Quarterly Report for Quarter Ending June 30, 2025 (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 and 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 and under the heading "Special Note Regarding Forward-Looking Statements" in this Quarterly Report, our actual results may differ materially from those anticipated in these forward-looking statements.

As used in this Quarterly Report on Form 10-Q, references to "Capricor Therapeutics," the "Company," "we," "us," "our" or similar terms include Capricor Therapeutics, Inc. and its wholly-owned subsidiary. References to "Capricor" are with respect to Capricor, Inc., our wholly-owned subsidiary.

Company Overview

Capricor Therapeutics, Inc. is a clinical-stage biotechnology company focused on the development of transformative cell and exosome-based therapeutics for treating Duchenne muscular dystrophy (DMD), a rare form of muscular dystrophy which results in muscle degeneration and premature death, and other diseases with high unmet medical needs.

Since our inception, we have devoted substantial resources to developing deramiocel and our other product candidates including our exosomes platform technology, developing our manufacturing processes, staffing our company and providing general and administrative support for these operations. We do not have any products approved for commercial sale. Our ability to eventually generate any product revenue sufficient to achieve profitability will depend on the successful development, approval and eventual commercialization of deramiocel for the treatment of DMD and our other product candidates. If successfully developed and approved, we intend and plan to commercialize deramiocel in the United States and Japan with our partner, Nippon Shinyaku Co., Ltd., a Japanese corporation (Nippon Shinyaku). Capricor may enter into licensing agreements or strategic collaborations in other markets. If we generate product sales or enter into licensing agreements or strategic collaborations, or further distribution relationships, we expect that any revenue we generate will fluctuate from quarter-to-quarter and year-to-year as a result of the timing and amount of any product sales, milestone payments and other payments. If we fail to complete the development of our product candidates in a timely manner, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

A summary description of our key product candidates, is as follows:

Deramiocel for the Treatment of DMD: Regulatory and Clinical Update

Capricor's lead clinical program is centered on deramiocel, an allogeneic cell therapy comprised of cardiosphere-derived cells (CDCs), for the treatment of cardiomyopathy associated with Duchenne muscular dystrophy. CDCs are a unique population of cardiac cells derived from healthy donor hearts, and they exert their therapeutic effect through immunomodulatory, anti-inflammatory, pro-angiogenic, and anti-fibrotic mechanisms-primarily mediated by secreted exosomes enriched with bioactive microRNAs. These non-coding RNA species influence gene expression in immune and tissue-resident cells, promoting regeneration and reducing inflammation, in contrast to dystrophin-restoring approaches like exon-skipping or gene therapy.

DMD is a progressive, fatal genetic disorder that results in significant skeletal and cardiac muscle deterioration. Over time, the lack of functional dystrophin leads to cardiomyocyte death and fibrosis, ultimately progressing to heart failure-the leading cause of death in DMD patients. There are currently no approved therapies specifically targeting DMD-associated cardiomyopathy, representing a substantial unmet medical and commercial opportunity for deramiocel.

Regulatory Progress and BLA Pathway

In the third quarter of 2024, we conducted a pre-Biologics License Application (BLA) meeting with the U.S. Food and Drug Administration (FDA) to discuss key components of our submission strategy, including the use of data from our HOPE-2 and HOPE-2 open label extension (OLE) trials, commercial manufacturing readiness and potential label considerations. Following additional discussions with the FDA, we completed our rolling BLA submission in December 2024. In early 2025, the FDA accepted our application for review, granted it Priority Review, and assigned a Prescription Drug User Fee Act (PDUFA) target action date of August 31, 2025.

At the May 2025 mid-cycle review meeting, the FDA noted no significant deficiencies. In May 2025, the FDA conducted a Pre-License Inspection (PLI) of our San Diego manufacturing facility for deramiocel. The inspection concluded with a Form 483 containing several observations. We were recently informed by the FDA that they have reviewed and found acceptable all responses to the 483 observations noted in the PLI.

In July 2025, we received a Complete Response Letter (CRL) stating that the current BLA does not meet the statutory requirement for substantial evidence of effectiveness and the need for additional clinical data. The CRL also cited certain outstanding items in the Chemistry, Manufacturing, and Controls (CMC) section, many of which we had previously addressed but were not reviewed by the FDA due to timing of the issuance of the CRL. At this time, we have internally addressed the remaining CMC issues noted in the CRL and have prepared formal responses which we plan to submit with our response to the CRL.

We are now actively preparing a formal written response to the CRL and have scheduled a Type A meeting with the FDA for August 2025. Pending regulatory guidance, Capricor seeks to resubmit its BLA based on its existing dataset and with HOPE-3 data (expected to be available in the fourth quarter of 2025) potentially serving as supportive and confirmatory evidence.

Clinical Development Overview

To date, we have completed two clinical trials evaluating deramiocel in DMD patients. The Phase I/II HOPE-Duchenne study showed encouraging signals in both skeletal and cardiac endpoints. In our randomized, placebo-controlled Phase II HOPE-2 trial, deramiocel met its primary endpoint (mid-level PUL v1.2; p=0.01) and secondary endpoints, including full PUL v2.0 (p=0.04) and left ventricular ejection fraction (LVEF; p=0.002). These results were published in The Lancet in March 2022, and the therapy was generally safe and well-tolerated.

Building on these results, we initiated the HOPE-2 OLE study, in which, at this time, 12 patients are continuing treatment with deramiocel. In June 2025, we reported positive four-year outcomes in the HOPE-2 OLE study demonstrating sustained preservation of cardiac function and a slowing in skeletal muscle decline. These findings further underscore the potential of deramiocel to alter disease progression. Clinical benefit was also observed when comparing treated patients to a natural history cohort, including statistically significant differences in PUL v2.0 scores and cardiac function metrics.

Phase 3 HOPE-3 Clinical Trial and Next Steps

Our ongoing Phase 3 clinical trial, HOPE-3, is a 1:1 randomized, double-blind, placebo-controlled study evaluating the safety and efficacy of deramiocel in approximately 104 boys with DMD. Participants receive four doses over 12 months, and the trial includes two manufacturing cohorts: Cohort A (Los Angeles facility) and Cohort B (San Diego facility). In the fourth quarter of 2023, the Data Safety Monitoring Board (DSMB) reviewed a pre-specified futility analysis and recommended that the study continue as planned.

We recently completed the 12-month treatment period in HOPE-3 and expect to report topline results in the fourth quarter of 2025, although the study remains blinded at present. In alignment with FDA feedback and our evolving regulatory strategy, we amended the study protocol to designate LVEF as the primary endpoint, shifting the focus to cardiac efficacy. This change reflects the FDA's emphasis on well-controlled cardiac outcome measures in DMD based on FDA feedback in the CRL and may, if the results are positive and accepted by the FDA, meaningfully support our BLA. Skeletal muscle function will remain a key secondary endpoint, assessed via PUL v2.0, which captures upper limb strength across a spectrum of functional domains.

Additionally, if positive, HOPE-3 may support international regulatory filings, and we have initiated discussions with health authorities in Europe and Japan to define potential approval pathways.

Designations and Commercial Planning

Deramiocel has received RMAT and orphan drug designations, and, if approved, Capricor is eligible to receive a Priority Review Voucher (PRV) under its rare pediatric disease designation. Capricor retains full rights to the PRV, if granted.

We have entered into exclusive Commercialization and Distribution Agreements with Nippon Shinyaku for the United States and Japan. We aim to efficiently scale commercial efforts in key markets upon potential approval.

Exosome Platform

Extracellular vesicles, including exosomes and microvesicles, are nanoscale, membrane-enclosed particles secreted by most cells. These vesicles carry proteins, lipids, and nucleic acids (such as mRNA and microRNAs) and play a key role in intercellular communication. They signal by binding to membrane receptors or delivering their cargo directly into target cells, influencing functions such as inflammation, survival, proliferation, and tissue regeneration. Due to their small size, low immunogenicity, and ability to interact in native cellular language, exosomes represent a promising new class of therapeutic agents capable of modulating complex biological systems. As cell-free products, they offer advantages in storage, handling, and delivery similar to traditional biologics like monoclonal antibodies.

Our focus is on developing a precision engineered exosome platform capable of delivering defined sets of effector molecules through well characterized mechanisms of action. Our exosome platform, has advanced through internal research and external collaborations, including with the National Institutes of Health (NIH), National Institute of Allergy and Infectious Diseases (NIAID), Johns Hopkins University, the Department of Defense (DoD), U.S. Army Institute of Surgical Research (USAISR), and Cedars-Sinai Medical Center.

Preclinical data from our StealthX™ platform demonstrated rapid development of a recombinant protein based vaccine against SARS-CoV-2. Building on advancements in RNA and protein science, targeting, and scalable manufacturing, the platform has potential applications across infectious diseases, monogenic disorders, and other indications.

In 2024, Capricor was selected to participate in Project NextGen, an initiative led by the U.S. Department of Health and Human Services aimed at advancing next generation COVID-19 vaccines with broader and longer lasting protection. Under this program, NIAID is sponsoring a Phase 1 clinical trial of our StealthX™ vaccine. The trial will be conducted and overseen by NIAID's Division of Microbiology and Infectious Diseases (DMID), with Capricor supplying the clinical material.

Following the clearance of the Investigational New Drug (IND) application by the FDA, the Phase 1 study initiated in August 2025. The trial includes several dosing arms initially focused on the spike (S) protein, with an additional planned arm which will utilize the nucleocapsid (N) protein, pending separate FDA clearance. If the vaccine meets NIAID's criteria for safety and efficacy, the program may advance to a funded Phase 2 study.

As we advance our exosome platform, our strategy is to identify partners who can provide capital and development expertise to support clinical advancement across targeted indications.

Financial Operations Overview

As of June 30, 2025, we had cash, cash equivalents, and marketable securities totaling approximately $122.8 million. In the fourth quarter of 2024, we submitted our BLA to the FDA, which triggered our second milestone pursuant to the terms of our U.S. Distribution Agreement with Nippon Shinyaku. In January 2025, we received the $10.0 million milestone payment.

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 $25.9 million and approximately $11.0 million, for the three months ended June 30, 2025 and 2024, respectively. Our net losses were approximately $50.3 million and approximately $20.8 million, for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of approximately $250.1 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 substantial 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.

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 deramiocel and our exosome technologies. As we proceed with the clinical development 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.

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 months ended June 30, 2025 and 2024 was $0 and approximately $4.0 million, respectively. Clinical Development income for the six months ended June 30, 2025 and 2024 was approximately $0 and $8.9 million. As of June 30, 2025, 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.

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 June 30, 2025 increased by approximately $9.5 million, or 76%, compared to the three months ended June 30, 2024. The increase was primarily driven by the following:

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R&D expenses for the six months ended June 30, 2025 increased by approximately $17.4 million, or 74%, compared to the six months ended June 30, 2024. The increase was primarily driven by the following:

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 June 30, 2025 increased by approximately $2.6 million, or 85%, compared to the three months ended June 30, 2024. The increase was primarily driven by the following:

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G&A expenses for the six months ended June 30, 2025 increased by approximately $4.6 million, or 65%, compared to the six months ended June 30, 2024. The increase was primarily driven by the following:

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Other Income

Investment Income. Investment income for the three months ended June 30, 2025 and 2024 was approximately $1.8 million and $0.6 million, respectively. Investment income for the six months ended June 30, 2025 and 2024 was

approximately $2.5 million and $1.1 million, respectively. The increase in investment income for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 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 and manufacturing-related expenses, including expenses related to the scale-up for potential commercial scale manufacturing if our deramiocel product is approved. In 2025, we expect to spend approximately $45.0 million to $50.0 million primarily consisting of CMC expansion, product inventory buildout, clinical, regulatory and pre-commercial expenses for our deramiocel program.

Exosome-Based Therapeutics and Vaccines - Our exosome platform is in early-stage preclinical development. We expect to spend approximately $5.0 million to $7.0 million during 2025 on development expenses related to our exosomes program, which includes personnel, preclinical studies and manufacturing related expenses for these technologies. Our expenses for this program are primarily focused on the expansion of our engineered exosomes platform including the manufacturing of our StealthX™ vaccine to be used in connection with our collaboration with NIAID.

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 a strategic partner. 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 June 30, 2025 and December 31, 2024 and our net increase (decrease) in cash, cash equivalents, and marketable securities for the six months ended June 30, 2025 and 2024 and is intended to supplement the more detailed discussion that follows. The amounts stated in the tables below are expressed in thousands. We estimate our current cash, cash equivalents, and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2026.

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Our total cash, cash equivalents and marketable securities as of June 30, 2025 were approximately $122.8 million compared to approximately $151.5 million as of December 31, 2024. The decrease in cash, cash equivalents and marketable securities from December 31, 2024 to June 30, 2025 is primarily due to our continuing efforts in preparing the Company for potential commercialization. As of June 30, 2025, we had approximately $28.6 million in total liabilities, of which approximately $12.0 million relates to deferred revenue, and approximately $95.7 million in net working capital.

Cash used in operating activities was approximately $26.6 million and approximately $13.6 million for the six months ended June 30, 2025 and 2024, respectively. The increase of approximately $13.0 million in cash used in operating activities is due to an approximately $29.5 million increase in net loss for the six months ended June 30, 2025 as compared to the same period in 2024. Furthermore, there was an increase of approximately $3.7 million in stock-based compensation, approximately $8.9 million in deferred revenue, and approximately $2.9 million in accounts payable and accrued expenses for the six months ended June 30, 2025 as compared to the same period in 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.

We had cash flow provided by investing activities of approximately $38.4 million for the six months ended June 30, 2025 and cash flow used in investing activities of approximately $5.2 million for the six months ended June 30, 2024, respectively. The change in investing activities for the six months ended June 30, 2025 as compared to the same period of 2024 is due to the net effect from purchases, sales and maturities of marketable securities and the purchase of approximately $2.6 million in property and equipment, leasehold improvements and construction in progress.

We had cash flow provided by financing activities of $69,934 and approximately $4.4 million for the six months ended June 30, 2025 and 2024, respectively. The decrease in cash provided by financing activities for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 is primarily due to the net proceeds from the sale of common stock during 2024.

From inception through June 30, 2025, we financed our operations primarily through private and public sales of our equity securities, 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:

Collaborations

Commercialization and Distribution Agreement with Nippon Shinyaku (Territory: 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 will be responsible for the clinical development and manufacturing of deramiocel. Nippon Shinyaku and NS Pharma, Inc. (its wholly-owned U.S. subsidiary) will be responsible for the distribution of deramiocel in the United States. Pursuant to the U.S Distribution Agreement, Capricor received an upfront payment of $30.0 million in 2022. 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 deramiocel 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 deramiocel 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.

Commercialization and Distribution Agreement with Nippon Shinyaku (Territory: Japan)

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.

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 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.

Binding Term Sheet with Nippon Shinyaku (Territory: Europe)

On September 16, 2024, Capricor entered into a Binding Term Sheet (the "Term Sheet") with Nippon Shinyaku for the commercialization and distribution of deramiocel 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 deramiocel for potential approval in the European region. Nippon Shinyaku would be responsible for the sales and distribution of deramiocel 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, 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 several amendments to the Term Sheet, pursuant to which the parties agreed to extend the date during which the parties shall negotiate the definitive agreement to September 30, 2025.

Financing Activities by the Company

October 2024 Underwritten Public Offering

On October 16, 2024, the Company entered into an underwriting agreement (the "Underwriting Agreement") with Piper Sandler and Oppenheimer as representatives of the underwriters (the "Underwriters"), pursuant to which the Company agreed to sell and issue, in a public offering, an aggregate of 5,073,800 shares of common stock, including the exercise in full of the underwriters' option to purchase additional shares to cover over allotments, at a public offering price of $17.00 per share for total gross proceeds of approximately $86.3 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 $5.4 million.

September 2024 Private Placement

On September 16, 2024, the Company entered into a Subscription Agreement with Nippon Shinyaku pursuant to which the Company agreed to issue and sell to Nippon Shinyaku in a private placement (the "Private Placement"), an aggregate of 2,798,507 shares of the common stock of the Company at a price per Share of $5.36, which was issued at a 20% premium to the 60-day volume-weighted average price, for an aggregate purchase price of approximately $15.0 million. The Subscription Agreement also includes lock-up provisions restricting Nippon Shinyaku from selling or otherwise disposing of shares of the Company's common stock until the six-month anniversary of the Closing Date.

In connection with the Private Placement, the Company also entered into a Registration Rights Agreement with Nippon Shinyaku on September 16, 2024 (the "Registration Rights Agreement"). Pursuant to the terms of the Registration Rights Agreement, the Company has filed with the SEC a registration statement to register for resale the shares sold in the Private Placement, which registration statement was declared effective on November 8, 2024.

ATM Program

On June 21, 2021, the Company initiated an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $75.0 million (the "ATM Program"), with the common stock to be distributed at the market prices prevailing at the time of sale. The ATM Program was established under a Common Stock Sales Agreement (the "Sales Agreement,"), with H.C. Wainwright & Co. LLC ("Wainwright"), under which the Company issued and sold shares of our common stock through Wainwright as sales agent. The Sales Agreement provided that Wainwright would be entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold. All shares issued pursuant to the ATM Program were issued pursuant to our shelf registration statement on Form S-3 (File No. 333-254363), which was initially filed with the Securities and Exchange Commission (the "SEC"), on March 16,

2021, amended on June 15, 2021 and declared effective by the SEC on June 16, 2021. From June 21, 2021 through October 1, 2024, the Company sold an aggregate of 9,228,383 shares of common stock under the ATM Program at an average price of approximately $8.13 per share for gross proceeds of approximately $75.0 million which represents all amounts that were available to be sold. Effective October 1, 2024, the ATM Program was closed and terminated. The Company paid cash commissions on the gross proceeds, plus reimbursement of expenses to Wainwright, as well as legal and accounting fees, in the aggregate amount of approximately $2.4 million.

CIRM Grant Award

On June 16, 2016, Capricor entered into an award (the "CIRM Award") with the California Institute for Regenerative Medicine ("CIRM") in the amount of approximately $3.4 million to fund, in part, Capricor's Phase I/II HOPE-Duchenne clinical trial investigating deramiocel for the treatment of DMD-associated cardiomyopathy. Pursuant to terms of the CIRM Award, the disbursements were tied to the achievement of specified operational milestones. In addition, the terms of the CIRM Award included a co-funding requirement pursuant to which Capricor was required to spend approximately $2.3 million of its own capital to fund the CIRM funded research project. The CIRM Award is further subject to the conditions and requirements set forth in the CIRM Grants Administration Policy for Clinical Stage Projects. Such requirements include, without limitation, the filing of quarterly and annual reports with CIRM, the sharing of intellectual property pursuant to Title 17, California Code of Regulations ("CCR") Sections 100600-100612, and potentially the sharing with the State of California of a fraction of licensing revenue received from a CIRM funded research project and net commercial revenue from a commercialized product which resulted from the CIRM funded research as set forth in Title 17, CCR Section 100608. The maximum royalty on net commercial revenue that Capricor could have been required to pay to CIRM was equal to nine times the total amount awarded and paid to Capricor.

After completing the CIRM funded research project and at any time after the award period end date (but no later than the ten-year anniversary of the date of the award), Capricor had the right to convert the CIRM Award into a loan, the terms of which will be determined based on various factors, including the stage of the research and development of the program at the time the election is made. On June 20, 2016, Capricor entered into a Loan Election Agreement with CIRM whereby, among other things, CIRM and Capricor agreed that if Capricor elects to convert the grant into a loan, the term of the loan could be up to five years from the date of execution of the applicable loan agreement; provided that the maturity date of the loan will not surpass the ten-year anniversary of the grant date of the CIRM Award. Beginning on the date of the loan, the loan shall bear interest on the unpaid principal balance, plus the interest that has accrued prior to the election point according to the terms set forth in the CIRM Loan Policy and CIRM Grants Administration Policy for Clinical Stage Projects (the "New Loan Balance"), at a per annum rate equal to the LIBOR rate for a three-month deposit in U.S. dollars, as published by the Wall Street Journal on the loan date, plus one percent. Interest shall be compounded annually on the outstanding New Loan Balance commencing with the loan date and the interest shall be payable, together with the New Loan Balance, upon the due date of the loan. In 2019, Capricor completed all milestones and close-out activities associated with the CIRM Award and expended all funds received.

The Company accounts for this award as a liability rather than income. As of June 30, 2025, Capricor's principal liability balance for the CIRM Award was approximately $3.4 million, excluding any accrued interest.

On February 26, 2025, Capricor notified CIRM of its election to convert the CIRM Award into a loan. As a result, certain requirements of the CIRM Award will no longer be applicable, including the revenue sharing requirements. The terms of the loan agreement are currently under discussion with CIRM. Depending on the results of these discussions, accrued interest on the CIRM Award could reach up to approximately $7.1 million and may continue to accrue over time until the final payout. There was no accrued interest recorded as of June 30, 2025.

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 generally accepted accounting principles. 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

Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842"), requires lessees to recognize most leases on the balance sheet with a corresponding right-to-use ("ROU") asset. 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. The assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of fixed lease payments over the lease term. ROU assets are evaluated for impairment using the long-lived assets impairment guidance.

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Leases will be classified as financing or operating, which will drive the expense recognition pattern. The Company elects to exclude short-term leases if and when the Company has them.

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The Company leases office and laboratory space, all of which are operating leases. Most leases include the option to renew and the exercise of the renewal options is at the Company's sole discretion. Options to renew a lease are not included in the Company's assessment unless there is reasonable certainty that the Company will renew. In addition, the Company's lease agreements generally do not contain any residual value guarantees or restrictive covenants.

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The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

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For real estate leases, the Company has elected the practical expedient under ASC 842 to account for the lease and non-lease components together for existing classes of underlying assets and allocates the contract consideration to the lease component only. This practical expedient is not elected for manufacturing facilities and equipment embedded in product supply arrangements.

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Revenue Recognition

The Company applies Accounting Standards Update ("ASU") 606, Revenue for Contracts from Customers, which amended revenue recognition principles and provides a single, comprehensive set of criteria for revenue recognition within and across all industries. The Company has not yet achieved commercial sales of its drug candidates to date, however, the new standard is applicable to its distribution agreements.

The revenue standard provides a five-step framework for recognizing revenue as control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that it determines are within the scope of the revenue standard, the Company performs the following five steps: (i) identify the contract; (ii) identify the performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses whether the goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation, or whether they are not distinct and are combined with other goods and services until a distinct bundle is identified. The Company then determines the transaction price, which typically includes upfront payments and any variable consideration that the Company determines is probable to not cause a

significant reversal in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is resolved. The Company then allocates the transaction price to each performance obligation and recognizes the associated revenue when, or as, each performance obligation is satisfied.

The Company's distribution agreements may entitle it to additional payments upon the achievement of milestones or shares of product revenue. The milestones are generally categorized into two types: development milestones and sales-based milestones. The Company evaluates whether it is probable that the consideration associated with each milestone or shared revenue payments will not be subject to a significant reversal in the cumulative amount of revenue recognized. Amounts that meet this threshold are included in the transaction price using the most likely amount method, whereas amounts that do not meet this threshold are excluded from the transaction price until they meet this threshold. At the end of each subsequent reporting period, the Company re-evaluates the probability of a significant reversal of the cumulative revenue recognized for its milestones and shared revenue payments, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income (loss) in the Company's condensed consolidated statements of operation and comprehensive loss. Typically, milestone payments and shared revenue payments are achieved after the Company's performance obligations associated with the distribution agreements have been completed and after the customer has assumed responsibility for the respective clinical program. Milestones or shared revenue payments achieved after the Company's performance obligations have been completed are recognized as revenue in the period the milestone or shared revenue payments was achieved. If a milestone payment is achieved during the performance period, the milestone payment would be recognized as revenue to the extent performance had been completed at that point, and the remaining balance would be recorded as deferred revenue.

The revenue standard requires the Company to assess whether a significant financing component exists in determining the transaction price. The Company performs this assessment at the onset of its distribution agreements. Typically, a significant financing component does not exist because the customer is paying for services in advance with an upfront payment. Additionally, future shared revenue payments are not substantially within the control of the Company or the customer.

Whenever the Company determines that goods or services promised in a contract should be accounted for as a combined performance obligation over time, the Company determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue is recognized using either the proportional performance method or on a straight-line basis if efforts will be expended evenly over time. Percentage of completion of patient visits in clinical trials are used as the measure of performance. The Company feels this method of measurement to be the best depiction of the transfer of services and recognition of revenue. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations. If the Company determines that the performance obligation is satisfied over time, any upfront payment received is initially recorded as deferred revenue on its condensed consolidated balance sheets.

Certain judgments affect the application of the Company's revenue recognition policy. For example, the Company records short-term (less than one year) and long-term (over one year) deferred revenue based on its best estimate of when such revenue will be recognized. This estimate is based on the Company's current operating plan, and the Company may recognize a different amount of deferred revenue over the next 12-month period if its plan changes in the future.

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 as a result of the issuance of stock options and restricted stock awards, as applicable. We have issued stock options and restricted stock awards to employees, directors and consultants under our five stock option plans: (i) the 2006 Stock Option Plan, (ii) the 2012 Restated Equity Incentive Plan (which superseded the 2006 Stock Option Plan), (the "2012 Plan"), (iii) the 2012 Non-Employee Director Stock Option Plan (the "2012 Non-Employee Director Plan"), (iv) the 2020 Equity Incentive Plan (the "2020 Plan"), and (v) the 2021 Equity Incentive Plan (the "2021 Plan"). At this time, the Company only issues stock options and restricted stock awards under the 2020 Plan, the 2021 Plan, and the 2025 Plan, and no longer issues stock awards under the 2006 Stock Option Plan, the 2012 Plan, or the 2012 Non-Employee Director 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 general and administrative expense or research and development expense, as applicable, in the Statements of Operations and Comprehensive Income (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 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.