Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the condensed consolidated notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's most recent annual report on Form 10-K. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including, but not limited to, those set forth under Part I, Item 1A, "Risk Factors" in the Company's most recent annual report on Form 10-K, under Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q and under the heading "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.

Company Overview

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, an investigative cellular therapy aimed to treat the skeletal and cardiac muscle complications associated with DMD, developing manufacturing capabilities and supporting our research and development activities. Our Biologics License Application ("BLA"), as amended, for Deramiocel for the treatment of DMD is currently under review by the U.S. Food and Drug Administration ("FDA") for potential approval in the United States, with a current Prescription Drug User Fee Act ("PDUFA") target action date of November 22, 2026. 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.

Cell Therapy (Deramiocel)

Our core program is focused on the development and commercialization of Deramiocel, an investigative cellular therapy comprised of cardiosphere-derived cells ("CDCs"), a population of cardiac-derived stromal cells isolated from qualified donated human hearts. Deramiocel is designed to slow disease progression in DMD through immunomodulatory, anti-inflammatory and anti-fibrotic activities of CDCs. These effects are mediated in part by exosomes secreted by CDCs that contain bioactive molecules, including microRNAs and other signaling factors, which may influence gene expression and cellular pathways involved in inflammation, fibrosis, and tissue repair.

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 skeletal and cardiac muscle decline. Capricor has administered over 1,300 intravenous infusions across our clinical program to approximately 125 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.

Exosomes Platform Technology (StealthX^TM)

Extracellular vesicles ("EVs"), including exosomes and microvesicles, are nano-scale membrane-enclosed vesicles secreted by many cell types that contain characteristic lipids, proteins and nucleic acids, including messenger RNA and microRNAs. These vesicles facilitate intercellular communication through the binding and activation of membrane receptors or through the delivery of molecular cargo into target cells. Through these mechanisms, EVs may influence a variety of biological processes, including cell survival, proliferation, inflammation and tissue repair.

Exosomes in particular have attracted increasing interest as potential therapeutic and diagnostic platforms. Their small size, generally low immunogenicity, and ability to deliver biologically active molecules to recipient cells may allow

them to modulate complex biological pathways. Because exosomes are cell-free vesicles, they may be stored, handled, and administered using approaches similar to those used for certain established biologic therapies.

Our exosome platform is supported by internal research and external collaborations. Our collaborations and research around exosomes include the National Institutes of Health, the National Institute of Allergy and Infectious Diseases ("NIAID"), JHU, the Department of Defense, the U.S. Army Institute of Surgical Research, and CSMC. Our platform leverages advances in RNA biology, protein engineering and targeted delivery technologies to support the development of exosome-based therapeutics and vaccines. We are currently exploring exosome-based approaches for infectious diseases, monogenic diseases and other potential indications.

To prioritize our resources on Deramiocel, we have moderated the pace of internal development of programs not directly related to Deramiocel, including our exosome-based platform, and expect to continue to do so pending further regulatory clarity. Our current strategy is to advance these programs primarily through collaborations and partnerships that may provide additional development resources and capital to support potential clinical development.

Our Pipeline - Key Programs

Deramiocel: Duchenne Muscular Dystrophy Program: Deramiocel is Capricor's lead product candidate and is being developed for the treatment of DMD, a rare, progressive genetic disease characterized by degeneration of skeletal and cardiac muscle.

Deramiocel's mechanism of action is distinct from mutation-targeted approaches such as exon-skipping oligonucleotides and gene therapies, which aim to restore dystrophin expression in muscle cells. DMD is caused by mutations in the dystrophin gene that impair production of functional dystrophin, a structural protein important for maintaining muscle integrity. Without functional dystrophin, muscle fibers are repeatedly damaged during contraction. This leads to chronic inflammation, muscle cell death and the progressive replacement of muscle tissue with fat and fibrosis. In skeletal muscle, the result is progressive weakness and loss of motor function, typically leading to loss of ambulation and, over time, loss of upper limb function. Loss of upper limb function limits patients' ability to perform daily activities such as eating, grooming and self-care. Respiratory muscle weakness also develops as the disease advances. The heart is affected as well: patients with DMD develop progressive cardiomyopathy, which can lead to heart failure, a leading cause of mortality in DMD. While several therapies have been developed to address certain genetic mutations associated with DMD, significant unmet medical need remains, particularly in patients with established skeletal and cardiac muscle disease.

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 each of their ongoing open-label extension studies, and the earlier Phase 1/2 HOPE-Duchenne clinical trial.

Biologics License Application: In late 2024, we completed our submission of a BLA to the FDA seeking approval of Deramiocel for the treatment of DMD. The FDA accepted the BLA for review, granted Priority Review, and assigned a PDUFA target action date of August 31, 2025. In July 2025, we received a Complete Response Letter ("CRL") from the FDA stating that the application did not meet the statutory requirement for substantial evidence of effectiveness and requesting additional clinical data.

Following a Type A meeting with the FDA in August 2025, we aligned with the FDA 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.

Advisory Committee Meeting: On July 29, 2026, the FDA held a meeting of the Cellular, Tissue and Gene Therapies Advisory Committee (the "Ad-Com Committee") where the Ad-Com Committee heard the respective positions of the FDA and the Company with respect to the data presented to the FDA. The Ad-Com Committee voted 3 in favor and 9 against on whether available evidence provides substantial evidence of effectiveness of Deramiocel for the treatment of

cardiomyopathy in patients with DMD. The Ad-Com Committee was not asked to vote on the HOPE-3 primary endpoint of skeletal-muscle function or on overall benefit-risk. In a separate discussion of upper limb function with members of the Ad-Com Committee, we believe the members' feedback was directionally supportive of the HOPE-3 clinical evidence of skeletal-muscle function. The Ad-Com Committee's recommendation is advisory only and is not binding on the FDA.

Major Amendment to the BLA: Following the Ad-Com Committee meeting, in August 2026, we submitted an amendment to the BLA that included 24-month data from the open-label extension of the HOPE-3 trial, together with additional analyses of the existing data package, in support of a refined proposed indication for the treatment of upper limb impairment in patients with DMD aged > 9 years old, consistent with the population and primary endpoint of HOPE-3. The FDA classified the submission as a major amendment and extended the PDUFA target action date by three months, to November 22, 2026. We believe that we have submitted all information requested by the FDA to date; however, the FDA may request additional information or analyses at any time during its review.

Bioresearch Monitoring Inspection: In July 2026, as part of its review of the BLA, the FDA conducted a Bioresearch Monitoring ("BIMO") inspection relating to the conduct of our clinical trials and issued a Form FDA 483 containing one inspectional observation relating primarily to the Company's standard operating procedures, documentation practices, vendor oversight, and audit report timeliness in connection with the conduct of the HOPE-3 clinical trial. The Company does not believe the observation affects the integrity or reliability of the HOPE-3 data. We have submitted our response to the FDA and are awaiting the Agency's feedback.

Recent Clinical Data: In July 2026, the full results of the HOPE-3 trial were published in The Lancet following independent peer review. As reported, HOPE-3 met its primary endpoint, demonstrating a statistically significant treatment difference versus placebo in change from baseline in the Performance of the Upper Limb, version 2.0 ("PUL 2.0") total score at 12 months (p=0.029), reflecting a slowing of upper limb disease progression. Results on additional functional and cardiac measures were nominally significant under the trial's prespecified hierarchical testing procedure. In October 2026, we presented 24-month data from the HOPE-3 open-label extension ("OLE") at the 31^st World Muscle Society Congress. In the OLE, patients originally randomized to placebo who received Deramiocel in the second year showed a 76% slowing in the rate of upper limb decline as measured by PUL 2.0, relative to their first year on placebo (difference of 1.56 points; 95% confidence interval 0.47 to 2.64). The OLE analyses are open-label, were not powered for statistical comparison, had no alpha allocated and are descriptive in nature. In November 2026, the HOPE-3 cardiac results, including a comparison to external natural history data, were presented at the American Heart Association Scientific Sessions 2026. In HOPE-3, Deramiocel was associated with reduced progression of myocardial fibrosis and with a difference in left ventricular ejection fraction of approximately 2.8 percentage points favoring Deramiocel versus placebo in patients with cardiomyopathy at baseline (nominal p=0.0165), each of which was a nominally significant secondary or subgroup analysis.

Manufacturing and Commercial Readiness: Our current Good Manufacturing Practice ("cGMP") manufacturing facility in San Diego, California is operational and, if Deramiocel is approved, is intended to support initial commercial supply. We are expanding the facility to add cleanroom capacity, with validation targeted for the first half of 2027; however, the timing and outcome of these activities are subject to risks and uncertainties, including FDA inspection and approval. We have also undertaken commercial launch planning activities, including with respect to distribution, patient support, market access, reimbursement, medical affairs and physician education.

In parallel with our U.S. regulatory activities, we have initiated regulatory engagement in Europe and Japan and are working with the relevant health authorities to determine the most appropriate regulatory pathway for Deramiocel in those regions. Expansion of our clinical program into younger patients with DMD and into Becker muscular dystrophy remains an area of focus; however, the initiation of any such trials will depend on the outcome of the U.S. regulatory process for Deramiocel.

StealthX™ Exosome Platform: Our StealthX™ exosome platform program consists of engineered exosomes for vaccine and therapeutic development.

Exosome Platform: Engineered Exosome-Based Vaccines: The StealthX™ vaccine is a proprietary vaccine developed internally by Capricor utilizing exosomes that were engineered to express either spike or nucleocapsid proteins

on the surface. Preclinical results from murine and rabbit models published in the peer-reviewed journal, Microbiology Spectrum, showed the StealthX™ vaccine resulted in robust antibody production, potent neutralizing antibodies, a strong T-cell response and a favorable safety profile. We 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 providing broader and more durable protection for COVID-19. As part of Project NextGen, NIAID conducted a Phase 1 clinical study with our StealthX™ vaccine. Preliminary data indicated the StealthX™ vaccine has been generally well tolerated and demonstrated a favorable safety profile across all dose levels tested. Early analyses showed limited neutralizing antibody responses at the evaluated dose levels, which may reflect prior vaccination or infection among trial participants. Final results from the trial, including cellular immune response data, are anticipated in the first half of 2027, subject to finalization of the study by NIAID.

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. Pending further regulatory clarity for our DMD program, we plan to 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.

These programs represent our core technology and products.

Financial Operations Overview

As of September 30, 2026, we had cash, cash equivalents, restricted cash, and marketable securities totaling approximately $198.5 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 $42.7 million and approximately $24.6 million, for the three months ended September 30, 2026 and 2025, respectively. Our net losses were approximately $117.3 million and approximately $74.9 million, for the nine months ended September 30, 2026 and 2025, respectively. As of September 30, 2026, we had an accumulated deficit of approximately $422.2 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 our 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 the U.S. Distribution Agreement and the Japan Distribution Agreement. 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 dispute against NS.

Our results have included non-cash compensation expense due to the issuance of stock awards and warrants, as applicable. We expense the fair value of stock awards and warrants over their vesting period as applicable. When more precise pricing data is unavailable, we determine the fair value of stock options using the Black-Scholes option-pricing model. The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the stock awards vest based upon time-based conditions. Stock-based compensation expense is included in the condensed consolidated statements of operations under general and administrative ("G&A") or research and development ("R&D") expenses, as applicable. We expect to record additional non-cash compensation expense in the future, which may be significant.

Results of Operations

Revenue

Clinical Development Income. Clinical development income for the three and nine months ended September 30, 2026 and 2025 was zero.

Operating Expenses

Research and Development Expenses. R&D expenses consist primarily of compensation and other related personnel costs, supplies, clinical trial costs, patient treatment costs, rent for laboratories and manufacturing facilities, consulting fees, costs of personnel and supplies for manufacturing, costs of service providers for preclinical, clinical and manufacturing, certain legal expenses resulting from intellectual property prosecution, stock-based compensation expense and other expenses relating to the design, development, testing and enhancement of our product candidates.

The following table summarizes our R&D expenses by category for each of the periods indicated:

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R&D expenses for the three months ended September 30, 2026 increased by approximately $9.2 million, or 45%, compared to the three months ended September 30, 2025. The increase was primarily driven by the following:

The increase was partially offset by a $0.8 million decrease in research expenses related to our exosomes platform, primarily related to timing of research activities for exosomes.

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R&D expenses for the nine months ended September 30, 2026 increased by approximately $24.5 million, or 40%, compared to the nine months ended September 30, 2025. The increase was primarily driven by the following:

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The increase was partially offset by a $2.2 million decrease in research expenses related to our exosomes platform, primarily related to timing of research activities for exosomes.

General and Administrative Expenses. G&A expenses consist primarily of compensation and other related personnel expenses for executive, finance and other administrative personnel, stock-based compensation expense, accounting, legal and other professional fees, consulting expenses, rent for corporate offices, business insurance and other corporate expenses.

The following table summarizes our G&A expenses by category for each of the periods indicated:

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G&A expenses for the three months ended September 30, 2026 increased by approximately $9.2 million, or 155%, compared to the three months ended September 30, 2025. The increase was primarily driven by the following:

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G&A expenses for the nine months ended September 30, 2026 increased by approximately $20.9 million, or 119%, compared to the nine months ended September 30, 2025. The increase was primarily driven by the following:

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Other Income (Expense)

Investment Income. Investment income for the three months ended September 30, 2026 and 2025 was approximately $2.0 million and $1.7 million, respectively. Investment income for the nine months ended September 30, 2026 and 2025 was approximately $7.1 million and $4.2 million, respectively. The increase in investment income for the three and nine months ended September 30, 2026 as compared to the three and nine months ended September 30, 2025 is due to a higher principal balance in our marketable securities, savings and money market fund accounts.

Products Under Active Development

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. For the first nine months of 2026, we spent approximately $41.9 million on 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.

Exosome Platform - Our exosome platform is in early-stage development. For the first nine months of 2026, we spent approximately $2.2 million on our exosome program, primarily related to research, preclinical studies and manufacturing costs associated with our NIAID program. This amount excludes personnel costs. We are prioritizing capital toward Deramiocel and are minimizing expenses related to the exosome platform until further regulatory clarity is obtained with respect to our DMD program.

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 depend on the outcome of our dispute with NS and, if we are successful

in such dispute, 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:

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Liquidity and Capital Resources

The following table summarizes our liquidity and capital resources as of September 30, 2026 and December 31, 2025 and our net increase (decrease) in cash, cash equivalents, and restricted cash for the nine months ended September 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. For information regarding our material cash requirements, including obligations under our lease and related license agreement for our new headquarters, manufacturing and laboratory facility and our outstanding purchase commitments, see Note 6 - "Leases" and Note 15 - "Commitments and Contingencies" to our condensed consolidated financial statements.

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Our total cash, cash equivalents, restricted cash, and marketable securities as of September 30, 2026 were approximately $198.5 million compared to approximately $318.1 million as of December 31, 2025. The decrease in cash, cash equivalents, restricted cash, and marketable securities from December 31, 2025 to September 30, 2026 is primarily due to our continuing efforts in preparing the Company for potential commercialization. As of September 30, 2026, we had approximately $120.6 million in total liabilities, consisting of approximately $92.2 million in lease liabilities, approximately $16.4 million in accounts payable and accrued expenses, and $12.0 million in deferred revenue, with net working capital of approximately $172.4 million.

Cash used in operating activities was approximately $96.4 million and approximately $46.2 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of approximately $50.2 million in cash used in

operating activities is due to an approximately $42.5 million increase in net loss for the nine months ended September 30, 2026 as compared to the same period in 2025. Furthermore, there was a decrease of approximately $10.3 million in the change in receivables balances, as well as approximately $5.1 million in the change in accounts payable and accrued expenses balances for the nine months ended September 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 $143.5 million for the nine months ended September 30, 2026 and cash flow provided by investing activities of approximately $54.4 million for the nine months ended September 30, 2025. The change in investing activities for the nine months ended September 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 $21.2 million in property and equipment, leasehold improvements and construction in progress in the nine months ended September 30, 2026, compared to approximately $6.6 million in the nine months ended September 30, 2025.

We had cash flow used in financing activities of approximately $2.7 million and cash flow provided by financing activities of approximately $0.1 million for the nine months ended September 30, 2026 and 2025, respectively. The change in cash provided by (used in) financing activities for the nine months ended September 30, 2026 as compared to the nine months ended September 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 September 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.

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:

Collaborations

Commercialization and Distribution Agreement (Nippon Shinyaku - United States)

On January 24, 2022, Capricor entered into the U.S. Distribution Agreement with Nippon Shinyaku, a Japanese corporation. Under the terms of the U.S. Distribution Agreement, Capricor appointed Nippon Shinyaku as its exclusive distributor in the United States of Deramiocel for the treatment of DMD.

On May 7, 2026, Capricor announced that it had filed a Motion for Preliminary Injunction and Complaint for Equitable Relief (the "Complaint") in the Superior Court of New Jersey. against Nippon Shinyaku Co., Ltd and NS Pharma, Inc. (collectively, "NS") with respect to the distribution of Deramiocel. The Complaint alleged that the defendants named therein, NS, failed to adequately prepare for the commercial launch of Deramiocel in the United States pursuant to the U.S. Distribution Agreement ("Distribution Agreement"), and have otherwise materially breached the terms of the Distribution Agreement. In the Complaint, the Company sought rescission of the 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 subsequently withdrew its application for a preliminary injunction, 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.

In the arbitration, NS filed a complaint for Breach of Contract against Capricor and demands declaratory and injunctive relief holding that Capricor breached the Distribution Agreement, that the Distribution Agreement remains in full force and effect, and requiring Capricor to perform its obligations thereunder. In the arbitration, Capricor filed counterclaims for breach of contract (repudiation and failure to perform), breach of the implied covenant of good faith and fair dealing, rescission based on mutual mistake, declaration of Capricor's right to distribute Deramiocel, and unjust enrichment, reserving claims for unilateral mistake and frustration of purpose. Capricor seeks damages for NS's breaches and repudiation, declaratory and injunctive relief holding that the Distribution Agreement has been repudiated and/or is rescinded such that Capricor is entitled to distribute, or hire another company to distribute, Deramiocel, and in the alternative Capricor seeks restitution for unjust enrichment.

Commercialization and Distribution Agreement (Nippon Shinyaku - Japan)

On February 10, 2023, Capricor entered into 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.

Under the terms of the Japan Distribution Agreement, Capricor received an upfront payment of $12.0 million in 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 Deramiocel 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. Subject to regulatory approval, Capricor or its designee will hold the Marketing Authorization in Japan if the product is approved in that territory.

Financing Activities by the Company

December 2025 Underwritten Public Offering

On December 5, 2025, the Company entered into an underwriting agreement with Piper Sandler & Co. and Oppenheimer & Co., Inc. as representatives of the Underwriters, pursuant to which the Company agreed to sell and issue, in a public offering an aggregate of 6,000,000 shares of common stock, including the exercise in full of the Underwriters' option to purchase an additional 900,000 shares to cover over allotments, at a public offering price of $25.00 per share for total gross proceeds of approximately $172.5 million, before deducting underwriting commissions and other offering expenses payable by the Company. The Company paid cash commissions on the gross proceeds, plus reimbursement of expenses to the Underwriters, as well as legal and accounting fees in the aggregate amount of approximately $10.5 million.

September 2025 ATM Program

On September 10, 2025, the Company established the September 2025 ATM Program under a prospectus supplement for aggregate sales proceeds of up to $150.0 million, pursuant to an Equity Distribution Agreement with the Agents by which the Agents may sell our common stock at the market prices prevailing at the time of sale. The Agents are entitled to compensation for their services at a commission rate of 3.0% of the gross sales price per share of common stock sold plus reimbursement of certain expenses. Effective December 5, 2025, the Company reduced the maximum offering amount from $150.0 million to $125.0 million.

Through December 31, 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 these sales. From January 1, 2026 through the date of this filing, no additional shares have been sold under the September 2025 ATM Program.

CIRM Grant Award

In 2016, Capricor entered into an award agreement with the California Institute for Regenerative Medicine ("CIRM") for approximately $3.4 million to support, in part, the Company's Phase I/II HOPE-Duchenne clinical trial.

The Company accounted for the award as a liability rather than income because the Company had the option to convert the award into a loan. In the second quarter of 2026, the Company entered into a loan repayment agreement with CIRM providing for repayment in two installments. As of September 30, 2026, the Company had fully repaid approximately $6.3 million, consisting of approximately $3.4 million of principal and approximately $2.9 million of accrued interest, satisfying its repayment obligation under the award. Although the CIRM loan has been fully repaid, the Company remains subject to certain reporting and other obligations under the applicable CIRM agreements and policies.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis, including research and development and clinical trial accruals, and stock-based compensation estimates. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our financial statements and accompanying notes.

Leases

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 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.

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Leases are classified as either finance or operating leases. The Company's leases are primarily operating leases. The Company elects the short-term lease exemption for leases with a term of twelve months or less.

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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.

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The Company has elected the practical expedient to combine lease and non-lease components for real estate leases. This practical expedient is not elected for manufacturing facilities and equipment embedded in product supply arrangements.

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Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), using a five-step model to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled. The Company's arrangements may include fixed consideration, such as upfront payments and milestones, as well as variable consideration, such as sales-based royalties and shared revenues. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is resolved.

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Revenue is recognized either at a point in time or over time, depending on when control of the promised goods or services is transferred to the customer. For performance obligations satisfied over time, the Company recognizes revenue based on a measure of progress that depicts the transfer of services to the customer. Upfront payments received in advance of performance are recorded as deferred revenue.

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Research and Development Expenses and Accruals

R&D expenses consist primarily of salaries and related personnel costs, supplies, clinical trial costs, patient treatment costs, rent for laboratories and manufacturing facilities, consulting fees, costs of personnel and supplies for manufacturing, costs of service providers for preclinical, clinical, manufacturing and commercial activities, and certain legal expenses resulting from intellectual property prosecution, stock compensation expense and other expenses relating to the design, development, testing and enhancement of our product candidates. Except for certain capitalized intangible assets, R&D costs are expensed as incurred.

Our cost accruals for clinical trials and other R&D activities are based on estimates of the services received and efforts expended pursuant to contracts with numerous clinical trial centers and contract research organizations ("CROs"), clinical study sites, laboratories, consultants or other clinical trial vendors that perform activities in connection with a trial. Related contracts vary significantly in length and may be for a fixed amount, a variable amount based on actual costs incurred, capped at a certain limit, or for a combination of fixed, variable and capped amounts. Activity levels are monitored through close communication with the CROs and other clinical trial vendors, including detailed invoice and task completion review, analysis of expenses against budgeted amounts, analysis of work performed against approved contract budgets and payment schedules, and recognition of any changes in scope of the services to be performed. Certain CRO and significant clinical trial vendors provide an estimate of costs incurred but not invoiced at the end of each quarter for each individual trial. These estimates are reviewed and discussed with the CRO or vendor as necessary, and are included

in R&D expenses for the related period. For clinical study sites which are paid periodically on a per-subject basis to the institutions performing the clinical study, we accrue an estimated amount based on subject screening and enrollment in each quarter. All estimates may differ significantly from the actual amount subsequently invoiced, which may occur several months after the related services were performed.

In the normal course of business, we contract with third parties to perform various R&D activities in the ongoing development of our product candidates. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, and the completion of portions of the clinical trial or similar conditions. The objective of the accrual policy is to match the recording of expenses in the financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical trials and other R&D activities are recognized based on our estimates of the degree of completion of the event or events specified in the applicable contract.

No adjustments for material changes in estimates have been recognized in any period presented.

Stock-Based Compensation

Our results include non-cash compensation expense related to stock options and restricted stock awards granted to employees, directors and consultants. The Company has six equity plans; however, it currently issues awards only under the 2020 Equity Incentive Plan, the 2021 Equity Incentive Plan, and the 2025 Plan. The Company no longer issues awards under the 2006 Stock Option Plan, the 2012 Restated Equity Incentive Plan or the 2012 Non-Employee Director Stock Option Plan.

We expense the fair value of stock-based compensation over the vesting period. For stock options, when more precise pricing data is unavailable, we determine the fair value using the Black-Scholes option-pricing model. This valuation model requires us to make assumptions and judgments about the variables used in the calculation. These variables and assumptions include the weighted-average period of time that the options granted are expected to be outstanding, the volatility of our common stock, and the risk-free interest rate. We account for forfeitures upon occurrence. For restricted stock awards, we determine the fair value using the Company's stock price at the grant date.

The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the awards vest based upon time-based conditions. Stock-based compensation expense is included in G&A expense or R&D expense, as applicable, in the condensed consolidated statements of operations and comprehensive loss. We expect to record additional non-cash compensation expense in the future, which may be significant.

Clinical Trial Expense

As part of the process of preparing our condensed consolidated financial statements, we are required to estimate our accrued expenses. Our clinical trial accrual process is designed to account for expenses resulting from our obligations under contracts with vendors, consultants, CROs, and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. Our objective is to reflect the appropriate clinical trial expenses in our condensed consolidated financial statements by matching the appropriate expenses with the period in which services are provided and efforts are expended. We account for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates through financial models that take into account discussions with applicable personnel and outside service providers as to the progress or state of completion of trials, or the services completed. During the course of a clinical trial, we adjust our clinical expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date in our condensed consolidated financial statements based on the facts and circumstances known to us at that time. Our clinical trial accrual and prepaid assets are dependent, in part, upon the receipt of timely and accurate reporting from CROs and other third-party vendors. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of

services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for any particular period.

Recently Issued or Newly Adopted Accounting Pronouncements

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with U.S. GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its financial statements.

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In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends the guidance in ASC 350-40, Intangibles - Goodwill and Other - Internal-Use Software. The amendments modernize the recognition and disclosure framework for internal-use software costs, removing the previous "development stage" model and introducing a more judgment-based approach. The ASU is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its financial statements.

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In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.

Other recent accounting pronouncements issued by the Financial Accounting Standards Board, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC, did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statement presentation or disclosures.