |  | $ | 4,961 |
Granted |  | 534,722 |  |  | 5.20 |  |  |  |  |
Exercised |  | (438,808) |  |  | 0.36 |  |  |  |  | 4,532 |
Forfeited, canceled, or expired |  | (419,171) |  |  | 0.66 |  |  |  |  |
Outstanding (vested and expected to vest) as of December 31, 2025 |  | 1,975,648 |  |  | 1.74 |  |  | 7.2 |  | $ | 17,869 |
Exercisable as of December 31, 2025 |  | 880,289 |  |  | 0.46 |  |  | 4.7 |  | $ | 9,005 |

The aggregate intrinsic values are calculated as the differences between the exercise prices of the underlying options and the fair value of the Company’s common stock for options that were in the money. The Company had 1,095,359 unvested stock options outstanding as of December 31, 2025.
As of December 31, 2025, unrecognized compensation cost of $2,734 related to outstanding unvested stock options is expected to be recognized as expense over a weighted average period of 1.8 years.
The weighted-average fair value of options granted during the years ended December 31, 2025 and 2024, was $3.70 and $1.83 per share, respectively. The total fair value of options vested were $798 and $72 during the years ended December 31, 2025 and 2024, respectively.
During the years ended December 31, 2025 and 2024, 438,808 and 253,909 stock options were exercised and satisfied with newly-issued shares, resulting in cash proceeds of $158 and $75, respectively.

| The accompanying notes are an integral part of these financial statements. | 141

The following table summarizes Black-Scholes option pricing model weighted-average assumptions.

| Year Ended December 31
| 2025 |  | 2024
Risk-free interest rate | 3.81 % |  | 4.30 %
Expected term | 6.05 years |  | 6.05 years
Volatility of common stock | 79.6 % |  | 73.4 %
Expected dividend rate | — % |  | — %

In estimating the fair value of the underlying common stock prior to IPO, the Company utilized a third party 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.
Restricted Stock Units
On September 15, 2025 the Company granted a total of 17,322 restricted stock units (RSUs) to its six non-employee directors utilizing a fair market value (FMV) of $4.33 per share of the Company's common stock on the grant date. These RSUs vested on December 31, 2025.

|  | Restricted Stock Units |  | Weighted Average Grant Date Fair Value per Share |  |
Outstanding as of December 31, 2024 |  | — |  |  |  |  |
Granted |  | 17,322 |  |  | $ | 4.33 |  |  |
Vested |  | (17,322) |  |  |  |  |
Outstanding as of December 31, 2025 |  | — |  |  |  |  |

For the year ended December 31, 2025, the Company recorded $75 in stock-based compensation related to RSUs. The total fair value of RSUs vested during the year ended December 31, 2025 was approximately $185.
Stock-Based Compensation Expense
Stock-based compensation, measured at the grant date, is recognized ratably over the requisite service period, using the straight-line method of expense attribution. Forfeitures are accounted for as a reduction in expense in the period in which they occur; no compensation cost is recorded for awards that do not vest. The Company recognized total stock-based compensation expense for employees and non-employees as components of the statement of operations and comprehensive loss as follows.

| Years Ended December 31,
| 2025 |  | 2024
Costs of revenue | $ | 9 |  |  | $ | 2 |
Selling and marketing | 20 |  |  | 17 |
Research and development | 212 |  |  | 53 |
General and administrative | 585 |  |  | 84 |
Total stock-based compensation expense | $ | 826 |  | $ | 156 |

| The accompanying notes are an integral part of these financial statements. | 142

13. SEGMENTS
The Company has one operating (and reportable) segment known as the Capsule Endoscopy Segment; its chief operating decision maker is its Chief Executive Officer. The composition of this segment reflects the Company’s focus on capsule endoscope medical devices addressing different areas within the GI tract. Refer to Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES and Note 6. REVENUE AND DEFERRED REVENUE for descriptions of products and services. Segment accounting policies are the same as those described therein. The chief operating decision maker assesses performance for the Capsule Endoscopy Segment and decides how to allocate resources based upon net income (loss) as reported in the statement of operations and comprehensive loss; also considered is operating income (loss), measured on the same basis as in the statement of operations and comprehensive loss. Net income (loss) and operating income (loss) are used in the process of evaluating expenses and determining where to prioritize resources.
Segment assets are identical to those reported in the balance sheet as total assets. Segment revenue is identical to that reported in the statement of operations and comprehensive loss; significant segment expenses are identical to those identified in the statement of operations and comprehensive loss under the line items for selling and marketing expenses, research and development expenses, and general and administrative expenses. Other segment items are represented by non-operating income (expense), net (which includes insignificant interest income) and the provision for income taxes as reported in the statement of operations and comprehensive loss. Segment depreciation expense and capital expenditures are identical to amounts in the statement of cash flows.
14. INCOME TAXES
The domestic and foreign components of loss before income taxes are as follows.

| Year ended December 31,
| 2025 |  | 2024
Domestic | $ | (24,424) |  |  | $ | (19,220) |
Foreign | (867) |  |  | (667) |
Loss before income taxes | $ | (25,291) |  |  | $ | (19,887) |

The components of the income tax provision are as follows.

| Year ended December 31,
| 2025 |  | 2024
Current provision |  |  |
U.S. Federal | $ | — |  |  | $ | — |
U.S. State | 11 |  |  | 4 |
Foreign | 13 |  |  | 7 |
Total current provision | $ | 24 |  |  | $ | 11 |
Deferred provision |  |  |
U.S. Federal | — |  |  | — |
U.S. State | — |  |  | — |
Foreign | — |  |  | — |
Total deferred provision | — |  |  | — |
Total income tax provision | $ | 24 |  |  | $ | 11 |

| The accompanying notes are an integral part of these financial statements. | 143

The reconciliation between the Company's effective tax rate and the statutory tax rate for the year ended December 31, 2025 is as follows:

| Year Ended December 31, 2025
| Amount |  | Percent
U.S. Federal statutory tax rate | $ | (5,311) |  |  | 21.0 | %
State and local income tax, net of federal taxes | 11 |  |  | (0.04) | %
Foreign tax effects |  |  |
Taiwan |  |  |
Local income taxes | 13 |  |  | (0.05) | %
Effects of changes in tax laws or rates enacted in the current period | — |  |  | — | %
Tax credits |  |  |
Research and development tax credits | — |  |  | — | %
Changes in valuation allowance | 5,213 |  |  | (20.6) | %
Nontaxable or nondeductible items | 100 |  |  | (0.4) | %
Other Adjustments | (1) |  |  | — | %
Total effective tax rate | $ | 24 |  |  | (0.1) | %

The reconciliation between the Company's effective tax rate and the statutory tax rate for the year ended December 31, 2024 is as follows:

| Year Ended December 31, 2024
Federal statutory income tax rate | 21.0 | %
Permanent book-tax differences | (0.4) | %
State income taxes, net of federal benefit | 3.7 | %
Federal and State research and development tax credits | (0.8) | %
Change in valuation allowance | (23.6) | %
Other | — | %
Total effective tax rate | (0.1) | %

The amounts of cash paid for income taxes by the Company are as follows:

| Amount
California | $ | 1 |
Massachusetts | 0.5 |
North Carolina | 1.0 |
New York State | 5.6 |
Total cash paid for income taxes (net of refunds) | $ | 8 |

On July 4, 2025, the One Big Beautiful Bill was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal tax system. Significant components include restoration of 100% accelerated tax depreciation on qualifying property including expansion to cover qualified production property. Another major aspect includes the return to immediate expensing of domestic research and experimental expenditures (“R&E”) which in some cases may include retroactive application back to 2021 for businesses with gross receipts of less than $31 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses. The

| The accompanying notes are an integral part of these financial statements. | 144

legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent. Less favorable business provisions include limitations on tax deductions for charitable contributions.
Deferred income taxes are accounted for using the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities, as measured by enacted state and federal tax rates.
The main components of deferred tax assets (liabilities) are as follows.

| December 31, 2025 |  | December 31, 2024
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 32,568 |  |  | $ | 26,441 |
Capitalized R&D expenses | 5,087 |  |  | 5,657 |
Research and development tax credits | 1,318 |  |  | 1,318 |
Accrued expenses | 443 |  |  | 95 |
Operating lease liabilities | 212 |  |  | 306 |
Other | 42 |  |  | 13 |
Total deferred tax assets | 39,670 |  |  | 33,830 |
Valuation allowance | (39,295) |  |  | (33,384) |
Deferred tax assets less valuation allowance | 375 |  |  | 446 |
Deferred tax liabilities: |  |  |
Depreciation | (132) |  |  | (151) |
Operating lease right-of-use assets | (202) |  |  | (295) |
Unrealized gains/losses | (41) |  |  | — |
Total deferred tax liabilities | (375) |  |  | (446) |
Net deferred tax assets | $ | — |  |  | $ | — |

Valuation Allowance Considerations
A valuation allowance against a deferred tax asset must be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, in particular the Company’s accumulated deficit and history of operating losses, it was concluded that uncertainty exists with respect to future realization of deferred tax assets. The valuation allowance increased during the years ended December 31, 2025 and December 31, 2024 in the amounts of $5,912 and $4,700, respectively.
Net Operating Losses and Tax Credit Carryforwards
The Company has experienced and generated net operating losses (“NOLs”) for tax purposes since inception. As of December 31, 2025 (December 31, 2024), total available gross (pre-tax) Federal and U.S. state NOL carryforward amounts were $126,094 and $93,244 ($100,304 and $79,481), respectively. Under the Federal Tax Cuts and Jobs Act of 2017, NOLs incurred in tax years beginning on or after January 1, 2018, are carried forward indefinitely and subject to a usage limitation of 80% of taxable income; NOLs incurred in tax years prior to January 1, 2018, are subject to a twenty-year carryforward before expiring and not subject to a usage limitation of taxable income. As of December 31, 2025 (December 31, 2024), total Federal and U.S. state research and development tax credit carryforward amounts, net of unrecognized tax benefits, were 1,318 (1,318), respectively.

| The accompanying notes are an integral part of these financial statements. | 145

NOLs and tax credit carryforward values are as follows as of December 31, 2025.

| Amount |  | Expiration Term
Net Operating Losses (gross; pre-tax) |  |  |
NOLs – Federal (arising after December 31, 2017) | $ | 77,974 |  |  | No expiry
NOLs – Federal (arising before January 1, 2018) | $ | 48,120 |  |  | 2027
NOLs – State - indefinite | $ | 3,327 |  |  | No expiry
NOLs – State – definite lived | $ | 89,917 |  |  | 2028
R&D Tax Credits |  |  |
R&D tax credits – Federal and State | $ | 1,318 |  |  | 2033

Utilization of NOL carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 as amended (“Section 382”), or, for states, state laws, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.
In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in expiration of a portion of the NOL carryforwards or research and development tax credit carryforwards before utilization.
Section 174 Capitalization
OBBBA made changes to Section 174 of the Internal Revenue Code of 1986 as amended for taxable years beginning December 31, 2024 with the Company being able to deduct domestic research and experimental (R&E) expenditures in the year they are incurred when before these costs were capitalized and amortized over 5 years. The Company is still required to capitalize foreign R&E costs and amortize them over 15 years.
For the tax year ended December 31, 2025 the Company incurred $3,545 of foreign R&D expenses which were capitalized and are being amortized over the respective period noted above. For the tax year ended December 31, 2024 the Company incurred $13,910 and $1,116 of domestic and foreign R&D expenses, respectively, which were capitalized and are being amortized over the respective periods noted above. These amounts are reflected in gross deferred tax assets (together with previous periods’ amounts, net of amounts amortized for tax purposes).

| The accompanying notes are an integral part of these financial statements. | 146

Uncertain Tax Positions
A reconciliation of the beginning and ending balance of total unrecognized tax benefits on a tax-effected basis for follows; these relate principally to research and development credit carryforwards.

Unrecognized tax benefits, December 31, 2023 | $ | 1,634 |
Additions for current tax positions | 3 |
Changes for previous tax positions | (165) |
Unrecognized tax benefits, December 31, 2024 | $ | 1,472 |
Additions for current tax positions | 12 |
Changes for previous tax positions | — |
Unrecognized tax benefits, December 31, 2025 | $ | 1,484 |

The Company has not yet conducted a study of its research and development credit carryforwards. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, the tax assets associated with the research and development credit carryforwards have been fully offset with a reserve. A full valuation allowance has been provided against the Company’s net deferred tax assets, and if an adjustment to the net unrecognized tax benefits were to occur, this adjustment would be offset by an equal adjustment to the valuation allowance.
The Company has recognized no interest and penalties associated with substantially all of its unrecognized tax benefits. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.
The Company files U.S. Federal and State income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business, the Company is subject to examination by taxing authorities throughout the U.S. These examinations could include examining the timing and amount of deductions, the allocation of income among various tax jurisdictions and compliance with laws.
The Company’s remaining open tax years subject to examination by federal and state tax authorities include the years ended December 31, 2019, through 2025 in the U.S and December 31, 2020 through 2025 in the Company’s foreign operations. However, for tax years from inception through the present, federal and state taxing authorities may examine and adjust loss carryforwards in the years in which those loss carryforwards are ultimately utilized. There are currently no pending income tax examinations.
15. NET LOSS PER SHARE

| Years Ended December 31,
| 2025 |  | 2024
Numerator: |  |  |
Net loss – basic and diluted | $ | (25,315) |  |  | $ | (19,898) |
Denominator: |  |  |
Weighted-average number of shares of common stock outstanding – basic and diluted | 24,555,381 |  |  | 2,020,077 |
Net loss per share – basic and diluted | $ | (1.03) |  |  | $ | (9.85) |

Basic net loss per share is the same as diluted net loss per share as the inclusion of potential common shares outstanding would have been anti-dilutive. The Company's convertible preferred stock Series constitute

| The accompanying notes are an integral part of these financial statements. | 147

participating securities; however, as a result of the net loss position, they are excluded from the calculation of basic net loss per share.
Potentially dilutive securities that were not included in the preceding calculations because they would be anti-dilutive were as follows.

| Years Ended December 31,
| 2025 |  | 2024
Convertible preferred stock (all series) | 19,279,825 |  |  | 38,665,583 |
Warrants on common stock | 90,763 |  |  | 15,015 |
Options on common stock | 2,027,469 |  |  | 2,298,947 |
Restricted Stock Units | 5,078 |  |  | — |
Total | 21,403,135 |  |  | 40,979,545 |

16. RELATED PARTIES
For the year ended December 31, 2025, the Company's material transactions with related parties were limited to a promissory note described in Note 7. NOTE PAYABLE and certain R&D expenses ($1,207 and $320 for the years ended December 31, 2025 and December 31, 2024, respectively) for non-recurring engineering services with an R&D and manufacturing services vendor that holds an insignificant percentage of the Company's capital stock. There were no other material transactions with related parties during the years ended December 31, 2025 and December 31, 2024 and no amounts due from or to related parties at December 31, 2025 or December 31, 2024.
17. SUBSEQUENT EVENTS
On February 12, 2026 the Company signed a consulting agreement with Wen-Hung Tsai, one of the Company's shareholders and a former member of the Company's Board of Directors (till February 26, 2024). Per the consulting agreement Mr.Wen-Hung Tsai will provide strategic advice, help with industrial affiliation and partnerships, as well as work on the supply chain establishment for new products. As compensation for his services, the Company granted to Mr.Wen-Hung Tsai on February 12, 2026 an option to purchase 250,000 shares of the Company's Common Stock under the Company’s 2025 Equity Incentive Plan. Eighty percent (80%) of the option grant is scheduled to vest and become exercisable on February 12, 2027. The remaining portion of the option grant is scheduled to vest and become exercisable in three (3) equal monthly installments on the same day of each successful calendar month following February 12, 2027.
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 commercially reasonable efforts to have such registration statement declared effective as soon as reasonably

| The accompanying notes are an integral part of these financial statements. | 148

practicable following the filing thereof with the SEC. The Registration Rights Agreement contains customary terms and conditions for a transaction of this type.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Based on our management’s evaluation (with the participation of our Chief Executive Officer and our principal financial officer) of our disclosure controls and procedures as required by Rule 13a-15 under the Exchange Act and the material weaknesses previously identified and further discussed below, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were not effective at the reasonable level of assurance as of December 31, 2025, the end of the period covered by this Annual Report. Please see below for the disclosure of the Company's material weaknesses in internal control and the remediation plan.
Material Weaknesses in Internal Control over Financial Reporting
Prior to our IPO, we have been a private company with limited accounting and financial reporting personnel and other resources to address our internal controls and procedures. We identified two material weaknesses in our financial reporting process as of December 31, 2024, which have not been fully remediated during the fiscal year ended December 31, 2025. The first material weakness relates to our failure to design or maintain sufficient controls over implementation of information technology general controls or complementary user entity controls for applications (such as our enterprise resource planning system ("ERP"), payroll, and stock option management IT systems) used in the preparation of our financial statements. More specifically, we did not design or maintain sufficient controls related to user access provisioning and monitoring, change management, program development and data management. The second material weakness relates to a lack of segregation of duties in the financial reporting function due to a limited number of staff performing the financial reporting function. More specifically, there is a limited level of multiple reviews among those tasked with preparing our financial records and with respect to our existing ERP system proper segregation of duties was not enforced (i.e., for journal entries, we did not always divide responsibilities with one person responsible for making the journal entry and a different person responsible for approving the journal entry).
Remediation Plan for the Material Weaknesses
To remediate the material weaknesses described above and prevent similar deficiencies in the future, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. For example, in addition to hiring a Corporate Controller in the three months ended March 31, 2025, we are also evaluating the current and future accounting and financial reporting personnel to ensure proper segregation of duties. We decided to replace our existing ERP system which would help address many of the control issues contributing to these material weaknesses. We formalized IT controls,

| The accompanying notes are an integral part of these financial statements. | 149

Entity level controls and business process controls and established an Internal Controls over Financial Reporting ("ICFR") program, covering planning, risk assessment, scoping and testing that we implemented during the quarter ended September 30, 2025 with regular status updates to the Audit Committee. In the quarter ended December 31, 2025, we started the implementation of a new ERP system.
Although we have begun the implementation of these remediation efforts, the material weaknesses will not be considered fully remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Any actions we have taken or may take to remediate these deficiencies are subject to continued management review supported by testing, as well as oversight by the Audit Committee of our board of directors.
We believe these measures will assist us with meeting the Sarbanes-Oxley Act compliance requirements and improving our overall internal controls. However, we cannot assure you that these measures may fully address the material weaknesses in our internal control over financial reporting or that we may conclude that they have been fully remediated.
We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. If the steps we take do not correct the material weaknesses in a timely manner, we will be unable to conclude that we maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis.
Changes in Internal Control Over Financial Reporting
Except for the remediation measures in connection with the material weaknesses described above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act during the quarter ended December 31, 2025 covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management’s Report on Internal Control over Financial Reporting
This Annual Report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Item 9B. Other Information
Trading arrangements
During the quarter ended December 31, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement (as such terms are defined pursuant to Item 408(a) of Regulation S-K).
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Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
In late August 2025, Kevin Lundquist stepped down as Chief Financial Officer of the Company. The responsibilities of principal financial officer and principal accounting officer were assumed by David Garcia, Senior VP of Finance who joined the Company on November 3, 2025.
On September 22, 2025, Rebecca Petersen, the Company’s Senior Director of Clinical Affairs, notified the Company of her planned retirement effective on October 15, 2025. Concurrently, the Company promoted Keri Jorgenson to Director of Clinical Operations and, Ms. Jorgenson, together with the other members of the clinical operations team, assumed responsibility for the Company’s clinical development operations and activities.
We have adopted a Code of Ethics and Business Conduct that applies to all of our directors, officers and employees, including our principal executive officer and principal financial officer. A current copy of the code is posted on the Investor Relations - Governance - Documents & Charters section of our website, which is located at www.capsovision.com. If the Company ever were to amend or waive any provision of its code of business conduct and ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, the Company intends to satisfy its disclosure obligations, if any, with respect to any such waiver or amendment by posting such information on its website set forth above rather than by filing a Current Report on Form 8-K. In the case of a waiver for an executive officer or a director, the disclosure required under applicable Nasdaq listing standards also will be made available on our website.
We have adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of our securities by directors, officers, and employees that are designed to promote compliance with insider trading laws, rules, and regulations, and applicable Nasdaq listing standards, as well as procedures designed to further the foregoing purposes. A copy of our insider trading policy is filed with this Annual Report as Exhibit 19.1.
The remaining information required by this Item will be set forth in the sections headed “Nominees for Election to the Board of Directors” and “The Board of Directors and Certain Governance Matters” in the Proxy Statement to be filed with the SEC within 120 days after the Company’s fiscal year end and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item will be set forth in the section headed “Executive Compensation” in the Proxy Statement to be filed with the SEC within 120 days after the Company’s fiscal year end and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters
The information required by this Item will be set forth in the section headed “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement to be filed with the SEC within 120 days after the Company’s fiscal year end and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be set forth in the section headed “Certain Relationships and Related Person Transactions” in the Proxy Statement to be filed with the SEC within 120 days after the Company’s fiscal year end and is incorporated herein by reference.
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Item 14. Principal Accountant Fees and Services
The information required by this Item will be set forth in the section headed “Principal Accountant Fees and Services” in the Proxy Statement to be filed with the SEC within 120 days after the Company’s fiscal year end and is incorporated herein by reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Annual Report:
(a) Financial Statements. See Index to Financial Statements included in the financial statements in this Annual Report.
(b) Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable or required, or the information required to be set forth therein is included in the financial statements or notes thereto included in the Index to Financial Statements of this Annual Report.
(c) Exhibits. The exhibits required to be filed as part of this Annual Report are listed in the Exhibit List attached hereto and are incorporated herein by reference.

Exhibit Number |  | Description |
3.1 |  | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 3, 2025 (File No. 001-42705)). |
3.2 |  | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on July 3, 2025 (File No. 001-42705)). |
4.1 |  | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the Registrant’s Registration Statement (File No. 333-287148), filed on June 13, 2025). |
4.2 |  | Amended and Restated Investors’ Rights Agreement, dated November 21, 2019 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on July 3, 2025 (File No. 001-42705)). |
4.3 |  | Form of Representative’s Warrant (incorporated by reference to Exhibit 4.3 to Amendment No. 3 to the Registrant’s Registration Statement (File No. 333-287148), filed on June 27, 2025). |
10.01# |  | 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.07 to the Registrant’s Registration Statement (File No. 333-287148), filed on May 9, 2025). |
10.02# |  | Form Agreements under 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.08 to the Registrant’s Registration Statement (File No. 333-287148), filed on May 9, 2025). |
10.03# |  | 2025 Equity Incentive Plan (incorporated by reference to Exhibit 10.09 to Amendment No. 3 to the Registrant’s Registration Statement (File No. 333-287148), filed on June 27, 2025). |
10.04# |  | Form of Stock Option Grant Agreement pursuant to 2025 Equity Incentive Plan (incorporated by reference to Exhibit 10.0 8 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-42705) filed on November 13, 2025). |
10.05# |  | CapsoVision, Inc Director Compensation Policy (incorporated by reference to Exhibit 10.0 6 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-42705) filed on November 13, 2025). |
10.06# |  | Form of Director Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.0 7 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-42705) filed on November 13, 2025). |
10.07#† |  | F orm of Indemnification Agreement for Directors and Officers (amended on December 22, 2025) |
10.08* |  | Amendment to Sample Purchase Agreement, dated March 9, 2026, by and between the Company and Canon, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-42705) filed on March 13, 2026) |
10.09† |  | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-42705) filed on March 20, 2026). |
10.10† |  | Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-42705) filed on March 20, 2026). |

154

14.1† |  | CapsoVision, Inc Code of Conduct and Ethics. |
19.1† |  | CapsoVision, Inc Insider Trading Policy. |
23.1† |  | Consent of Baker Tilly US, LLP, Independent Registered Public Accounting Firm. |
24.1† |  | Power of Attorney. Reference is made to the signature page hereto. |
31.1† |  | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2† |  | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1†† |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2†† |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
97.1† |  | CapsoVision, Inc Recoupment of Certain Compensation Policy |
101.INS |  | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |  | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. |
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

___________________________________________________
† Filed herewith
†† Furnished herewith
# Indicates management contract or compensatory plan.
* Certain confidential information contained in this document has been omitted pursuant to Item 601 (b)(10)(iv) of Regulation S-K promulgated under the Exchange Act. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
Item 16. Form 10-K Summary
None.
155

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

| CAPSOVISION, INC.
Date: March 26, 2026 | By: | /s/ Kang-Huai (Johnny) Wang
|  | Kang-Huai (Johnny) Wang
|  | President and Chief Executive Officer

POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kang-Huai (Johnny) Wang and David Garcia and each of them, as his or her true and lawful attorneys-in-fact and agents, and each of them, with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated:
156

Signature |  | Title |  | Date
/s/ Kang-Huai (Johnny) Wang |  | Director, President and Chief Executive Officer (Principal Executive Officer) |  | March 26, 2026
Kang-Huai (Johnny) Wang |  |
/s/ David Garcia |  | Senior VP of Finance (Principal Financial Officer and Principal Accounting Officer) |  | March 26, 2026
David Garcia |  |
/s/ Chen Lung Tsai |  | Chairman of the Board of Directors |  | March 26, 2026
Chen Lung Tsai |  |
/s/ Hui Ying (Patty) Kuo |  | Director |  | March 26, 2026
Hui Ying (Patty) Kuo |  |
/s/ Julia Gouw |  | Director |  | March 26, 2026
Julia Gouw |  |
/s/ Michele Harari |  | Director |  | March 26, 2026
Michele Harari |  |
/s/ Joanne Imperial, M.D. |  | Director |  | March 26, 2026
Joanne Imperial, M.D. |  |
/s/ Wen-Herng (Henry) King |  | Director |  | March 26, 2026
Wen-Herng (Henry) King |  |

157