CAPRICOR THERAPEUTICS, INC.

Previous wording

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 Item 1A, “Risk Factors” in this Quarterly Report 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.

Current wording

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.

Previous wording

Capricor Therapeutics, Inc. is a biotechnology company focused on the development and potential commercialization of cell and exosome-based therapeutics for the treatment of Duchenne muscular dystrophy (“DMD”), a rare genetic disorder characterized by progressive muscle degeneration and premature death, as well as other diseases with significant unmet medical need. Since our inception, we have devoted substantial resources to the development of our lead product candidate, Deramiocel, a cell therapy aimed to treat the skeletal and cardiac muscle complications associated with DMD, as well as to advancing our exosome-based platform technologies, developing manufacturing capabilities and supporting our research and development activities. Our Biologics License Application (“BLA”) for Deramiocel for the treatment of DMD is currently under review by the U.S. Food and Drug Administration (“FDA”), with a current Prescription Drug User Fee Act (“PDUFA”) target action date of August 22, 2026, for potential approval in the United States. We currently have no products approved for commercial sale. Our ability to generate product revenue and achieve profitability will depend on the successful development, regulatory approval and commercialization of Deramiocel and any other product candidates we may develop.

Current wording

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.

Previous wording

Our core program is focused on the development and commercialization of Deramiocel, a cell therapy product candidate 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, pro-angiogenic 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.

Current wording

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.

Previous wording

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 approximately 1,300 intravenous infusions across our clinical program to over 200 patients with DMD in three separate clinical trials. We believe therapies that address inflammatory and fibrotic processes contributing to muscle degeneration may provide potential benefit across a broad population of individuals with DMD.

Current wording

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.

Previous wording

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”), Johns Hopkins University (“JHU”), the Department of Defense, the U.S. Army Institute of Surgical Research, and Cedars-Sinai Medical Center (“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.

Current wording

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.

Previous wording

Our current strategy is focused on advancing these programs through collaborations and partnerships that may provide additional development resources and capital to support potential clinical development.

Current wording

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.

Previous wording

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. The absence of functional dystrophin leads to progressive skeletal and cardiac muscle damage, muscle cell death and replacement of muscle tissue with fibrosis. Cardiac involvement is a major component of disease progression in DMD. In patients with DMD, heart muscle cells progressively deteriorate and are replaced with scar tissue, leading to cardiomyopathy and ultimately heart failure, which is a leading cause of mortality in individuals with 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.

Current wording

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.

Previous wording

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 I/II HOPE-Duchenne clinical trial.

Current wording

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.

Previous wording

Following a Type A meeting with the FDA in August 2025, we aligned with the Agency on a regulatory path forward to address the CRL, including the submission of additional clinical data from the Phase 3 HOPE-3 trial. We subsequently submitted our response to the CRL, which the FDA accepted as a complete response and classified as a Class 2 resubmission, assigning a new PDUFA target action date of August 22, 2026.

Current wording

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.

Previous wording

Advisory Committee Meeting: On July 29, 2026, the Cellular, Tissue and Gene Therapies Advisory 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 Committee was not asked to vote on the HOPE-3 primary endpoint or on overall benefit-risk, and in a separate discussion of upper limb function its feedback was directionally supportive of the HOPE-3 clinical evidence. The Advisory Committee’s recommendation is advisory only and is not binding on the FDA.

Current wording

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.

Previous wording

Bioresearch Monitoring Inspection: In July 2026, the FDA conducted a Bioresearch Monitoring (“BIMO”) inspection in connection with its review of the BLA. At the conclusion of the inspection, the FDA issued a Form 483, Notice of Inspectional Observations, citing one 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, however, we can provide no assurance as to how the FDA will evaluate our response to the 483 or whether the observations will affect the timing or outcome of the FDA’s review of the BLA. At this time, the Company has submitted its response to the FDA and is awaiting further feedback.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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, the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, is conducting 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 expected later in 2026, subject to completion of the study by NIAID. If NIAID finds that our StealthX™ vaccine meets its criteria for safety and efficacy, they may consider our program for a funded Phase 2 study.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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 $40.7 million and approximately $25.9 million, for the three months ended June 30, 2026 and 2025, respectively. Our net losses were approximately $74.7 million and approximately $50.3 million, for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we had an accumulated deficit of approximately $379.6 million. We expect to incur significant expenses and operating losses for the foreseeable future.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

The increase was partially offset by a $0.6 million decrease in research expenses related to our exosomes platform, primarily related to timing of research activities for exosomes.

Current wording

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.

Previous wording

The increase was partially offset by a $1.4 million decrease in research expenses related to our exosomes platform, primarily related to timing of research activities for exosomes.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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 six months of 2026, we spent approximately $28.2 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.

Current wording

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.

Previous wording

Exosome Platform – Our exosome platform is in early-stage development. For the first six months of 2026, we spent approximately $1.3 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.

Current wording

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.

Previous wording

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 litigation with NS and, if we are successful in such litigation, whether we commercialize Deramiocel in the United States directly or through one or more distributors. Further, we cannot predict with any significant degree of certainty the amount of time which will be required to complete our clinical trials, the costs of completing research and development projects or whether, when and to what extent we will generate revenues from the commercialization and sale of any of our product candidates. The duration and cost of clinical trials may vary significantly over the life of a project as a result of unanticipated events arising during manufacturing and clinical development and as a result of a variety of other factors, including:

Current wording

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:

Previous wording

The following table summarizes our liquidity and capital resources as of June 30, 2026 and December 31, 2025 and our net increase (decrease) in cash, cash equivalents, and marketable securities for the six months ended June 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.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

Cash used in operating activities was approximately $60.7 million and approximately $26.6 million for the six months ended June 30, 2026 and 2025, respectively. The increase of approximately $34.1 million in cash used in operating activities is due to an approximately $24.4 million increase in net loss for the six months ended June 30, 2026 as compared to the same period in 2025. Furthermore, there was an decrease of approximately $10.3 million in the change in receivables balances, as well as approximately $4.0 million in the change in accounts payable and accrued expenses balances for the six months ended June 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.

Current wording

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.

Previous wording

We had cash flow used in investing activities of approximately $203.4 million for the six months ended June 30, 2026 and cash flow provided by investing activities of approximately $38.4 million for the six months ended June 30, 2025. The change in investing activities for the six months ended June 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 $16.6 million in property and equipment, leasehold improvements and construction in progress in the six months ended June 30, 2026, compared to approximately $2.6 million in the six months ended June 30, 2025.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

On May 7, 2026, Capricor announced that it had filed a Motion for Preliminary Injunction and Complaint in the Superior Court of New Jersey. The Complaint alleges a fundamental pricing flaw in the U.S. Distribution Agreement and that the defendants named therein, NS, have failed to adequately prepare for the commercial launch of the Company’s product Deramiocel in the United States pursuant to the U.S. Distribution Agreement, and have otherwise materially breached the terms of the U.S. Distribution Agreement. In the Complaint, the Company seeks rescission of the U.S. Distribution Agreement, declaratory judgment that the Company has the right to distribute Deramiocel directly or through distributors other than NS, and other equitable remedies. The state court was scheduled to hear Capricor's motion for preliminary injunction on August 10, 2026, ahead of the current PDUFA action date. Capricor withdrew the motion,

Current wording

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.

Previous wording

On December 5, 2025, the Company entered into an underwriting agreement with Piper Sandler & Co. and Oppenheimer & Co., Inc. as representatives of the underwriters (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.

Current wording

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.

Previous wording

On September 10, 2025, the Company established an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $150.0 million (the “September 2025 ATM Program”), pursuant to an Equity Distribution Agreement with Piper Sandler and Oppenheimer (collectively, 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.

Current wording

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.

Previous wording

$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.

Current wording

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.

Previous wording

On June 16, 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 of Deramiocel for the treatment of DMD-associated cardiomyopathy. The award was subject to operational milestones, a co-funding requirement, and certain reporting, intellectual property and revenue-sharing obligations under CIRM’s clinical-stage award policies. The Company completed all milestones and close-out activities associated with the award in 2019 and expended all funds received.

Current wording

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.

Previous wording

The Company accounts for the award as a liability rather than income because the Company had the option to convert the award into a loan. In February 2025, the Company notified CIRM of its election to convert the award into a loan. In May 2026, the Company entered into a loan repayment agreement with CIRM providing for repayment in two installments. As of June 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

Leases are classified as either financing 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.

Current wording

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.

Previous wording

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.

Current wording

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