CAPR 10-K & 10-Q changes, risk factors and insider trading

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, clinicalfinancial condition, results of operations and commercializationprospects. activities,These risks include those related to the manufacturingdevelopment, regulatory approval and potential commercialization of our product candidates, our manufacturing activities, intellectual property, third-party relationships, competitioncompetitive factors, product and environmental liability, and our common stock. These risks are discussed more fully below and include, but are not limited to, risks related to:

We need substantial additional funding before we can complete the development of our product candidates. If we are unable to obtain such additional capital, we will be forced to delay, reduce or eliminate our product development and clinical programs and may not have the capital required to otherwise operate our business.

Developing biopharmaceutical products, including conducting preclinical studies and clinical trials and establishing manufacturing capabilities and commercialization infrastructure, is expensive. As of December 31, 2024,2025, we had cash, cash equivalents, and marketable securities totaling approximately $151.5$318.1 million. Additionally, we received a milestone payment of $10.0 million in the first quarter of 2025 under the terms of our U.S. Distribution Agreement with Nippon Shinyaku and we may potentially receive other additional development and sales-based milestones. We have not generated any revenues from the commercial sale of products. We will not be able to generate any product revenues until, and only if, we receive approval to sell our drug candidates from the FDA or other regulatory authorities.

The Company’s deramiocelDeramiocel technology is in late-stage development and may require further clinical testing before it may be approved by the FDA, or another regulatory authority in a jurisdiction outside the United States, which could take several years to complete, if ever. The Company’s failure to establish efficacy of deramiocelDeramiocel would have a material adverse effect on the Company. We cannot predict with any certainty the results of such clinical testing, including the results of our ongoing Phase 3 trial of our deramiocel product candidate for DMD. Additionally, we cannot predict with any certainty if, or when, we might commence any additional clinical trials of our exosome product candidates, whether we will be able to secure additional strategic partners, or whether our current trials will yield sufficient data to permit us to proceed with additional clinical development and ultimately submit an application for regulatory approval of our exosome product candidates in the United States or abroad, or whether such applications will be accepted by the appropriate regulatory agencies.

Our corporate headquarters and our manufacturing and research facilities are located in San Diego and in the greater Los Angeles, California area, a region known for seismic activity, as well as being susceptible to drought and fires. A significant natural disaster, such as an earthquake, flood or fire, occurring at our headquarters or manufacturing facilities, or at the facilities of any third-party manufacturer or vendor, could have a material adverse effect on our business, financial condition and results of operations. In addition, outbreaks of viruses, infectious diseases or pandemics (including, for example, the outbreak of the novel coronavirus (COVID-19)), terrorist acts or acts of war targeted at the United States, and specifically in the California region, or geopolitical conflicts, such as the Russia-Ukraine conflictconflict, Venezuela, and the conflicts in Gaza, Iran, and across the Middle East, could cause damage or disruption to us, our employees, facilities, contractors and collaborators, which could have a material adverse effect on our business, financial condition and results of operations.

Should we achieve our near-term product development milestones, of which no assurance can be given, our long-term viability will depend upon the expansion of our operations and the effective management of our growth, which will place a significant strain on our management and on our administrative, operational and financial resources, especially if we expand our business and operations internationally. To manage this growth, we maywill need to expand our facilities, augment our operational, financial and management systems and hire and train additional qualified personnel.personnel, including people and companies with expertise in commercialization activities, some of whom may be outside consultants who are not our full-time employees. If we are unable to manage our growth effectively, our business would be harmed.

We will need FDA approval to market and sell any of our product candidates in the United States and approvals from FDA-equivalent regulatory authorities in foreign jurisdictions to commercialize our product candidates in those jurisdictions. In order to obtain FDA approval of anyDeramiocel for the treatment of our product candidates,DMD, we submitted to the FDA a BLA for potential approval of deramiocel,Deramiocel, which BLAcurrently hasis been accepted by the FDA forunder review. This application requires significant research and animal testing, which are referred to as preclinical studies, as well as human testing, which are referred to as clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity, and novelty of the product candidate, and requires substantial resources for research, development, testing and manufacturing. We cannot predict whether our research and clinical approaches will result in drugs that the FDA considers safe for humans and effective for indicated uses. The FDA and other foreign regulatory agencies have substantial discretion in the approval process and may require us to conduct additional preclinical and clinical testing or to perform post-marketing studies. In addition, for biologic and cell therapy products, regulatory review may include scrutiny of our CMC package, manufacturing controls and facility readiness, and may require process changes, comparability data, or other remediation that could delay approval or limit the scope of an approved indication. The approval process may also be delayed by changes in government regulation, future legislation, administrative action or changes in FDA policy that occur prior to or during our regulatory review.

Our exosome technologies involve a relatively new therapeutic approach which will face both clinical and regulatory challenges. To date, and to the best of our knowledge, no products based on exosomes have been approved in the United States for therapeutic use. It is therefore difficult to accurately predict the developmental challenges we may face for our exosome technologies as they proceed through preclinical studies and clinical trials. In addition, because we have only conducted preclinical studies and, in collaboration with NIAID, recently initiated a Phase 1 clinical study, with our exosome technologies, we have not yet been able to assess their safety in humans, and there may be short-term or long-term effects from treatment with our exosomes that we cannot predict at this time. Also, animal models for the indications we may explore may not exist or may be difficult to obtain for our preclinical studies. As a result of these factors, we are unable to predict the time and cost of development of our exosome technologies and we cannot predict whether the application of our exosome technologies, or any similar or competitive exosome technologies, will result in regulatory approval of any products. There can be no assurance that any development problems we experience in the future related to our exosomes or any of our research programs will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also decide to discontinue exosome development programs if we believe that there is excessive competition in a disease target. Any of these factors may prevent us from completing our preclinical studies or any clinical trials that we may initiate or commercializing any product candidates we may develop on a timely or profitable basis, if at all.

We hope to file additional INDs over the next several years, including with respect to our exosome technologies in one or more indications.indications as well as potentially in BMD. However, the timing of our filing of these INDs is primarily dependent on receiving further data from our preclinical studies, having sufficient processes in place in connection with the manufacturing of the exosomes and the availability of necessary funding for any potential clinical trial.

Changes in regulatory requirements and guidance may occur, and we may need to amend clinical trial protocols to reflect these changes with appropriate regulatory authorities. In August 2023, the FDA published a guidance document, Informed Consent, Guidance for IRBs, Clinical Investigators, and Sponsors, which supersedes past guidance and finalizes draft guidance on informed consent. The FDA’s new guidance presents evolving requirements for informed consent which may affect recruitment and retention of patients in clinical trials. Further, in December 2023, the FDA published a final rule, Institutional Review Board Waiver or Alteration of Informed Consent for Minimal Risk Clinical Investigations, which allows exceptions from informed consent requirements when a clinical investigation poses no more than minimal risk to the human subject and includes appropriate safeguards to protect the rights, safety, and welfare of human subjects. Modifications to informed consent or other clinical trial requirements may affect enrollment or retention of patients, require modifications to trial documents and may cause delays to the trial.

On June 28, 2024, the U.S. Supreme Court issued an opinion holding that courts reviewing agency action pursuant to the Administrative Procedure Act (APA) “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The decision willmay have a significant impact on how lower courts evaluate challenges to agency interpretations of law, including those by the U.S. Department of Health and Human Services, CMS, FDA and other agencies with significant oversight of the biopharmaceutical industry. The new framework is likely to increase both the frequency of such challenges and their odds of success by eliminating one way in which the government previously prevailed in such cases. As a result, significant regulatory policies may be subject to increased litigation and judicial scrutiny.

In addition, federal agency activities, priorities, leadership, policies, rulemaking, communications, spending, and staffing may be significantly impacted by election cycles.cycles and legislative developments. For example, the current presidential administration’sadministration has signaled its continued commitment to significantly reduce government spending through cuts to federal healthcare programs and reductions in the workforces of key government agencies, such as the U.S. Department of Health and Human Services, CMS and FDA. Efforts by the current administration to further limit federal agency budgets or personnel may result in reductions to agency budgets, employees, and operations,operations. whichThe mayadministration leadand agencies have also made abrupt announcements about new or changed regulatory policies, such as policies related to sloweruse responseof timesAI and longerto review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates. Any resulting changes in regulation may result in unexpected delays, increased costs, or other negative impacts on our business that are difficult to predict.applications.

In the event that an adverse safety issue, clinical hold or other adverse finding occurs in one or more of our clinical trials, once initiated, or in a clinical trial conducted by a third partythird-party sponsor or investigator using the same product candidate, such event could adversely affect our other clinical trials and ability to obtain marketing approval. Moreover, there is a relatively limited safety data set for product candidates using an exosome platform. An adverse safety issue or other adverse finding in a clinical trial conducted by a third-party with a product candidate similar to ours could adversely affect our clinical trials.

There are manynumerous pharmaceutical companies,and biotechnology companies, publicacademic and private universities,institutions, government agencies and research organizations that compete with us in developing varioustherapies approachesfor toDuchenne themuscular treatmentdystrophy of (“DMD which includes competitors both”) in the United States and internationally. WithIf deramiocel,approved, weDeramiocel expectwill tocompete facewith competitionboth fromcurrently existingapproved productstherapies and productsproduct candidates in development. AtSeveral thisexon-skipping time,therapies therehave arereceived fouraccelerated approval from the FDA conditionallyfor approvedgenetically exondefined skippingsubsets drugs:of DMD patients, including EXONDYS 51® (eteplirsen), AMONDYS 45® (casimersen), and VYONDYS 53® (golodirsen), which are phosphorodiamidate morpholino oligomers (“PMOs approved for the treatment of DMD patients amenable to Exon 51, Exon 45 and Exon 53 skipping, respectively, and are”) marketed by Sarepta Therapeutics, Inc.,as andwell as VILTEPSO® (vitolarsenviltolarsen), a PMO approved for the treatment of DMD patients amenable to Exon 53 skipping, which is marketed by Nippon Shinyaku through its U.S. subsidiary, NS Pharma, Inc. Currently,In Sarepta’saddition, gene therapy approaches are being developed to deliver functional microdystrophin geneto therapy,muscle Elevidyscells, including ELEVIDYS® (delandistrogene moxeparvovec), also developed by Sarepta Therapeutics, which is approved forin the treatmentUnited ofStates ambulantfor certain individuals with DuchenneDMD whoaged are at least 4four years of age and conditionallyolder. approved for non-ambulant individuals with Duchenne. There are multipleNumerous other companies focused onare developing genetic basedand non-genetic therapies thatdesigned to target dystrophin mechanismsexpression andor non-dystrophinother mechanisms forassociated thewith treatmentdisease ofprogression in DMD.

We have received orphan drug status for deramiocelDeramiocel for the treatment of DMD.DMD from the U.S. and EMA. Even though we have received orphan drug designation (“ODD”) as described above, we may not be the first to obtain marketing approval for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. For any product candidate for which we have been or will be granted ODD in a particular indication, it is possible that another company also holding ODD for the same product candidate will receive marketing approval for the same indication before we do. If that were to happen, our applications for that indication may not be approved until the competing company’s period of exclusivity expires.

In addition to manufacturing deramiocelDeramiocel for its own clinical trials, Capricor provided deramiocelDeramiocel for investigational purposes in two clinical trials sponsored by CSMC. Additionally, we recently were selected to be part of Project NextGen, an initiative by the U.S. Department of Health and Human Services to advance a pipeline of new, innovative vaccines for COVID-19. As part of Project NextGen, the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, willis conductconducting a Phase 1 clinical study with our StealthX™ vaccine, subject to regulatory approval.vaccine. NIAID's Division of Microbiology and Infectious Diseases (“DMID”) wouldis overseeoverseeing the study.

Our research and development activities, preclinical studies, clinical trials, and manufacturing and marketing of our potential products are subject to extensive regulation by the FDA and other regulatory authorities in the United States, as well as by regulatory authorities in other countries. In the United States, our product candidates are subject to regulation as biological products or as combination biological products/medical devices under the Federal Food, Drug and Cosmetic Act, the Public Health Service Act and other statutes, and as further provided in the Code of Federal Regulations. Different regulatory requirements may apply to our products depending on how they are categorized by the FDA under these laws. These regulations can be subject to substantial and significant interpretation, addition, amendment or revision by the FDA and by the legislative process. The FDA may determine that we will need to undertake clinical trials beyond those currently planned. Furthermore, the FDA may determine that results of clinical trials do not support approval for the product.product or they may determine that our trials were not well-controlled or were deficient in some other way. Similar determinations may be encountered in foreign countries including determinations that our manufacturing processes being utilized in the United States are not compliant with the regulations adopted in those foreign countries. The FDA will continue to monitor products in the market after approval, if any, and may determine to withdraw its approval or otherwise seriously affect the marketing efforts for any such product. The same possibilities exist for trials to be conducted outside of the United States that are subject to regulations established by local authorities and local law. Any such determinations would delay or deny the introduction of our product candidates to the market and have a material adverse effect on our business, financial condition, and results of operations.

Regulatory authorities in the United States and other jurisdictions may not accept clinical data generated outside their jurisdiction, and obtaining foreign approvals may require additional studies or clinical trials. If we decide to expand or conduct one or more of our clinical trials to investigative sites in Europe, Japan, or other countries outside of the United States, we will have additional regulatory requirements that we will have to meet in connection with our manufacturing, distribution, use of data and other matters. For example, if we decide to conduct our trials in Europe, we may have to move our manufacturing facility to a facility located in Europe, enter into an agreement with a European manufacturer to manufacture our product candidates for us, enter into an agreement with a domestic manufacturer who maintains an acceptable cGMP facility or ensure that our facility meets Japanese, European or other foreign specifications. Any of those options would involve a significant monetary investment, time delays, and increased risk and may impact the progress of our clinical trials and regulatory approvals.

If we or current or future collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions and substantial penalties, which could affect our ability to develop, marketmarket, and sell our products and may harm our reputation.

Although we do not currently have any products on the market, if our therapeutic candidates or clinical trials become covered by federal health carehealthcare programs, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal, state and foreign governments of the jurisdictions in which we conduct our business. Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any therapeutic candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse, transparency, and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our therapeutic candidates for which we obtain marketing approval. Some of our pre-commercial activities also may be subject to some of these laws. For more information on potentially applicable healthcare laws and regulations, See Part I, Item 1 – Other U.S. Healthcare FraudLaws and AbuseCompliance Laws.Requirements.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal and state enforcement bodies have increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictionsconvictions, and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

Efforts to ensure that our current and future business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs. If our operations are found to be in violation of any of these or any other healthcare regulatory laws that may apply to us, we may be subject to significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare, MedicaidMedicaid, and other federal healthcare programs or similar programs in other countries or jurisdictions, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement and curtailment or restructuring of our operations, any of which could adversely impact our ability to operate our business and our results of operations.

Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation, even the mere issuance of a subpoena or the fact of an investigation alone, regardless of the merit, could result in negative publicity, a drop in our share price, or other harm to our business, financial condition and results of operations. Defending against any such actions could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, timetime, and resources.

Any drugs we develop may become subject to unfavorable pricing regulations, third-party coveragecoverage, and reimbursement practices or healthcare reform initiatives, thereby harming our future business prospects.

We currently expect that certain drugs we develop may need to be administered under the supervision of a physician on an outpatient basis. Under currently applicable U.S. law, certain drugs that are not usually self-administered (including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Specifically, Medicare Part B coverage may be available for eligible beneficiaries when the following, among other requirementsrequirements, have been satisfied:

Third-party payors often rely upon Medicare coverage policies and payment limitations in setting their own reimbursement rates. These coverage policies and limitations may rely, in part, on compendia listings for approved therapeutics. Our inability to promptly obtain relevant compendia listings, coverage, and adequate reimbursement from both government-funded and private payors for new drugs that we develop and for which we obtain regulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our financial condition. See Part I, Item 1 – Healthcare Reform for additional detail on legislative and regulatory changes that could affect our operations.

U.S. federal government agencies currently face potentially significant spending reductions. For example, as a result of the Budget Control Act of 2011, the Bipartisan Budget Act (“BBA”), and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an annual 2% reduction to Medicare payments took effect on April 1, 2013, and has been extended into through the first eight months of the fiscal year 2032 sequestration order. The U.S. federal budget remains insubject flux,to uncertainty and change, which could, among other things, result in additional cutsreductions toin Medicare payments to providers and otherwise affect federal spending on clinical and preclinical research and development. The Medicare program is frequently mentioned as a target for spending cuts. The full impact on our business of any future cuts in Medicare or other programs is uncertain. In addition, we cannot predict anythe impact whichthat the actions of the current Trump administration and the U.S. Congress may have on the federal budget. If federal spending is reduced, and staffing reductions are put into effect, these actions will also impact the ability of relevant agencies, such as the FDA, CMS, HHS,the Department of Health and Human Services, or the National Institutes of Health, to continue to function at current levels. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve drug research and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.

In 2022, we completed construction of our new primary manufacturing facility located within our Researchresearch and Developmentdevelopment Facilityfacility in San Diego, California as we prepare for a potential commercial launch. This facility is designed to produce GMP deramiocel productDeramiocel for clinical and potential commercial use, subject to FDA approval. It is to be determined whether theThe FDA willconducted ultimatelya approvepre-license commercialinspection manufacturing(“PLI”) at this facility. We are using product manufactured fromof our San Diego manufacturing facility toas support Cohort Bpart of the ongoingBLA HOPE-3review trialprocess. andThe supportinginspection ourconcluded OLEwith trials.a WeForm recently483 enteredcontaining intoseveral an amendmentobservations, to ourwhich leasethe addingCompany anprovided additionalwritten approximateresponses. 22,000The squareFDA feetsubsequently ofconfirmed spacethat forall continued manufacturing expansion. We planresponses to buildthe additionalForm cleanrooms483 inobservations thiswere expandedfound space suitable for commercial manufacturing, subject to FDA approval.acceptable.

Additionally, weWe also maintain a portion of our laboratories,laboratory, research and manufacturing facilities in leased premises at Cedars-Sinai Medical Center (“CSMC”) in Los Angeles, California. InDeramiocel thatmanufactured portionat this facility has been used to support our current and prior clinical studies, including Cohort A of the leasedHOPE-3 premisestrial. where we manufacture deramiocel,Although we believe that we follow current good manufacturing practices to the extent that they are applicable to the stage of our clinical programs, although our facilityprograms at the CSMC facility, the facility is not current Good Manufacturing Practices (“cGMP”) qualified for commercial cGMP manufacturing. Capricor has been manufacturing deramiocel in this facility for our current and previous studies including Cohort A of the HOPE-3 trial. Our planslease to useat the CSMC facility for future trials could change if we fail to meet the specifications necessary to produce our product in a qualified manner. Currently, our CSMC Facilities Lease is scheduled to expire on July 31, 2026.2026, Weand havewe beencurrently givenplan noto assurancesvacate the premises and cease manufacturing operations at that thelocation CSMCat Facilitiesthat Lease for the manufacturing space will be continued beyond July 31, 2026.time.

In addition, theThe FDA may consider the data we provide as part of our BLA is insufficient to provedetermine that the drugmanufacturing process used inat our San Diego facility is not sufficiently comparable to the drugprocess producedused into manufacture product at our Los Angeles facility andthat usedsupplied in our priorearlier clinical studies.trials. ThisIf couldthe resultFDA indoes usnot beingagree requiredthat tothese conductprocesses furtherare testingcomparable, andwe may result in us beingbe required to conduct additional clinicalanalytical and/ortesting, nonclinical studies or clinical trials prior to BLAapproval approval.of our BLA. Even if we do complete theour clinical trial,trials theare studycompleted may notand meet itstheir prespecified endpoints, and even if it does, the FDA may still disagree with our determinationconclusions thatregarding the trialsufficiency isof sufficientthe data to support the approval of our BLA application.BLA.

We obtain the donor hearts from which our CDCs are manufactured from organ procurement organizations (“OPOs”). There is no guarantee that the OPOs which currently provide donor hearts to us will be able to continue to supply us with donor hearts in the future or, in that case, that an alternative OPO will be available to us. If those OPOs or an alternative OPO is not able or willing to supply us with donor hearts, we would be unable to produce our CDCs or CDC-exosomes and the development of our lead product candidate would be significantly impaired and possibly terminated. Additionally, OPOs are subject to regulations of various government agencies. There is no guarantee that laws and regulations pursuant to which our OPOs provide donor hearts will not change, making it more difficult or even impossible for the OPOs to continue to supply us with the hearts we need to produce our product candidates. There are also no guarantees that the OPOs which supply hearts have followed federal or state regulations addressing the donation of human organs and other regulatory matters. We are required to obtain and maintain certain licenses in connection with our manufacturing facilities and activities. There is no guarantee that any licenses issued to us will not expire, be revoked, or forfeited by operation of law or otherwise. If we were denied any required license or if any of our licenses were to be revoked or forfeited, we would suffer significant harm. Additionally, if a serious adverse event in any of our clinical trials or during any time when our product is being commercially distributed were to occur during the period in which any required license was not in place, we could be exposed to additional liability if it were determined that the event was due to our fault and we had not secured the required license. Other states may impose additional licensing requirements upon us which, until obtained, would limit our ability to conduct our trials or sell our product in such states.

We are currently producing doses of deramiocelDeramiocel in order to conduct our ongoing clinical trials as well as prepare for potential commercial launch. The process of manufacturing our products is complex, highly regulated and subject to multiple risks. The complex processes associated with the manufacture of our product candidates expose us to various manufacturing challenges and risks, which may include delays in manufacturing adequate supply of our product candidates, limits on our ability to increase manufacturing capacity, and the potential for product failure and product variation that may interfere with preclinical and clinical trials, along with additional costs. We also may make changes to our manufacturing process at various points during development, and even after commercialization, for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate, or other reasons. Such changes carry the risk that they will not achieve their intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of current or future clinical trials, or the performance of the product, once commercialized. In some circumstances, changes in the manufacturing process may require us to perform ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials. For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical trials or at earlier portions of a trial to the product used in later clinical trials or later portions of the trial. We may also make further changes to our manufacturing process before or after commercialization, and such changes may require us to show the comparability of the resulting product to the product used in the clinical trials using earlier processes. We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process. If clinical data are not ultimately comparable to that seen in the earlier trials in terms of safety or efficacy, we may be required to make further changes to our process and/or undertake additional clinical and/or nonclinical testing, which could significantly delay the clinical development or commercialization of the associated product candidate.

Although we continue to build on our experience in manufacturing our product candidates, we have no experience, as a company, manufacturing product candidates for commercial supply. We may never be successful in manufacturing product candidates in sufficient quantities or with sufficient quality for commercial use. Our manufacturing capabilities could be affected by cost-overruns, unexpected delays, supply chain failures, equipment failures, labor shortages, operator error, natural disasters, unavailability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

In order to manufacture deramiocelDeramiocel in quantities sufficient to meet our anticipated commercial opportunity in the U.S. and other global markets, we will need to continue to increase our manufacturing capabilities. Scaling manufacturing from clinical to commercial production may introduce additional process variability, equipment requirements, and regulatory scrutiny. We may encounter technical challenges to increasing the scale at which we manufacture deramiocel,Deramiocel, including with respect to material procurement and quality control and assurance. An increase in production could make it more difficult for us to comply with quality system regulations or other applicable requirements that are currently enforced by the FDA and other regulatory authorities, or that may be introduced in the future, in both the United States and in other countries. Commercial scale production of deramiocelDeramiocel on a continuing basis also will require us to continue to hire and retain additional management and technical personnel who have the necessary manufacturing experience and skills. We might not successfully identify, hire or retain qualified personnel on a timely basis or at all. Our inability to increase the scale of our manufacturing of deramiocelDeramiocel could impair our ability to generate revenue and adversely affect market acceptance of our product.

Additionally, we rely on third-party vendors forto perform certain tests (sterility,such etc.as sterility testing) required for product release. If these vendors are unable to perform the services,required whetherservices due to capacity,capacity limitations, availability of materials, regulatory constraints or other constraints, including federal and state regulations,factors, we will notmay be ableunable to sellrelease deramiocelproduct for clinical or commercial use until we can retain an alternative vendors toare supply these services.retained. We may be unable to transition to alternative methodsvendors in a timely or cost-effective mannermanner, or at all, which could harm our business and results of operations.

The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the related audited consolidated notes to those statements included elsewhere in this Annual Report on Form 10-K. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, includingincluding, but not limited to, those set forth under Item 1A., “Risk Factors” or elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements.

We have no commercial product sales to date and will not have the ability to generate any commercial product revenue until after we have received approval from the FDA or equivalent foreign regulatory bodies to begin selling our product candidates. Developing biological products is a lengthy and very expensive process. Even if we obtain the capital necessary to continue the development of our product candidates, whether through a strategic transaction or otherwise, we do not expect to complete the development of a product candidate for several years, if ever. To date, most of our development expenses have related to our product candidates, consisting of deramiocelDeramiocel and our exosome technologies. As we proceed with the clinical development and potential commercialization of deramiocel,Deramiocel, and as we further develop our exosome technologies, our expenses will further increase. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance the development of our products and our clinical programs. Our recent major sources of working capital have been primarily proceeds from public equity sales of securities and upfront payments pursuant to our U.S. and Japan Distribution Agreements with Nippon Shinyaku. While we pursue our preclinical and clinical programs, we continue to explore potential partnerships for the development of one or more of our product candidates in the U.S. and in other territories across the world, subject to the rights of Nippon Shinyaku.

Clinical Development Income. Clinical development income for the years ended December 31, 20242025 and 20232024 was zero and approximately $22.3 million and $25.2 million, respectively. As of December 31, 2024, the Company has fully recognized $50.0 million in development milestone payments received from Nippon Shinyaku related to the Exclusive Commercialization and Distribution Agreement (the “U.S. Distribution Agreement”). The upfront payment of $30.0 million and the first milestone payment of $10.0 million was ratably recognized as revenue using a proportional performance method in relation to the completion of the HOPE-3 clinical trial (Cohort A) whereas the $10.0 million related to the second milestone payment was recognized as revenue at the point in time when the BLA was submitted in December 2024.

Other Income (Expense)

The following table summarizes our liquidity and capital resources as of and for each of our last two fiscal years, and our net increase (decrease) in cash, cash equivalents, and marketable securities as of and for each of our last two fiscal years and is intended to supplement the more detailed discussion that follows. The amounts stated in the tables below are expressed in thousands. We estimatebelieve that our current cash, cash equivalents, and marketable securities will beare sufficient to fund our operating expenses and capital expenditure requirements intofor 2027.at least the next twelve months from the issuance date of these consolidated financial statements.

Our total cash, cash equivalents, and marketable securities as of December 31, 20242025 were approximately $151.5$318.1 million compared to approximately $39.5$151.5 million as of December 31, 2023.2024. The increase in cash, cash equivalents and marketable securities from December 31, 20242025 as compared to December 31, 20232024 is primarily due to an underwritten public offering in OctoberDecember 2024,2025, equity financings through our at-the-market offering and aproceeds $15.0received millionfrom privatewarrants placementand withoptions Nippon Shinyaku,exercised, which is partially offset by our net loss of approximately $40.5$105.0 million.million, as well as investment made in purchases of property and equipment, and payments made for construction in progress. The net loss for the year ended December 31, 20242025 was driven by the increased R&D expenses in connection with our clinical program in DMD. As of December 31, 2024,2025, we had approximately $25.0$50.2 million in total liabilities, of which approximately $12.0 million relates to deferred revenue and approximately $1.5$14.5 million related to lease liabilities in connection with our operating lease right-of-use assets. As of December 31, 2024,2025, we had approximately $142.4$287.1 million in net working capital.

Cash used in operating activities was approximately $40.0$69.8 million and $25.6$40.0 million for the years ended December 31, 20242025 and 2023,2024, respectively. The net change of approximately $14.4$29.8 million in cash from operating activities is due to thean milestoneapproximately payment of $10.0$64.6 million fromincrease Nipponin Shinyakunet andloss reductionfor ofthe deferredyears revenue.ended December 31, 2025 as compared to the same period in 2024. Furthermore, there was an increase of approximately $2.4$7.2 million in stock-based compensationcompensation, approximately $3.0 million in accrued interest liability, approximately $10.3 million in receivables, approximately $12.3 million in deferred revenue, and anapproximately increase$4.0 million in netaccounts losspayable ofand approximatelyaccrued $18.2 millionexpenses for the year ended December 31, 20242025 as compared to the same period in 2023. Furthermore, there was a net change of approximately $0.6 million in accounts payable and accrued expenses.2024. To the extent we obtain sufficient capital and/or long-term debt funding and are able to continue developing our product candidates, including if we expand our platform technology portfolio, engage in further research and development activities, and, in particular, conduct preclinical studies and clinical trials, we expect to continue incurring substantial losses, which will generate negative net cash flows from operating activities.

We had cash flow provided by investing activity of approximately $97.5 million for the year ended December 31, 2025 and cash flow used in investing activityactivities of approximately $116.2 million for the year ended December 31, 2024 and cash flow provided by investing activities of approximately $5.1 million for the year ended December 31, 2023.2024. The change in cash flow by investing activities for the year ended December 31, 20242025 as compared to the same period of 20232024 is due to the net effect from purchases, sales, and maturities of marketable securities as well as purchases of property and equipmentequipment, leasehold improvements and leaseholdconstruction improvements.in progress.

We had cash flow provided by financing activities of approximately $152.8$248.9 million and $25.6$152.8 million for the years ended December 31, 20242025 and 2023,2024, respectively. The increase in cash provided by financing activities for the year ended December 31, 20242025 as compared to the same period of 20232024 is primarily due to the net proceeds from the sale of common stock.stock and from exercises of warrants and stock options. During 20242025 we received net proceeds from the sale of stock of approximately $152.3$237.0 million compared to approximately $25.5$152.3 million over the same period of 2023.2024. During 2025 we received net proceeds from exercises of warrants and stock options of approximately $11.9 million compared to approximately $0.5 million in 2024.

From inception through December 31, 2024,2025, we financed our operations primarily through private and public sales of our equity securities, government grants, and payments from distribution agreements and collaboration partners. As we have not generated any revenue from the commercial sale of our products to date, and we do not expect to generate revenue for several years, if ever, we will need to raise substantial additional capital to fund our research and development, including our long-term plans for clinical trials and new product development. We may seek to raise additional funds through various potential sources, such as equity and debt financings, government grants, or through strategic collaborations and license agreements or other distribution agreements. We can give no assurances that we will be able to secure such additional sources of funds to support our operations, complete our clinical trials or if such funds become available to us, that such additional financing will be sufficient to meet our needs. Moreover, to the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates or grant licenses on terms that may not be favorable to us.

Our estimates regarding the sufficiency of our financial resources are based on assumptions that may prove to be wrong. We may need to obtain additional funds sooner than planned or in greater amounts than we currently anticipate. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:

On January 24, 2022, Capricor entered into a Commercialization and Distribution Agreement (the “U.S. Distribution Agreement”) with Nippon Shinyaku,Shinyaku a- JapaneseUnited corporation.States)

Under the terms of the U.S. Distribution Agreement, Capricor will be responsible for the clinical development and manufacturing of deramiocel.Deramiocel. Nippon Shinyaku and NS Pharma, Inc. (its wholly-owned U.S. subsidiary) will be responsible for the distribution of deramiocelDeramiocel in the United States. Pursuant to the U.S. Distribution Agreement, Capricor received an upfront payment of $30.0 million in 2022.million. The first milestone payment of $10.0 million was paid upon completion of the futility analysis of the HOPE-3 trial whereby the outcome was determined to be not futile. The second milestone payment of $10.0 million was triggered in December 2024 upon submission of the BLA to the FDA seeking marketing approval of deramiocelDeramiocel in the United States. Additionally, there is another potential milestone of $80.0 million due to Capricor upon receipt of marketing approval. The foregoing milestones are considered development milestones under the terms of the U.S. Distribution Agreement. Further, there are various potential sales-based milestones, if commercialized, tied to the achievement of certain sales thresholds for annual net sales of deramiocelDeramiocel of up to $605.0 million. Subject to regulatory approval, Capricor will have the right to receive a share of product revenue which falls between 30 and 50 percent.

Under the terms of the Japan Distribution Agreement, Capricor received an upfront payment of $12.0 million in the first quarter of 2023 and in addition, Capricor will potentially receive additional development and sales-based milestone payments of up to approximately $89.0 million, subject to foreign currency exchange rates, and a meaningful double-digit share of product revenue. Nippon Shinyaku will be responsible for the distribution of deramiocelDeramiocel in Japan. Capricor will be responsible for the conduct of clinical development and regulatory approval in Japan, as may be required, as well as the manufacturing of deramiocel.Deramiocel. Subject to regulatory approval, Capricor or its designee will hold the Marketing Authorization in Japan if the product is approved in that territory.

On September 16, 2024, Capricor entered into a Binding Term Sheet (the “Term Sheet”) with Nippon Shinyaku for the commercialization and distribution of deramiocelDeramiocel for the treatment of DMD in the European region, as defined in the Term Sheet. Subject to finalization of a definitive agreement, under the terms of the Term Sheet, Capricor would be responsible for the development and manufacturing of deramiocelDeramiocel for potential approval in the European region. Nippon Shinyaku would be responsible for the sales and distribution of deramiocelDeramiocel in the European region. Subject to regulatory approval, Capricor would receive a double-digit share of product revenue and additional development and sales-based milestone payments. If the definitive agreement is entered into on the same economic terms as the term sheet,into, Capricor will receive an upfront payment of $20.0 million upon execution of the definitive agreement, with potential additional development and sales-based milestone payments of up to $715.0 million. At this time, Capricor and Nippon Shinyaku have entered into variousseveral amendments to the Term Sheet, pursuant to which the parties agreed to extend the date during which the parties shall negotiate the terms of the definitive agreement to April 30,1, 2025.2026.

Part 1, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 17, 2026, describes important risk factors that could cause our business, financial condition, results of operations and prospects to differ significantly from those suggested by forward-looking statements made in this Quarterly Report on Form 10-Q or otherwise presented by us from time to time. Other than the addition of, and modifications to the risk factors listed below, there have been no material changes from the risk factors previously described under Part I, Item 1A of the Form 10-K.10-K and under Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.

We have filed a Complaint for Equitable Relief and Application for Preliminary Injunction (the “Complaint”) in the Superior Court of New Jersey, Chancery Division, Bergen County.Jersey. The Complaint alleges that the defendants named therein, NS, have failed to adequately prepare for the commercial launch of the Company’s product Deramiocel in the United States pursuant to the Commercialization and Distribution Agreement dated January 25, 2022, between the Company and NS (the “U.S. Distribution Agreement”), and have otherwise materially breached the terms of the U.S. Distribution Agreement. In the Complaint, the Company seeks rescission of the U.S. Distribution Agreement, declaratory judgment that the Company has the right to distribute Deramiocel directly or through distributors other than NS, and other equitable remedies. Capricor withdrew the motion, without prejudice, having determined that resolving this contractual dispute in arbitration following the FDA's decision would give the parties a more complete regulatory record to work from. The Company estimates arbitration to begin this fall.

Litigation such as this lawsuitIt is inherentlydifficult uncertain,to predict the outcome of any dispute, and there can be no assurance that we will prevail in this matter or obtain the remedies we seek. The litigationarbitration process may continue for an extended period of time, may be expensive and time-consuming, and may divert the attention and resources of management and other personnel away from our business operations and strategic objectives. In addition, NS mayhas assertasserted counterclaims against us. An adverse outcome in the litigationarbitration or in any counterclaims could materially and adversely affect our business, financial condition, results of operations and prospects.

If we are unsuccessful in the litigation,arbitration, we may be unable to prevent NS from engaging in activities that we believe are harmful to our business. Any unfavorable ruling could adversely affect our competitive position, reduce potential revenues, impair our ability to commercialize our products, or otherwise negatively impact the market price of our common stock.

Regardless of the outcome, litigationarbitration may generate negative publicity, create uncertainty among customers, distributors, suppliers or collaboration partners, and adversely affect our ability to enter into strategic transactions or obtain financing on favorable terms.

Should we achieve our near-term product development milestones, of which no assurance can be given, our long-term viability will depend upon the expansion of our operations and the effective management of our growth, which will place a significant strain on our management and on our administrative, operational and financial resources, especially if we expand our business and operations internationally. The extent of our need to expand our operations, particularly with respect to a commercial sales organization, will heavily depend on the outcome of our litigationdispute with NS and, if we are successful in such litigation,dispute, whether we commercialize Deramiocel in the United States directly or through one or more distributors. To manage this growth, we will need to expand our facilities, augment our operational, financial and management systems and hire and train additional qualified personnel, including people and companies with expertise in commercialization activities, some of whom may be outside consultants who are not our full-time employees. If we are unable to manage our growth effectively, our business would be harmed.

If we are unsuccessful in our litigationdispute with NS, a substantial portion of our potential revenue for the foreseeable future would depend on milestone, revenue sharing and other payments received from Nippon Shinyaku under our distribution agreements, pursuant to which Nippon Shinyaku has exclusive distribution rights for Deramiocel in the United States and Japan for a significant period of time, with only limited rights of either party to terminate these agreements. In that event, if Nippon Shinyaku failed to successfully commercialize Deramiocel in the United States or Japan, whether due to strategic priorities, financial constraints, insufficient commercial resources, inadequate performance or other factors, our ability to generate revenue from Deramiocel in those territories would be materially limited, which would adversely affect our business, financial condition and results of operations. Even if we are successful in our litigationdispute with NS, we may ultimately partner with one or more distribution partners for the commercialization of Deramiocel in the United States or other territories, and in that event we would depend upon the performance of those distribution partners. The failure of any such distribution partner to successfully commercialize Deramiocel could adversely affect our business, financial condition and results of operations.

We are actively looking into potential additional strategic partnerships for our product candidates, particularly for Deramiocel in additional territories outside the United States and Japan, and for our exosomes product candidates. To the extent that we are successful in our litigationdispute against NS, we may also explore strategic partnerships for the commercialization of Deramiocel in the United States. If we do not establish strategic partnerships, we potentially will have to undertake development and commercialization efforts with respect to our product candidates on our own, which would be costly and adversely impact our ability to commercialize any future products or product candidates. If we enter into any strategic partnerships with pharmaceutical, biotechnology or other life science companies, we will be subject to a number of risks, including:

Capricor Therapeutics, Inc. is a biotechnology company focused on the development and potential commercialization of cell and exosome-based therapeutics for the treatment of Duchenne muscular dystrophy (“DMD”), a rare genetic disorder characterized by progressive muscle degeneration and premature death, as well as other diseases with significant unmet medical need. Since our inception, we have devoted substantial resources to the development of our lead product candidate, Deramiocel, a cell therapy designedaimed to addresstreat the cardiacskeletal and skeletalcardiac muscle complications associated with DMD, as well as to advancing our exosome-based platform technologies, developing manufacturing capabilities and supporting our research and development activities. Our Biologics License Application (“BLA”) for Deramiocel for the treatment of DMD is currently under review by the U.S. Food and Drug Administration (“FDA”), with a current Prescription Drug User Fee Act (“PDUFA”) target action date of August 22, 2026, for potential approval in the United States. We currently have no products approved for commercial sale. Our ability to generate product revenue and achieve profitability will depend on the successful development, regulatory approval and commercialization of Deramiocel and any other product candidates we may develop. If approved and if our litigation against NS Pharma, Inc. and Nippon Shinyaku Co., Ltd. (collectively, “NS”) is successful, we intend to commercialize Deramiocel in the United States directly or through distributors, and we may also seek commercialization through strategic partners in other select international markets.

Our clinical development program for Deramiocel has focused on adolescents and young adults with DMD, including many patients who are non-ambulatory and experiencing progressive cardiacskeletal and skeletalcardiac muscle decline. Capricor has administered approximately 1,300 intravenous infusions across our clinical program to over 200 patients with DMD in three separate clinical trials. We believe therapies that address inflammatory and fibrotic processes contributing to muscle degeneration may provide potential benefit across a broad population of individuals with DMD.

We have conducted a comprehensive clinical development program evaluating Deramiocel in patients with DMD, including randomized controlled trials and long-term follow-up studies designed to assess safety and efficacy across multiple measures of disease progression. These studies include the Phase 3 HOPE-3 trial, the Phase 2 HOPE-2 trial and itseach of their ongoing open-label extension,extension studies, and the earlier Phase I/II HOPE-Duchenne clinical trial.

Following a Type A meeting with the FDA in August 2025, we aligned with the Agency on a regulatory path forward to address the CRL, including the submission of additional clinical data from the Phase 3 HOPE-3 trial. We subsequently submitted our response to the CRL, which the FDA accepted as a complete response and classified as a Class 2 resubmission, assigning a new PDUFA target action date of August 22, 2026. If approved, Deramiocel has the potential to become the first therapy designed to address both skeletal and cardiac muscle manifestations of DMD.

Exosome Platform: Engineered Exosome-Based Therapeutics: We are focused on developing a precision-engineered exosome platform technology that has the potential to deliver defined sets of effector molecules that exert their effects through defined mechanisms of action. AtPending thisfurther time,regulatory clarity for our DMD program, we areplan exploringto continue to explore the use of our proprietary StealthX™ exosome platform for a broad range of therapeutic applications including targeted RNA, protein and small molecule therapeutics to treat or prevent a variety of diseases.

As of MarchJune 31,30, 2026, we had cash, cash equivalents, and marketable securities totaling approximately $278.6$237.9 million. Since our inception, we have received approximately $600 million through a combination of equity financings, strategic collaborations, grants and other non-dilutive funding sources.

Due to our significant research and development expenditures, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were approximately $33.9$40.7 million and approximately $24.4$25.9 million, for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Our net losses were approximately $74.7 million and approximately $50.3 million, for the six months ended June 30, 2026 and 2025, respectively. As of MarchJune 31,30, 2026, we had an accumulated deficit of approximately $338.8$379.6 million. We expect to incur significant expenses and operating losses for the foreseeable future.

As we seek to develop and commercialize Deramiocel or any other product candidates including those related to our exosomes program, we anticipate that our expenses will increase significantly and that we will need additional funding to support our continuing operations. Until such time when we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations or other distribution agreements. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at all. If we fail to raise capital or other potential funding or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of Deramiocel or our other product candidates. The timing and scale of any commercial launch expenditures, and our ability to access capital on favorable terms, may be affected by the outcome of the FDA’s review of the BLA.

We have no commercial product sales to date and will not have the ability to generate any commercial product revenue until after we have received approval from the FDA or equivalent foreign regulatory bodies to begin selling our product candidates. Developing biological products is a lengthy and very expensive process. To date, most of our development expenses have related to our product candidates, consisting of Deramiocel and our exosome technologies. As we proceed with the clinical development and potential commercialization of Deramiocel, and as we further develop our exosome technologies, our expenses will further increase. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance the development of our products and our clinical programs. Our recent major sources of working capital have been primarily proceeds from public equity sales of securities and upfront payments pursuant to our U.S. and Japan Distribution Agreements with Nippon Shinyaku. While we pursue our preclinical and clinical programs, we continue to explore potential partnerships for the development of one or more of our product candidates in the U.S. and in other territories across the world, subject to the rights of Nippon Shinyaku and the outcome of our litigationdispute against NS.

Clinical Development Income. Clinical development income for the three and six months ended MarchJune 31,30, 2026 and 2025 was zero.

R&D expenses for the three months ended MarchJune 31,30, 2026 increased by approximately $8.5$6.8 million, or 45%,31%, compared to the three months ended MarchJune 31,30, 2025. The increase was primarily driven by the following:

G&A expenses for the three months ended MarchJune 31,30, 2026 increased by approximately $3.3$8.4 million, or 55%,148%, compared to the three months ended MarchJune 31,30, 2025. The increase was primarily driven by the following:

Investment Income. Investment income for the three months ended MarchJune 31,30, 2026 and 2025 was approximately $2.9$2.2 million and $0.7$1.8 million, respectively. Investment income for the six months ended June 30, 2026 and 2025 was approximately $5.1 million and $2.5 million, respectively. The increase in investment income for thethree threeand six months ended MarchJune 31,30, 2026 as compared to thethree threeand six months ended MarchJune 31,30, 2025 is due to a higher principal balance in our marketable securities, savings and money market fund accounts.

Deramiocel for the treatment of DMD – The expenses for our DMD program include costs for personnel, clinical, regulatory, commercial, and research activities, including expenses related to scale-up for potential commercial scale manufacturing if our Deramiocel product is approved. InFor the first six months of 2026, we expect to spendspent approximately $100.0$28.2 million to $125.0 million primarily consisting of CMC expansion, product inventory buildout, clinical, regulatory and pre-commercial expenses foron our Deramiocel program. This amount excludes personnel costs. The Company expects to provide additional guidance on its longer-term financial outlook for this program following greater regulatory clarity, which will inform future strategic and capital allocation decisions.

Our expenditures on current and future clinical development programs, particularly our Deramiocel and exosomes programs, cannot be predicted with any significant degree of certainty as they are dependent on the results of our current trials and our ability to secure additional funding and/or strategic partners. In particular, our expenditures on the commercialization of Deramiocel, if approved, will heavily depend on the outcome of our litigation with NS and, if we are successful in such litigation, whether we commercialize Deramiocel in the United States directly or through one or more distributors. Further, we cannot predict with any significant degree of certainty the amount of time which will be required to complete our clinical trials, the costs of completing research and development projects or whether, when and to what extent we will generate revenues from the commercialization and sale of any of our product candidates. The duration and cost of clinical trials may vary significantly over the life of a project as a result of unanticipated events arising during manufacturing and clinical development and as a result of a variety of other factors, including:

The following table summarizes our liquidity and capital resources as of MarchJune 31,30, 2026 and December 31, 2025 and our net increase (decrease) in cash, cash equivalents, and marketable securities for the threesix months ended MarchJune 31,30, 2026 and 2025 and is intended to supplement the more detailed discussion that follows. The amounts stated in the tables below are expressed in thousands. We believe that our current cash, cash equivalents, and marketable securities are sufficient to fund our operating capital requirements for at least the next twelve months from the issuance date of these condensed consolidated financial statements.

Our total cash, cash equivalents and marketable securities as of MarchJune 31,30, 2026 were approximately $278.6$237.9 million compared to approximately $318.1 million as of December 31, 2025. The decrease in cash, cash equivalents and marketable securities from December 31, 2025 to MarchJune 31,30, 2026 is primarily due to our continuing efforts in preparing the Company for potential commercialization. As of MarchJune 31,30, 2026, we had approximately $47.6$122.5 million in total liabilities, consisting of approximately $14.8$91.0 million in lease liabilities, approximately $14.5$19.5 million in accounts payable and accrued expenses, and $12.0 million relates to deferred revenue, and $6.3 million in CIRM liability, with net working capital of approximately $249.5$209.2 million.

Cash used in operating activities was approximately $29.3$60.7 million and approximately $6.4$26.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The increase of approximately $22.8$34.1 million in cash used in operating activities is due to an approximately $9.5$24.4 million increase in net loss for the threesix months ended MarchJune 31,30, 2026 as compared to the same period in 2025. Furthermore, there was an increasedecrease of approximately $10.2$10.3 million in the change in receivables balances, as well as $4.4approximately $4.0 million in the change in accounts payable and accrued expenses balances for the threesix months ended MarchJune 31,30, 2026 as compared to the same period in 2025. To the extent we obtain sufficient capital and/or long-term debt funding and are able to continue developing our product candidates, including if we expand our platform technology portfolio, engage in further research and development activities, and, in particular, conduct preclinical studies and clinical trials, we expect to continue incurring substantial losses.

We had cash flow used in investing activities of approximately $154.6$203.4 million for the threesix months ended MarchJune 31,30, 2026 and cash flow provided by investing activities of approximately $23.9$38.4 million for the threesix months ended MarchJune 31,30, 2025. The change in investing activities for the threesix months ended MarchJune 31,30, 2026 as compared to the same period of 2025 is due to the net effect from purchases, sales and maturities of marketable securities and the purchase of approximately $10.8$16.6 million in property and equipment, leasehold improvements and construction in progress in the threesix months ended MarchJune 31,30, 2026, compared to approximately $1.1$2.6 million in the threesix months ended MarchJune 31,30, 2025.

We had cash flow used in financing activities of approximately $2.8 million and cash flow provided by financing activities of approximately $1.5 million and $0.1 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The increasechange in cash provided by (used in) financing activities for the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended MarchJune 31,30, 2025 is primarily due to payments made for CIRM liability, partially offset by the net proceeds from the exercises of stock options.

From inception through MarchJune 31,30, 2026, we financed our operations primarily through private and public sales of our equity securities, government grants, and payments from distribution agreements and collaboration partners.

TheOn CompanyMay has7, 2026, Capricor announced that it had filed a Complaint for Equitable Relief and ApplicationMotion for Preliminary Injunction (theand “Complaint”) in the Superior Court of New Jersey, Chancery Division, Bergen County.Jersey. The Complaint alleges a fundamental pricing flaw in the U.S. Distribution Agreement and that the defendants named therein, NS, have failed to adequately prepare for the commercial launch of the Company’s product Deramiocel in the United States pursuant to the U.S. Distribution Agreement, and have otherwise materially breached the terms of the U.S. Distribution Agreement. In the Complaint, the Company seeks rescission of the U.S. Distribution Agreement, declaratory judgment that the Company has the right to distribute Deramiocel directly or through distributors other than NS, and other equitable remediesremedies. The state court was scheduled to hear Capricor's motion for preliminary injunction on August 10, 2026, ahead of the current PDUFA action date. Capricor withdrew the motion, without prejudice, having determined that resolving this contractual dispute in arbitration following the FDA's decision would give the parties a more complete regulatory record to work from. The Company estimates arbitration to begin this fall. Capricor's position on the underlying dispute has not changed: it continues to believe the pricing structure in the U.S. Distribution Agreement is fundamentally flawed in a way that would impede patient access, and continues to seek rescission.

On February 10, 2023, Capricor entered into a Commercialization and Distribution Agreement (the “Japan Distribution Agreement”) with Nippon Shinyaku. Under the terms of the Japan Distribution Agreement, Capricor appointed Nippon Shinyaku as its exclusive distributor in Japan of Deramiocel for the treatment of DMD.

Through MarchDecember 31, 2026,2025, the Company sold an aggregate of 2,682,307 shares of common stock under the September 2025 ATM Program at an average price of approximately $28.89 per share for gross proceeds of approximately $77.5 million. The Company paid approximately $2.4 million of aggregated fees related to thisthese sale.sales. From January 1, 2026 through the date of this filing, no additional shares have been sold under the September 2025 ATM Program.

The Company accounts for the award as a liability rather than income because the Company had the option to convert the award into a loan. In February 2025, the Company notified CIRM of its election to convert the award into a loan. In AprilMay 2026, the Company andentered CIRM were finalizing documentation forinto a loan repayment agreement with CIRM providing for repayment in two tranches: approximately $3.4 million due within three calendar days following execution of the agreement, and approximately $2.9 million due no later than June 12, 2026.installments. As of MarchJune 31,30, 2026, the totalCompany repaymenthad amountfully ofrepaid approximately $6.3 million, consisting of approximately $3.4 million inof principal and approximately $2.9 million inof accrued interest, wassatisfying recordedits asrepayment aobligation current liability inunder the condensed consolidated balance sheet.award.

The Company accounts for its leases in accordance with ASC Topic 842, Leases (“ASC 842”), which requires lessees to recognize most leases on the balance sheet with a corresponding right-to-useright-of-use asset (“ROU asset”) and a lease liability for most leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based on present value of fixed lease payments over the lease term.

The Company uses its incremental borrowing rate to measure lease liabilities when the implicit rate is not readily determinable. The Company determines its incremental borrowing rate based on the rate of interest it would have to pay on a collateralized basis to borrow, over a similar term and in a similar economic environment, an amount equal to the lease payments.