Financial Data and Key Metrics Changes - For Q2 2025, total revenue was $3.3 million, reflecting a 17% growth compared to 2024, driven by an increase in the number of CapsoCam Plus capsules sold [23][24] - Gross margin for the quarter was 55%, consistent with expectations as the company scales [24] - Net loss was $4.6 million for Q2 2025, compared to a net loss of $5.3 million in Q2 2024 [24] Business Line Data and Key Metrics Changes - As of June 30, 2025, CapsoCam Plus for small bowel screening has been used by over 143,000 patients, with approximately 7,900 patients using the system in 2025, representing a year-over-year growth of 17% [19][20] - New accounts grew by 75% in 2025 compared to the same quarter in 2024, indicating continued physician adoption [22] - A 46% increase in GI clinics and mega GI groups was observed in 2025 over the same quarter last year [22] Market Data and Key Metrics Changes - The market potential for the CapsuleCam colon is estimated to exceed $1 billion, targeting patients at higher risk for colonoscopy-related complications [12] - The company is expanding its pipeline to address other parts of the GI tract, including pancreatic and esophageal varices screening, which represents a significant market opportunity [17][18] Company Strategy and Development Direction - The company aims to leverage its existing sales infrastructure to expand into additional indications, creating cross-sell opportunities without significant increases in headcount [22] - The development pipeline includes the submission of an AI module for CapsoCam Plus to the FDA by late September or early October, which is expected to enhance diagnostic capabilities [10][27] - The company plans to initiate pivotal studies for esophageal varices screening in 2026, further broadening its market opportunity [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's technology, strategy, and team to execute on growth opportunities, particularly in the small bowel market and the integration of AI [27] - The company anticipates stronger sales in Q3 and expects Q4 sales to be historically the highest due to seasonal trends [26] Other Important Information - The company completed its initial public offering on July 3, 2025, receiving total net proceeds of $23.4 million [25] - A development agreement with Canon was announced to design and evaluate next-generation CMOS image sensors, valued at approximately $4.1 million [26] Q&A Session Summary Question: Clarification on colon launch plans - The plan is for the second-generation device, not the initial device submitted [30][31] Question: Timing for the second-generation colon capsule - The submission for the second-generation device is planned for the first quarter, following the first approval [34][35] Question: Details on the Canon arrangement - The agreement includes an upfront payment of $1 million and spans a couple of years, with deliverables tied to the final engineering design [37] Question: Cash burn in the quarter and expectations for the year - Cash burn was around $11.5 million, with expectations of approximately $20 million for the year [40] Question: Timeline for AI feature submission and market receptivity - The AI module is planned for submission in September, with a launch expected next year; doctors are already aware of the feature and receptive to it [42][44] Question: Advantages of in-house AI development - The company has complete control over its AI development, which provides a significant advantage compared to relying on external partners [46]

Part I - Financial Information This section presents the company's unaudited financial statements and management's discussion and analysis of its financial condition and results of operations [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed financial statements, including balance sheets, statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders' deficit, and statements of cash flows, along with detailed notes explaining the company's business, accounting policies, and financial components for the periods ended June 30, 2025, and December 31, 2024 [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | % Change | | :----- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Cash | $9,319 | $1,066 | $(8,253) | -88.56% | | Total Current Assets | $14,847 | $7,799 | $(7,048) | -47.47% | | Total Assets | $16,803 | $9,547 | $(7,256) | -43.18% | | Total Current Liabilities | $1,801 | $4,221 | $2,420 | 134.37% | | Total Liabilities | $2,688 | $4,908 | $2,220 | 82.59% | | Total Convertible Preferred Stock | $143,625 | $143,625 | $0 | 0.00% | | Total Stockholders' Deficit | $(129,510) | $(138,986) | $(9,476) | 7.32% | [Condensed Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This section details the company's revenues, expenses, and net loss over specific reporting periods | Metric (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net Revenue | $6,098 | $5,338 | $760 | 14.24% | | Costs of Revenue | $2,793 | $2,352 | $441 | 18.75% | | Gross Profit | $3,305 | $2,986 | $319 | 10.68% | | Gross Margin | 54% | 56% | -2% | -3.57% | | Total Operating Expenses | $13,338 | $12,466 | $872 | 6.99% | | Operating Loss | $(10,033) | $(9,480) | $(553) | 5.83% | | Net Loss and Comprehensive Loss | $(10,000) | $(9,465) | $(535) | 5.65% | | Net Loss per Share (Basic and Diluted) | $(4.49) | $(4.84) | $0.35 | -7.23% | [Condensed Statements of Convertible Preferred Stock and Stockholders' Deficit](index=9&type=section&id=Condensed%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Deficit%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This section outlines changes in the company's convertible preferred stock and stockholders' deficit over time | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | % Change | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Convertible Preferred Stock | $143,625 | $143,625 | $0 | 0.00% | | Common Stock Shares Outstanding | 2,090,945 | 2,459,183 | 368,238 | 17.61% | | Additional Paid-in Capital | $838 | $1,362 | $524 | 62.53% | | Accumulated Deficit | $(130,350) | $(140,350) | $(10,000) | 7.67% | | Total Stockholders' Deficit | $(129,510) | $(138,986) | $(9,476) | 7.32% | [Condensed Statements of Cash Flows](index=11&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This section reports the cash generated and used by the company's operating, investing, and financing activities | Cash Flow Activity (Six Months Ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net Cash Used in Operating Activities | $(9,512) | $(7,636) | $(1,876) | 24.57% | | Net Cash Used in Investing Activities | $(70) | $(149) | $79 | -53.02% | | Net Cash Provided by Financing Activities | $1,202 | $72 | $1,130 | 1569.44% | | Net Decrease in Cash | $(8,380) | $(7,713) | $(667) | 8.65% | | Cash at End of Period | $1,066 | $6,819 | $(5,753) | -84.36% | [Notes to Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed financial statements [1. Description of Business and Organizational Structure](index=12&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS%20AND%20ORGANIZATIONAL%20STRUCTURE) This section describes the company's core business, products, and corporate structure - CapsoVision develops, manufactures, and markets endoscopic video imaging devices for the GI system, including CapsoCam Plus (on-market for small intestines) and CapsoColon 3D (in-development for large intestines)[29](index=29&type=chunk)[30](index=30&type=chunk) - The company completed its IPO in July 2025, issuing **5,629,978 shares at $5.00 per share**, generating approximately **$28.1 million in gross proceeds**[33](index=33&type=chunk) - Immediately prior to the IPO, all outstanding redeemable convertible preferred stock converted into common stock[34](index=34&type=chunk) [2. Going Concern](index=13&type=section&id=2.%20GOING%20CONCERN) This section assesses the company's ability to continue operations for the foreseeable future, considering its financial health - As of June 30, 2025, the Company had cash of **$1,066 thousand** and a stockholders' deficit of **$138,986 thousand**[35](index=35&type=chunk) - For the six months ended June 30, 2025, the Company reported an operating loss of **$10,033 thousand** and net cash used in operating activities of **$9,512 thousand**[35](index=35&type=chunk) - Management concluded that there is **substantial doubt** about the Company's ability to continue as a going concern within one year, despite raising approximately **$23.4 million in net proceeds** from its July 2025 IPO, as these funds are not probable to be sufficient[35](index=35&type=chunk) [3. Summary of Significant Accounting Policies](index=13&type=section&id=3.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the key accounting principles and methods used in preparing the financial statements - The Company retroactively adjusted all share and per-share amounts for a **1-for-3.33 reverse stock split** effective July 2, 2025[39](index=39&type=chunk) - The Company operates as a **single operating (and reportable) segment**, with its Chief Executive Officer as the chief operating decision maker[42](index=42&type=chunk) - Revenue is recognized using a **five-step model**, distinguishing between product revenue (capsules, CapsoView device) and service revenue (CapsoCloud, video reading services), with recognition either at a point in time or over time[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - The Company has recorded a **full valuation allowance** against all deferred tax assets due to a significant accumulated deficit, operating losses, and negative operating cash flows[83](index=83&type=chunk) - The Company early adopted ASU 2023-07 (Segment Reporting) effective January 1, 2023, and is evaluating the impact of ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [4. Fair Value Measurements](index=22&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) This section details the valuation techniques and inputs used to measure assets and liabilities at fair value - Financial assets (cash, accounts receivable) and liabilities (accounts payable) are carried at fair value and classified as **Level 1 measurements** due to their insensitivity to interest rates and/or close proximity to maturity[45](index=45&type=chunk)[88](index=88&type=chunk) [5. Balance Sheet Components](index=22&type=section&id=5.%20BALANCE%20SHEET%20COMPONENTS) This section provides a detailed breakdown of specific asset and liability accounts on the balance sheet Inventory Composition (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :------- | :------------ | :---------------- | :----- | :------- | | Finished goods | $94 | $176 | $(82) | -46.59% | | Work in process | $1,356 | $897 | $459 | 51.17% | | Raw materials | $1,592 | $1,556 | $36 | 2.31% | | Total Inventory | $3,042 | $2,629 | $413 | 15.71% | Prepaid Expenses and Other Current Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :------- | :------------ | :---------------- | :----- | :------- | | Advance payments for inventory purchases | $268 | $349 | $(81) | -23.21% | | Deferred initial public offering costs | $1,136 | $225 | $911 | 404.89% | | Other | $433 | $324 | $109 | 33.64% | | Total Prepaid expenses and other current assets | $1,837 | $898 | $939 | 104.57% | Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :------- | :------------ | :---------------- | :----- | :------- | | Accrued compensation | $467 | $349 | $118 | 33.81% | | Accrued clinical trial expenses | $69 | $13 | $56 | 430.77% | | Accrued R&D expenses | $682 | $0 | $682 | N/A | | Accrued sales taxes | $43 | $67 | $(24) | -35.82% | | Other | $327 | $140 | $187 | 133.57% | | Total Accrued expenses and other current liabilities | $1,588 | $569 | $1,019 | 179.09% | [6. Revenue and Deferred Revenue](index=23&type=section&id=6.%20REVENUE%20AND%20DEFERRED%20REVENUE) This section explains the company's revenue recognition policies and details its revenue streams and deferred revenue balances Total Revenue Disaggregated (Six Months Ended June 30) | Category | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------- | :------------------ | :------------------ | :-------------------- | :------- | | U.S. Products | $4,269 | $3,756 | $513 | 13.66% | | U.S. Services | $432 | $359 | $73 | 20.33% | | OUS Products | $1,397 | $1,223 | $174 | 14.23% | | Total Revenue | $6,098 | $5,338 | $760 | 14.24% | - The primary driver for revenue growth was a **15% period-over-period increase** in CapsoCam Plus capsules sold for the six months ended June 30, 2025[184](index=184&type=chunk) - Deferred revenue decreased from **$132 thousand** as of December 31, 2024, to **$97 thousand** as of June 30, 2025[101](index=101&type=chunk) [7. Note Payable](index=25&type=section&id=7.%20NOTE%20PAYABLE) This section describes the terms and status of the company's outstanding promissory notes - On May 27, 2025, the Company issued a **$1,000 thousand promissory note** to an existing 5% stockholder, with a **1% monthly interest rate**[103](index=103&type=chunk) - The note was repaid in full with interest on July 11, 2025, and the investor received **7,508 shares of common stock** upon IPO completion[103](index=103&type=chunk)[154](index=154&type=chunk) [8. Leases](index=25&type=section&id=8.%20LEASES) This section details the company's lease arrangements, including right-of-use assets and lease liabilities Lease Expenses (Six Months Ended June 30) | Category | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------- | :------------------ | :------------------ | :-------------------- | :------- | | Operating lease expense | $237 | $239 | $(2) | -0.84% | | Short-term lease expense | $18 | $17 | $1 | 5.88% | | Total lease expense | $255 | $256 | $(1) | -0.39% | Lease-Related Balance Sheet Data (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :------- | :------------ | :---------------- | :----- | :------- | | Operating lease right-of-use assets | $1,024 | $1,195 | $(171) | -14.31% | | Total operating lease liabilities | $1,066 | $1,238 | $(172) | -13.90% | [9. Commitments and Contingencies](index=28&type=section&id=9.%20COMMITMENTS%20AND%20CONTINGENCIES) This section discloses the company's contractual obligations and potential future liabilities - The Company relies significantly on third-party contract manufacturers in Taiwan for materials procurement and manufacturing, acknowledging supply risks[112](index=112&type=chunk) - The Company is not a party to any material litigation or legal proceedings as of June 30, 2025[113](index=113&type=chunk) - In April 2025, the Company received **$208 thousand** in refundable payroll tax credits from the U.S. Federal government under the Employee Retention Credit program[114](index=114&type=chunk) [10. Capital Stock](index=28&type=section&id=10.%20CAPITAL%20STOCK) This section provides information on the company's authorized and outstanding capital stock, including preferred and common shares - All Series of preferred stock converted into common stock immediately prior to the closing of the Company's IPO on July 2, 2025[120](index=120&type=chunk) - Preferred Stock had rank-ordered liquidation preferences, with Series E, F-1, F-2, G, G-1, and H having the highest priority, followed by Series D-2 (with **2x original issue price**), then Series D and D-1, and finally Series A, B, C, and C-1[123](index=123&type=chunk) - Preferred Stockholders were entitled to non-cumulative dividends at an **8.00% rate**, payable in preference to common stock, but the Company has never declared or paid any dividends[124](index=124&type=chunk) - Protective provisions required approval from a majority of outstanding Preferred Stock for actions such as amending charter/bylaws adversely affecting preferred stock, increasing/decreasing authorized shares, creating senior securities, liquidation, or IPO[127](index=127&type=chunk) [11. Stock-Based Compensation](index=31&type=section&id=11.%20STOCK-BASED%20COMPENSATION) This section details the company's stock option plans and the associated compensation expenses - The **2025 Equity Incentive Plan** became effective upon the IPO, authorizing **4,204,204 shares**, and the 2005 Plan was terminated for new grants[132](index=132&type=chunk)[133](index=133&type=chunk) Stock Option Activity (Six Months Ended June 30, 2025) | Activity | Options on Common Stock | Weighted Average Exercise Price | | :------- | :---------------------- | :---------------------------- | | Outstanding as of Dec 31, 2024 | 2,298,905 | $0.47 | | Granted | 171,171 | $2.63 | | Exercised | (353,223) | $0.37 | | Forfeited, canceled, or expired | (72,999) | $0.32 | | Outstanding as of Jun 30, 2025 | 2,043,854 | $0.68 | Stock-Based Compensation Expense (Six Months Ended June 30) | Category | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------- | :------------------ | :------------------ | :-------------------- | :------- | | Costs of revenue | $5 | $1 | $4 | 400.00% | | Selling and marketing | $14 | $7 | $7 | 100.00% | | Research and development | $100 | $12 | $88 | 733.33% | | General and administrative | $203 | $8 | $195 | 2437.50% | | Total stock-based compensation expense | $322 | $28 | $294 | 1050.00% | [12. Segments](index=33&type=section&id=12.%20SEGMENTS) This section identifies the company's operating segments and how their performance is evaluated - The Company operates as a **single operating (and reportable) segment**, the "Capsule Endoscopy Segment"[145](index=145&type=chunk) - The chief operating decision maker assesses performance and allocates resources based on net income (loss) and operating income (loss)[145](index=145&type=chunk) [13. Income Taxes](index=35&type=section&id=13.%20INCOME%20TAXES) This section outlines the company's income tax position, including deferred taxes and effective tax rates - The Company had an approximately **zero effective tax rate** for the six months ended June 30, 2025 and 2024, due to a full valuation allowance against net deferred tax assets[147](index=147&type=chunk) [14. Net Loss Per Share](index=35&type=section&id=14.%20NET%20LOSS%20PER%20SHARE) This section presents the calculation of basic and diluted net loss per share Net Loss Per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | Net loss – basic and diluted (in thousands) | $(10,000) | $(9,465) | $(535) | 5.65% | | Weighted-average common shares outstanding | 2,225,301 | 1,956,169 | 269,132 | 13.76% | | Net loss per share – basic and diluted | $(4.49) | $(4.84) | $0.35 | -7.23% | - Potentially dilutive securities (convertible preferred stock, warrants, options) were **anti-dilutive** and excluded from net loss per share calculations[149](index=149&type=chunk)[150](index=150&type=chunk) [15. Related Parties](index=35&type=section&id=15.%20RELATED%20PARTIES) This section discloses transactions and relationships with related parties - Material related party transactions for the six months ended June 30, 2025, included a **$1,000 thousand promissory note** from a 5% stockholder and **$662 thousand in R&D expenses** from a vendor[151](index=151&type=chunk) [16. Subsequent Events](index=36&type=section&id=16.%20SUBSEQUENT%20EVENTS) This section reports significant events that occurred after the balance sheet date but before the financial statements were issued - Post-IPO, the Company issued **168,898 Representatives' Warrants** to underwriters, exercisable at **$6.25 per share**[153](index=153&type=chunk) - On July 7, 2025, a **$1,000 thousand promissory note** from an investor was repaid, and the investor received **7,508 shares of common stock**[154](index=154&type=chunk) - On July 3, 2025, authorized common stock increased to **300,000,000 shares** from 190,000,000[155](index=155&type=chunk) - On July 15, 2025, the Company entered a development agreement with Canon Inc. for CMOS image sensor samples, with a fee of approximately **$4.1 million**[156](index=156&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key factors affecting performance, a detailed breakdown of revenue and expenses, and an analysis of liquidity and capital resources. It covers the company's business model, operational components, and critical accounting estimates [Overview](index=37&type=section&id=Overview) This section provides a high-level summary of the company's business and financial position - CapsoVision develops advanced imaging and AI technologies for capsule endoscopy, with CapsoCam Plus for small bowel and CapsoCam Colon (510(k) submitted Q2 2025, approval anticipated Q1 2026) for large intestines[158](index=158&type=chunk)[160](index=160&type=chunk) - As of June 30, 2025, the company had an accumulated deficit of **$140.4 million**, funded primarily by convertible preferred stock sales and CapsoCam product revenue[161](index=161&type=chunk) [Our Business Model](index=38&type=section&id=Our%20Business%20Model) This section describes the company's strategy for generating revenue and achieving its business objectives - Near-term revenue growth strategy for CapsoCam Plus includes expanding customer base, increasing sales team effectiveness, pursuing pediatric market, introducing complementary products (capsule delivery device, patency capsule), facilitating telemedicine, and incorporating AI-assisted reading technology[163](index=163&type=chunk) - The company plans to invest in R&D for new capsule products and enhancements, including adapting CapsoCam for new GI indications like esophageal conditions and pancreatic cancer[165](index=165&type=chunk) - Ongoing investment in AI aims to improve pathology detection accuracy, streamline diagnostic and report generation processes, leveraging a unique, ever-expanding patient pathology dataset from CapsoCloud[166](index=166&type=chunk) [Components of our Results of Operations](index=40&type=section&id=Components%20of%20our%20Results%20of%20Operations) This section details the key financial elements that contribute to the company's overall financial performance - Revenue is derived from product sales (CapsoCam capsules, CapsoView device) and service offerings (CapsoCloud, video reading), recognized either at a point in time or over time[167](index=167&type=chunk) - Costs of revenue include materials, labor, manufacturing overhead, physician reading fees, and CapsoCloud operating costs, expected to increase with revenue growth[170](index=170&type=chunk) - Gross profit and gross margin are influenced by selling prices, product costs, customer/product mix, production volumes, and potential tariffs[171](index=171&type=chunk)[172](index=172&type=chunk) - Operating expenses (selling & marketing, R&D, G&A) are expected to increase in absolute terms due to expansion, R&D investments (especially AI and clinical trials), and public company costs, but decrease as a percentage of revenue[174](index=174&type=chunk)[177](index=177&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024](index=43&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section provides a detailed analysis of the company's financial performance for the specified periods Key Financial Results (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | $ Change | % Change | | :----- | :------------------ | :------------------ | :------- | :------- | | Revenue | $6,098 | $5,338 | $760 | 14% | | Costs of revenue | $2,793 | $2,352 | $441 | 19% | | Gross profit | $3,305 | $2,986 | $319 | 11% | | Gross margin | 54% | 56% | -2% | -3.57% | | Selling and marketing | $3,808 | $3,423 | $385 | 11% | | Research and development | $6,499 | $7,482 | $(983) | -13% | | General and administrative | $3,031 | $1,561 | $1,470 | 94% | | Total operating expenses | $13,338 | $12,466 | $872 | 7% | | Operating loss | $(10,033) | $(9,480) | $(553) | 6% | | Net loss and comprehensive loss | $(10,000) | $(9,465) | $(535) | 6% | - Revenue growth was primarily driven by a **15% increase** in CapsoCam Plus capsules sold for the six months ended June 30, 2025[184](index=184&type=chunk) - Research and development expenses decreased by **13%** due to the completion of the CapsoCam Colon pivotal study at the end of 2024[192](index=192&type=chunk) - General and administrative expenses increased by **94%**, primarily due to higher professional service expenses (**$1.1 million**), stock-based compensation (**$0.2 million**), and headcount-related expenses (**$0.5 million**), partially offset by a **$0.2 million** COVID-19 relief program credit[194](index=194&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to generate and manage cash to meet its financial obligations and fund operations [Overview](index=47&type=section&id=Overview_Liquidity) This section summarizes the company's current liquidity position and going concern assessment - As of June 30, 2025, the Company had an accumulated deficit of **$140.4 million** and cash of **$1.1 million**[196](index=196&type=chunk)[201](index=201&type=chunk) - Net cash used in operating activities was **$9.5 million** for the six months ended June 30, 2025[196](index=196&type=chunk) - Management has **substantial doubt** about the Company's ability to continue as a going concern within one year, even after the IPO, and will likely need additional financing[198](index=198&type=chunk)[201](index=201&type=chunk) [Source of Liquidity](index=47&type=section&id=Source%20of%20Liquidity) This section identifies the primary sources of cash available to the company - As of June 30, 2025, the Company had **$1.1 million in cash**[199](index=199&type=chunk) - The Company received **$143.6 million in gross proceeds** from convertible preferred stock sales through June 30, 2025, which converted to common stock upon IPO[199](index=199&type=chunk) - The IPO completed on July 3, 2025, generated **$23.4 million in net proceeds**[200](index=200&type=chunk) [Funding Requirements](index=48&type=section&id=Funding%20Requirements) This section outlines the company's anticipated capital needs and the factors influencing them - Net proceeds from the IPO and existing cash are **not sufficient** to fund operations for at least the next 12 months[201](index=201&type=chunk) - Future capital needs are dependent on factors such as new product development, market acceptance, regulatory clearances, third-party reimbursement, supply chain management, sales team growth, intellectual property protection, and public company operating costs[202](index=202&type=chunk)[203](index=203&type=chunk) - Inability to obtain adequate financing could significantly limit business growth, force scaling back plans, or lead to liquidation[204](index=204&type=chunk)[205](index=205&type=chunk) [Cash Flows](index=49&type=section&id=Cash%20Flows_Liquidity) This section provides a detailed analysis of cash inflows and outflows from operating, investing, and financing activities Summary of Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | | :----------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(9,512) | $(7,636) | | Net cash used in investing activities | $(70) | $(149) | | Net cash provided by financing activities | $1,202 | $72 | | Net decrease in cash | $(8,380) | $(7,713) | - Net cash used in operating activities for H1 2025 was **$9.5 million**, driven by net loss and increased inventory[207](index=207&type=chunk) - Net cash provided by financing activities for H1 2025 was **$1.2 million**, primarily from a **$1 million promissory note** and **$0.2 million** from option/warrant exercises[210](index=210&type=chunk) [Contractual Obligations and Commitments](index=51&type=section&id=Contractual%20Obligations%20and%20Commitments) This section details the company's future payment obligations under various contracts - Contractual obligations as of June 30, 2025, include **$1.1 million** in operating lease payments due within 30 months[212](index=212&type=chunk) [Critical Accounting Estimates](index=51&type=section&id=Critical%20Accounting%20Estimates) This section discusses accounting estimates that require significant judgment and are susceptible to change - Research and development expenses, especially for clinical trials, involve significant estimation uncertainty due to unpredictable outcomes, variable cost behavior, and limited visibility into trial progress[215](index=215&type=chunk)[216](index=216&type=chunk) - Revenue recognition requires significant judgment in estimating standalone selling prices (using a cost-plus-expected margin approach) and determining applicable time periods for deferred revenue recognition[219](index=219&type=chunk)[220](index=220&type=chunk) - Stock-based compensation valuation using the Black-Scholes model involves significant estimation uncertainty, particularly for the fair value and volatility of the underlying common stock[224](index=224&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not applicable to the company - The company states that quantitative and qualitative disclosures about market risk are not applicable[226](index=226&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the company's disclosure controls and procedures and internal control over financial reporting, including identified material weaknesses and the ongoing remediation plan [Evaluation of Disclosure Controls and Procedures](index=53&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's controls designed to ensure timely and accurate public disclosures - As of June 30, 2025, the CEO and CFO concluded that disclosure controls and procedures were **not effective** due to identified material weaknesses[228](index=228&type=chunk) [Material Weaknesses in Internal Control over Financial Reporting](index=53&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20over%20Financial%20Reporting) This section identifies significant deficiencies in the company's internal controls that could lead to material misstatements in financial reporting - First material weakness: failure to design/maintain sufficient controls over IT general controls (user access, change management, program development, data management) for key IT systems (ERP, payroll, stock option management)[229](index=229&type=chunk)[368](index=368&type=chunk) - Second material weakness: lack of segregation of duties in the financial reporting function due to limited staff, specifically regarding multiple reviews and proper segregation for journal entries in the ERP system[229](index=229&type=chunk)[369](index=369&type=chunk) [Remediation Plan for the Material Weaknesses](index=53&type=section&id=Remediation%20Plan%20for%20the%20Material%20Weaknesses) This section outlines the company's actions to address and correct identified deficiencies in internal control over financial reporting - Remediation efforts include hiring a Corporate Controller, evaluating accounting personnel for segregation of duties, considering an ERP system upgrade/replacement, and formalizing IT, Entity-level, and business process controls with an ICFR program[230](index=230&type=chunk) - Material weaknesses will not be considered fully remediated until remedial controls operate effectively for a sufficient period and are tested[231](index=231&type=chunk) [Changes in Internal Control Over Financial Reporting](index=54&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports any changes in the company's internal control over financial reporting during the period - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2025, other than remediation efforts for identified material weaknesses[235](index=235&type=chunk) Part II - Other Information This section covers legal proceedings, risk factors, equity sales, defaults, and other disclosures relevant to the company's operations and stock [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings that would significantly impact its business or financial condition, though future litigation remains a possibility - The Company is not currently a party to any material litigation, arbitration, claims, or proceedings[238](index=238&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section details the significant risks and uncertainties that could materially affect the company's business, financial condition, results of operations, and prospects, covering financial performance, product development, regulatory compliance, supply chain, market competition, AI and data privacy, operational management, internal controls, intellectual property, and common stock-related risks [Summary Risk Factors](index=55&type=section&id=Summary%20Risk%20Factors) This section provides a concise overview of the most critical risks facing the company - Key risks include a history of net losses, going concern doubt, reliance on CapsoCam Plus, delayed CapsoCam Colon revenue (H2 2026 target), challenges in CapsoCam Colon adoption, and potential failure to expand GI-tract solutions[240](index=240&type=chunk)[241](index=241&type=chunk)[243](index=243&type=chunk) - Regulatory delays for 510(k) clearance (especially for AI-integrated CapsoCam Colon and CapsoCam Plus), supply chain disruptions from single-source Asian suppliers, geopolitical/trade risks in Asia, and inadequate third-party reimbursement are significant concerns[243](index=243&type=chunk) [Business and Industry Risk Factors](index=57&type=section&id=Business%20and%20Industry%20Risk%20Factors) This section outlines risks inherent to the company's specific business operations and the broader industry environment [Financial Performance and Going Concern](index=57&type=section&id=Financial%20Performance%20and%20Going%20Concern) This section highlights risks related to the company's historical financial losses and its ability to continue as a going concern - The Company incurred net losses of **$11.3 million** (2023), **$19.9 million** (2024), and **$10.0 million** (H1 2025), with an accumulated deficit of **$140.4 million** as of June 30, 2025[242](index=242&type=chunk) - Substantial doubt exists about the Company's ability to continue as a going concern, necessitating additional capital-raising activities beyond the IPO to fund operations and growth[245](index=245&type=chunk)[247](index=247&type=chunk) [Product Development and Commercialization Risks](index=59&type=section&id=Product%20Development%20and%20Commercialization%20Risks) This section addresses challenges in developing, obtaining regulatory approval for, and successfully marketing new products - Near-term revenue is solely from CapsoCam Plus small bowel sales, with growth strategies including pediatric market, complementary products (delivery device, patency capsule), telemedicine, and AI integration[249](index=249&type=chunk)[254](index=254&type=chunk) - CapsoCam Colon revenue is not expected until **H2 2026**, pending FDA clearance for its second generation, which features AI and improved optics[252](index=252&type=chunk)[253](index=253&type=chunk) - Broad adoption of CapsoCam Colon depends on expanding its indicated patient population (e.g., removing GI bleeding requirement), continuous accuracy enhancements, and achieving high successful examination completion rates[255](index=255&type=chunk)[256](index=256&type=chunk) - Longer-term expansion into new GI indications (esophageal varices, pancreatic cancer) requires substantial R&D investment, rigorous clinical studies, and regulatory clearance, with no assurance of success[257](index=257&type=chunk)[258](index=258&type=chunk) [Regulatory and Compliance Risks](index=62&type=section&id=Regulatory%20and%20Compliance%20Risks) This section covers risks associated with obtaining and maintaining regulatory clearances and adhering to healthcare laws - Significant delays or failure to obtain 510(k) clearance for CapsoCam Colon (initial and second generation) and AI-integrated CapsoCam Plus could occur due to distinct regulatory requirements, FDA review complexities, and potential need for additional data or more rigorous pathways[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[265](index=265&type=chunk) - Any failure or defect in the GI-tract capsule endoscopy solution (capsules, software, AI) could harm reputation, expose the company to liability, and reduce sales[273](index=273&type=chunk) - Compliance with cGMP, Anti-Kickback Statute, False Claims Act, FCPA, and economic sanctions regulations is essential, with non-compliance risking penalties, litigation, and reputational damage[327](index=327&type=chunk)[354](index=354&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) - Relationships with board-certified physicians for reading services are subject to varying state licensing laws, and non-compliance could lead to restructuring, penalties, and revenue loss[353](index=353&type=chunk) [Supply Chain and Geopolitical Risks](index=66&type=section&id=Supply%20Chain%20and%20Geopolitical%20Risks) This section outlines risks stemming from reliance on third-party suppliers and potential impacts of international relations - The company relies heavily on **single-source component suppliers** (Largan for lens, Toshiba for CMOS, Moai/Speedbridge for ASICs) and assembly manufacturers in Asia (Taiwan and Japan)[274](index=274&type=chunk) - Supply chain risks include inability to meet demand, quality issues, price increases, discontinuation of components, difficulty finding alternative suppliers, and geopolitical tensions[275](index=275&type=chunk)[278](index=278&type=chunk) - Operations in Taiwan and Japan expose the company to substantial geopolitical risks (e.g., China-Taiwan tensions, trade wars, tariffs) and natural disasters (earthquakes, typhoons), which could disrupt supply and increase costs[277](index=277&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) [Market and Competitive Risks](index=68&type=section&id=Market%20and%20Competitive%20Risks) This section discusses challenges from market competition, pricing pressures, and the need for adequate reimbursement - Intense competition from established companies like Medtronic (first-mover advantage, resources, exclusive arrangements) and Asia-based companies (Ankon, Jinshan, IntroMedic) offering lower prices[304](index=304&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Delays in launching AI-integrated CapsoCam Plus (anticipated late 2025) create a market disadvantage against competitors already offering AI-driven solutions[307](index=307&type=chunk) - Broad adoption and revenue growth for CapsoCam Colon depend significantly on obtaining adequate third-party reimbursement, particularly from CMS, which is uncertain and subject to cost-containment efforts and policy changes[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk)[285](index=285&type=chunk) - Patient adherence to dietary and bowel cleansing protocols, as well as the manual capsule retrieval process, are critical for CapsoCam effectiveness, and alternative screening methods could reduce demand[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk) [AI and Data Privacy Risks](index=71&type=section&id=AI%20and%20Data%20Privacy%20Risks) This section addresses risks related to the accuracy and regulatory compliance of AI technologies and data protection - Risks of AI-assisted reading technology include inaccurate abnormality identification, potential for undue clinician reliance, and failure to deliver expected viewing or accuracy improvements[293](index=293&type=chunk)[294](index=294&type=chunk) - AI technology is susceptible to errors or biases if models are incorrectly designed, trained on incomplete/inaccurate/biased data, or used without sufficient oversight, potentially harming product performance and reputation[295](index=295&type=chunk) - The rapidly changing regulatory landscape for AI and stringent data privacy laws (HIPAA, GDPR) create compliance uncertainty, risks of legal liabilities, fines, and reputational damage from data breaches or misuse[298](index=298&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) [Operational and Management Risks](index=76&type=section&id=Operational%20and%20Management%20Risks) This section covers risks related to product safety, key personnel, macroeconomic conditions, and financial services industry stability - Risks associated with CapsoCam capsules include capsule retention (industry rate up to **2%**, company's reported **<0.1%** but potentially understated), component failures (defective battery packs), and rare aspiration[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - Success is substantially dependent on retaining senior management and key personnel, and product/professional liability suits could lead to substantial damages and increased insurance rates[329](index=329&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk) - Macroeconomic conditions (inflation, geopolitical instability, interest rates) and healthcare policy changes (ACA, budget cuts) could adversely affect demand, costs, and reimbursement[336](index=336&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk) - Adverse developments in the financial services industry could impact liquidity, and cash deposits exceeding FDIC limits pose a risk of uninsured losses[341](index=341&type=chunk)[342](index=342&type=chunk) [Internal Control and IT System Risks](index=88&type=section&id=Internal%20Control%20and%20IT%20System%20Risks) This section details vulnerabilities in the company's IT systems and internal financial reporting controls - Heavy reliance on IT systems (including CapsoCloud) makes the company vulnerable to cyberattacks and data breaches, risking operational disruptions, financial losses, and reputational damage[364](index=364&type=chunk)[365](index=365&type=chunk) - Identified material weaknesses include insufficient IT general controls (user access, change management, data management) and lack of segregation of duties in financial reporting[368](index=368&type=chunk)[369](index=369&type=chunk) - Failure to remediate material weaknesses could adversely affect financial reporting accuracy and timeliness, investor confidence, and potentially lead to litigation[371](index=371&type=chunk)[373](index=373&type=chunk) [Risks Relating to Our Intellectual Property](index=89&type=section&id=Risks%20Relating%20to%20Our%20Intellectual%20Property) This section outlines the challenges and uncertainties associated with protecting the company's intellectual property assets [General IP Protection Risks](index=89&type=section&id=General%20IP%20Protection%20Risks) This section discusses the broad challenges in securing and defending intellectual property rights - Success depends on obtaining, maintaining, enforcing, and protecting intellectual property (patents, trademarks, trade secrets) globally, which is expensive, time-consuming, and complex[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk) - Risks include potential invalidation, modification, or circumvention of issued patents, and challenges in enforcing rights in foreign jurisdictions where laws may offer less protection[377](index=377&type=chunk)[381](index=381&type=chunk)[386](index=386&type=chunk) [Patent Expiration and Law Changes](index=93&type=section&id=Patent%20Expiration%20and%20Law%20Changes) This section addresses the risks associated with the limited lifespan of patents and evolving patent laws - Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, and fee payment requirements, with non-compliance risking abandonment or lapse of patent rights[388](index=388&type=chunk) - Patents have a limited lifespan (generally **20 years** from filing), and expiration could lead to loss of exclusive rights, increased competition, and reduced market share[389](index=389&type=chunk)[391](index=391&type=chunk) - Changes in U.S. or foreign patent laws or their interpretations could diminish the value of patents, increase prosecution costs, and impair the ability to protect current and future products[393](index=393&type=chunk)[394](index=394&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk) [Global IP Protection Challenges](index=96&type=section&id=Global%20IP%20Protection%20Challenges) This section highlights difficulties in protecting intellectual property across different international legal systems - Protecting intellectual property globally is expensive, and foreign laws may not offer the same extent of protection as U.S. laws, making it difficult to prevent infringement or marketing of competing products[400](index=400&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk) [IP Enforcement and Litigation Risks](index=96&type=section&id=IP%20Enforcement%20and%20Litigation%20Risks) This section covers the potential for costly and complex legal disputes related to intellectual property infringement - Failure to successfully enforce intellectual property rights could adversely affect commercial value and competitive position, as detecting and proving infringement can be difficult and costly[404](index=404&type=chunk)[405](index=405&type=chunk) - The company may become a party to expensive, time-consuming, and unsuccessful intellectual property litigation or administrative proceedings, which could interfere with its ability to develop, manufacture, and commercialize products[406](index=406&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk) - Adverse outcomes in litigation could force the company to cease operations, pay substantial damages, redesign products, or obtain costly licenses, significantly harming the business[409](index=409&type=chunk)[414](index=414&type=chunk) [Inventorship and Ownership Claims](index=101&type=section&id=Inventorship%20and%20Ownership%20Claims) This section discusses risks of disputes over who owns or invented the company's intellectual property - The company may face claims challenging the inventorship or ownership of its intellectual property rights from current or former employees, contractors, or partners, potentially leading to loss of rights or costly litigation[418](index=418&type=chunk)[419](index=419&type=chunk) [Confidential Information and Trade Secret Protection](index=103&type=section&id=Confidential%20Information%20and%20Trade%20Secret%20Protection) This section addresses the challenges of safeguarding proprietary non-patented information - Failure to protect confidential information and trade secrets through confidentiality agreements and security measures could harm the value of products and competitive position, as unauthorized disclosure or independent development by competitors is a risk[422](index=422&type=chunk)[423](index=423&type=chunk)[424](index=424&type=chunk)[426](index=426&type=chunk) [Trademark Protection](index=104&type=section&id=Trademark%20Protection) This section outlines risks related to maintaining and enforcing the company's brand names and logos - Inadequate protection of trademarks and trade names could hinder brand recognition, lead to market confusion, and force re-branding, adversely affecting competitive position[427](index=427&type=chunk)[428](index=428&type=chunk)[430](index=430&type=chunk) [Open Source Software Risks](index=106&type=section&id=Open%20Source%20Software%20Risks) This section details potential liabilities arising from the use of open source software in the company's products - Use of open source software components carries risks, including potential requirements to make proprietary source code publicly available if license terms are not complied with, leading to competitive harm or litigation[431](index=431&type=chunk)[432](index=432&type=chunk) [Risks Relating to Our Common Stock](index=106&type=section&id=Risks%20Relating%20to%20Our%20Common%20Stock) This section addresses specific risks associated with the company's common stock, including its market price, liquidity, and corporate governance [Emerging Growth/Smaller Reporting Company Status](index=106&type=section&id=Emerging%20Growth%2FSmaller%20Reporting%20Company%20Status) This section explains the implications of the company's regulatory classification for reporting and investor perception - As an "emerging growth company" and "smaller reporting company," the company benefits from reduced reporting requirements, which may make its common stock less attractive to some investors[433](index=433&type=chunk)[434](index=434&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk) [Public Company Costs and Internal Controls](index=107&type=section&id=Public%20Company%20Costs%20and%20Internal%20Controls) This section addresses the financial and operational burdens of being a publicly traded company and maintaining effective controls - Operating as a public company incurs increased legal, accounting, and compliance costs, and failure to maintain effective internal controls could lead to investor loss of confidence and stock price decline[437](index=437&type=chunk)[439](index=439&type=chunk)[442](index=442&type=chunk) [No Dividends and Funding Needs](index=109&type=section&id=No%20Dividends%20and%20Funding%20Needs) This section clarifies the company's dividend policy and the potential for future equity dilution - The company does not intend to pay dividends, meaning investor returns will depend on stock price appreciation[445](index=445&type=chunk)[446](index=446&type=chunk) - Future capital raises for business growth may dilute existing stockholders' ownership[447](index=447&type=chunk)[448](index=448&type=chunk) [Stock Price Volatility and Dilution](index=111&type=section&id=Stock%20Price%20Volatility%20and%20Dilution) This section discusses factors that could lead to fluctuations in stock price and the impact of future share issuances - Sales of substantial shares (e.g., **41.1 million shares** post-lock-up expiration on January 3, 2026) could cause the stock price to fall[449](index=449&type=chunk)[451](index=451&type=chunk)[454](index=454&type=chunk) [Anti-Takeover Provisions](index=112&type=section&id=Anti-Takeover%20Provisions) This section describes corporate governance mechanisms that could deter hostile takeovers - Charter documents and Delaware law contain provisions that could discourage takeovers and limit stockholders' ability to choose a judicial forum for disputes[456](index=456&type=chunk)[457](index=457&type=chunk)[459](index=459&type=chunk)[462](index=462&type=chunk)[464](index=464&type=chunk)[466](index=466&type=chunk) [Indemnification and Forum Selection](index=114&type=section&id=Indemnification%20and%20Forum%20Selection) This section covers provisions for protecting officers and directors and limitations on legal venues for disputes - Claims for indemnification by directors, officers, and agents may reduce available funds for third-party claims, and exclusive forum provisions could limit stockholders' judicial options[460](index=460&type=chunk)[462](index=462&type=chunk)[464](index=464&type=chunk)[466](index=466&type=chunk) [Market Price Volatility and Analyst Coverage](index=115&type=section&id=Market%20Price%20Volatility%20and%20Analyst%20Coverage) This section addresses the potential for significant fluctuations in the company's stock price and the impact of market analysis - The market price of common stock may be highly volatile due to various factors, and lack of analyst coverage could negatively impact stock price and trading volume[467](index=467&type=chunk)[469](index=469&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=116&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's unregistered sales of equity securities, including stock option and warrant exercises, and the use of proceeds from its initial public offering - For H1 2025, **171,171 stock options** were granted, **353,223 common shares** issued from option exercises, and **15,015 common shares** from warrant exercises, all exempt from registration[470](index=470&type=chunk) - Post-period, **7,508 common shares** were issued to an investor upon repayment of a **$1 million promissory note**[471](index=471&type=chunk) - The July 2025 IPO generated **$23.4 million in net proceeds**, with no material change in planned use[472](index=472&type=chunk)[473](index=473&type=chunk) [Item 3. Defaults Upon Senior Securities](index=116&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[474](index=474&type=chunk) [Item 4. Mine Safety Disclosures](index=118&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[475](index=475&type=chunk) [Item 5. Other Information](index=118&type=section&id=Item%205.%20Other%20Information) This section confirms that no directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[476](index=476&type=chunk) [Item 6. Exhibits](index=119&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key corporate governance documents, equity incentive plans, and other material agreements - Exhibits include corporate governance documents (certificate of incorporation, bylaws), stock-related forms (common stock certificate, representative's warrant), equity incentive plans (2005, 2025), indemnification agreements, a purchase agreement with Canon Inc., and officer certifications[477](index=477&type=chunk) [Signatures](index=121&type=section&id=Signatures) This section contains the signatures of the company's President and Chief Executive Officer, and Chief Financial Officer, certifying the report - The report was signed by Kang-Huai (Johnny) Wang (President and CEO) and Kevin Lundquist (CFO) on August 14, 2025[483](index=483&type=chunk)

[Executive Summary & Business Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Highlights) CapsoVision achieved robust performance growth in Q2 2025, driven by increasing CapsoCam Plus adoption, a successful IPO funding future growth, and key product development milestones including FDA 510(k) submission for CapsoCam Colon and planned AI module integration [Recent Highlights](index=1&type=section&id=Recent%20Highlights) The company achieved significant revenue growth in Q2 2025, with a substantial increase in new customers, expanded CapsoCam Plus patient usage, key product pipeline advancements, and a successful IPO completion Second Quarter 2025 Business Highlights | Metric | Q2 2025 | Q2 2024 | Year-over-Year Growth | | :--- | :--- | :--- | :--- | | Total Revenue | $3.3 million | $2.843 million | 17% | | New Accounts | - | - | 75% | | CapsoCam Plus Patient Usage | Over 143,000 | - | - | | IPO Net Proceeds | $23.4 million | - | - | - Submitted a 510(k) notification to the FDA in June 2025 for CapsoCam Colon, a non-invasive capsule for colon imaging[10](index=10&type=chunk) - Completed an Initial Public Offering (IPO) on July 3, 2025, raising approximately **$23.4 million** in net proceeds[9](index=9&type=chunk)[10](index=10&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Johnny Wang highlighted robust CapsoCam Plus adoption and growing physician interest in the capsule endoscopy pipeline, noting the IPO provides capital for accelerated growth and new indications, with confidence in future AI module integration and CapsoCam Colon development - CapsoCam Plus achieved stable adoption in small bowel imaging, with increasing physician interest in the capsule endoscopy product line[4](index=4&type=chunk) - Successfully completed an IPO, securing additional capital to accelerate growth and expand into high-impact new indications[4](index=4&type=chunk) - Near-term goals include submitting and obtaining FDA 510(k) clearance, integrating proprietary AI modules into CapsoCam Plus, and continuing development and regulatory approval for CapsoCam Colon[5](index=5&type=chunk) - Anticipates advancing pancreatic cancer and esophageal varices programs, where panoramic imaging offers distinct clinical advantages and early detection potential[5](index=5&type=chunk) [Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) CapsoVision achieved year-over-year growth in revenue and gross profit in Q2 2025, effectively managing operating expenses through the completion of key research and clinical trials, with a significant capital injection from the July IPO despite reduced cash and cash equivalents [Second Quarter 2025 Financial Results Summary](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results%20Summary) In Q2 2025, total revenue grew by 17% year-over-year, driven by increased CapsoCam Plus capsule sales, with stable gross profit and margin, reduced operating expenses due to completed trials, and cash and cash equivalents of **$1.1 million** as of June 30, supplemented by **$23.4 million** net IPO proceeds in July Second Quarter 2025 Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $3.3 million | $2.843 million | **17% increase** | | Gross Profit | $1.8 million | $1.592 million | **$0.2 million (14%) increase** | | Gross Margin | **55%** | **56%** | **1 percentage point decrease** | | Operating Expenses | $6.5 million | $6.863 million | **$0.4 million decrease** | | Cash and Cash Equivalents (as of June 30) | **$1.1 million** | - | - | - The decrease in operating expenses is primarily attributed to lower costs associated with the completion of key research and clinical trials[8](index=8&type=chunk) [Company Information](index=2&type=section&id=Company%20Information) CapsoVision is a commercial-stage medical technology company focused on developing advanced imaging and AI-driven solutions to revolutionize GI disease detection and diagnosis, with its core product CapsoCam Plus commercially available and an active innovative product pipeline including CapsoCam Colon [About CapsoVision](index=2&type=section&id=About%20CapsoVision) CapsoVision is a commercial-stage medical technology company dedicated to transforming GI disease detection and diagnosis through advanced imaging and AI, featuring its flagship CapsoCam Plus® wireless panoramic capsule endoscope for high-resolution small bowel visualization, and developing CapsoCam Colon with enhanced AI for non-invasive colon imaging and polyp detection, with plans to expand its platform to various GI indications including esophageal and pancreatic diseases - CapsoVision is a commercial-stage medical technology company focused on developing advanced imaging and AI-driven solutions to transform the detection and diagnosis of gastrointestinal diseases[13](index=13&type=chunk) - Its flagship product, CapsoCam Plus®, is a wireless, panoramic capsule endoscope enabling high-resolution visualization of the small bowel, supporting cloud-based or direct capsule video retrieval[13](index=13&type=chunk) - The next-generation product, CapsoCam Colon, integrates enhanced AI, aiming for non-invasive colon imaging and polyp detection[13](index=13&type=chunk) - The company's proprietary platform is designed to expand into multiple gastrointestinal indications, including esophageal and pancreatic diseases[13](index=13&type=chunk) [Condensed Financial Statements (Unaudited)](index=3&type=section&id=Condensed%20Financial%20Statements%20%28Unaudited%29) This section presents CapsoVision's unaudited condensed financial statements, including statements of operations for the three and six months ended June 30, 2025 and 2024, balance sheets as of June 30, 2025 and December 31, 2024, and statements of cash flows for the six months ended June 30, 2025 and 2024 [Condensed Statements of Operations and Comprehensive Loss](index=3&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This table presents the company's unaudited operating and comprehensive loss for Q2 and the first half of 2025 and 2024, detailing revenue, costs, operating expenses, operating loss, and ultimately net loss and net loss per share Condensed Statements of Operations and Comprehensive Loss | Metric (K USD) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 3,315 | 2,843 | 6,098 | 5,338 | | Cost of Sales | 1,504 | 1,251 | 2,793 | 2,352 | | Gross Profit | 1,811 | 1,592 | 3,305 | 2,986 | | Total Operating Expenses | 6,462 | 6,863 | 13,338 | 12,466 | | Operating Loss | (4,651) | (5,271) | (10,033) | (9,480) | | Net Loss and Comprehensive Loss | (4,625) | (5,266) | (10,000) | (9,465) | | Net Loss Per Share – Basic and Diluted (USD) | (2.02) | (2.58) | (4.49) | (4.84) | [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) This table provides unaudited balance sheets as of June 30, 2025, and December 31, 2024, detailing the company's assets, liabilities, convertible preferred stock, and stockholders' deficit Condensed Balance Sheets | Metric (K USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | 1,066 | 9,319 | | Total Current Assets | 7,799 | 14,847 | | Total Assets | 9,547 | 16,803 | | Total Current Liabilities | 4,221 | 1,801 | | Total Liabilities | 4,908 | 2,688 | | Total Convertible Preferred Stock | 143,625 | 143,625 | | Total Stockholders' Deficit | (138,986) | (129,510) | [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) This table presents the company's unaudited cash flows for the first half of 2025 and 2024, detailing cash flows from operating, investing, and financing activities, along with the ending cash balance Condensed Statements of Cash Flows | Metric (K USD) | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (9,512) | (7,636) | | Net Cash Used in Investing Activities | (70) | (149) | | Net Cash Provided by Financing Activities | 1,202 | 72 | | Net Decrease in Cash | (8,380) | (7,713) | | Cash at End of Period | 1,066 | 6,819 | [Supplementary Information](index=2&type=section&id=Supplementary%20Information) This section provides details on the company's Q2 2025 financial results conference call and webcast, important forward-looking statements, and investor and media contact information [Conference Call and Webcast Details](index=2&type=section&id=Conference%20Call%20and%20Webcast%20Details) CapsoVision will host a conference call on August 14, 2025, to discuss its second-quarter financial results, with investor participation available via phone or the company's investor relations website - The conference call to discuss Q2 financial results will be held on August 14, 2025, at 4:30 PM ET[11](index=11&type=chunk) - Domestic dial-in is (800) 715-9871, international dial-in is (646) 307-1963, and the conference ID is 1668374[11](index=11&type=chunk) - A webcast link is available in the investor relations section of www.capsovision.com, with a replay accessible on the website for one year[11](index=11&type=chunk)[12](index=12&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, concerning future events and financial performance, based on current expectations and involving significant risks and uncertainties where actual results may differ materially - Forward-looking statements involve future events, business, and financial performance, including words such as "anticipate," "expect," and "intend"[14](index=14&type=chunk) - These statements are based on current expectations and involve significant risks and uncertainties, including market conditions, financial position, failure to obtain regulatory approvals, and product adaptability failures[14](index=14&type=chunk) - Actual results and timing of events may differ materially from forward-looking statements, and the company undertakes no obligation to update or revise these statements unless required by law[14](index=14&type=chunk) [Investor and Media Contacts](index=2&type=section&id=Investor%20and%20Media%20Contacts) Provides detailed contact information for CapsoVision's investor relations and media contacts - Investor Relations Contact: Leigh Salvo, New Street Investor Relations, Email: Investors@CapsoVision.com[15](index=15&type=chunk) - Media Contacts: Leslie Strickler and Paul Spicer, Être Communications, Email: leslies@etrecommunications.com | pauls@etrecommunications.com[15](index=15&type=chunk)

Core Insights - CapsoVision, Inc. reported a total revenue of $3.3 million for Q2 2025, marking a 17% increase compared to Q2 2024, primarily driven by increased sales of CapsoCam Plus capsules [6][9] - The company successfully completed its IPO in July 2025, raising net proceeds of approximately $23.4 million, which will be used to accelerate growth and expand into new indications [3][7][9] - Management highlighted the importance of obtaining FDA 510(k) approval for the AI module in CapsoCam Plus and the continued development of CapsoCam Colon as key growth drivers [4][5] Financial Performance - Total revenue for Q2 2025 was $3.3 million, a 17% increase from $2.8 million in Q2 2024 [6][14] - Gross profit increased to $1.8 million, up 14% from $1.6 million in Q2 2024, with a gross margin of 55% [6][14] - Operating expenses decreased to $6.5 million, down $0.4 million from Q2 2024, mainly due to reduced expenses related to clinical trials [7][14] Operational Highlights - New accounts grew by 75% in Q2 2025 compared to the same quarter in 2024 [9] - CapsoCam Plus has been utilized by over 143,000 patients as of June 30, 2025 [9] - The company submitted a 510(k) notification to the FDA for CapsoCam Colon in June 2025 [9] Future Outlook - The company aims to enhance accuracy and ease physician workload through the integration of AI in its products [4] - CapsoVision plans to advance programs targeting pancreatic cancer and esophageal varices, leveraging its panoramic imaging technology [4][5]