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Item 7. Management’s Discussion and Analysis

2026-03-17 compared with 2025-03-26 · 166 added, 199 removed, 232 unchanged (61% of the section changed)

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This discussion includes forward-looking statements that involve risks and uncertainties.

As a result of many factors, including those set forth under Item 1A., “Risk Factors” or elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements.

As a result of many factors, including, but not limited to, those set forth under Item 1A., “Risk Factors” or elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements.

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:

Our core program is focused on the development and commercialization of a cell therapy technology (referred to herein as deramiocel) comprised of cardiosphere-derived cells (“CDCs”), which are a rare population of cardiac cells isolated from donated cells of healthy human hearts, for the treatment of DMD.

Deramiocel is designed to slow disease progression in DMD through the immunomodulatory, anti-inflammatory, pro-angiogenic and anti-fibrotic actions of CDCs, which are mediated by secreted exosomes laden with bioactive cargo.

Among the cargo elements known to be bioactive in CDC-exosomes are microRNAs.

Collectively, these non-coding RNA species alter gene expression in macrophages and other target cells, dialing down generalized inflammation and stimulating tissue regeneration in DMD (and in a variety of other inflammatory diseases).

This mechanism of action, consistent with the changes observed in clinical studies to date in circulating inflammatory biomarkers, contrasts with that of exon-skipping oligonucleotides and gene therapy approaches, which aim to restore dystrophin expression.

DMD pathophysiology is driven by the impaired production of functional dystrophin which normally functions as a structural protein in muscle.

The reduction of functional dystrophin in muscle cells leads to significant cell damage and ultimately causes muscle cell death and fibrotic replacement.

In DMD patients, heart muscle cells progressively die and are replaced with scar tissue.

This cardiomyopathy eventually leads to heart failure, which is currently the leading cause of death among those with DMD.

The annual cost of care for patients with DMD is very high and increases with disease progression.

There is no currently approved treatment for DMD-cardiomyopathy, therefore, we believe that DMD represents a significant market opportunity for our product candidate, deramiocel.

Biologics License Application (“BLA”):

In the third quarter of 2024, we held a pre-BLA meeting with FDA where we discussed our rolling BLA submission schedule, potential label expansion, plans for commercial manufacturing as well as other topics.

Subsequent to this meeting, we held several additional meetings with FDA and announced our intent to file a BLA based on existing cardiac data from our Phase 2 HOPE-2 and HOPE-2 OLE trials compared to patient-level natural history data.

We completed the full submission of the BLA in December 2024 and in the first quarter of 2025, we were informed by the FDA, they have accepted

for review our BLA seeking full approval for deramiocel as a treatment for patients diagnosed with DMD cardiomyopathy.

Additionally, the FDA granted the BLA Priority Review with a Prescription Drug User Fee Act (“PDUFA”) target action date of August 31, 2025.

The FDA also informed us that they have not yet decided whether an Advisory Committee meeting is needed in relation to our application.

To date, we have completed two promising clinical trials investigating deramiocel for DMD.

Data from the first trial, a Phase I/II trial named HOPE-Duchenne, suggested improvements in skeletal and cardiac endpoints.

In HOPE-2, a Phase II clinical trial conducted in the United States, deramiocel was used to treat patients with late-stage DMD.

In March 2022, we announced that the final one-year results from HOPE-2 were published in The Lancet showing that the trial met its primary efficacy endpoint of the mid-level dimension of the Performance of the Upper Limb (“PUL”) v1.2 (p=0.01) and additional positive endpoints of full PUL v2.0 (p=0.04) and a cardiac endpoint of left ventricular ejection fraction (p=0.002).

deramiocel was generally safe and well-tolerated throughout the studies.

Additionally, we are currently conducting an open label extension (“OLE”) study of the HOPE-2 trial in which 12 patients have elected to continue treatment of deramiocel.

We announced positive one-year and two-year results from this ongoing OLE study.

The HOPE-2-OLE study previously met its primary endpoint at the one-year timepoint on the PUL v2.0 scale (p=0.02).

The study remains ongoing and the three-year data demonstrated improvements in multiple measures of cardiac function, including left ventricular ejection fraction (LVEF), as well as indexed volumes, which are considered highly relevant in terms of predicting long-term cardiac outcomes.

In order to evaluate the relevance of the data to disease progression as well as the chronic and progressive nature of DMD where cardiac function can decline year over year, a natural history data set was used to compare the trajectory of those treated with deramiocel to standard of care.

In addition to the cardiac data, patients demonstrated a statistically and clinically relevant benefit in the PUL v2.0 total score when compared to an external comparator dataset of similar DMD patients.

Deramiocel treatment during the OLE portion of the study continues to yield a consistent safety profile and has been well-tolerated throughout the study.

Phase 3 (HOPE-3) Clinical Trial:

HOPE-3 is a Phase 3, multi-center, randomized, double-blind, placebo-controlled clinical trial comprised of two cohorts evaluating the safety and efficacy of deramiocel in participants with DMD and impaired skeletal muscle function who are on a stable regimen of systemic glucocorticoids.

Non-ambulatory and ambulatory boys who meet eligibility criteria are randomly assigned to receive either deramiocel or placebo every 3 months for a total of 4 doses during the first 12-months of the study.

Approximately 105 eligible study subjects are currently enrolled in the dual-cohort study (comprised of Cohorts A and B).

Cohort A uses product manufactured at our Los Angeles facility and Cohort B uses product manufactured at our San Diego facility.

Subjects are randomized to either deramiocel or placebo in a 1:1 ratio.

In the fourth quarter of 2023, we announced a positive outcome of the futility analysis for Cohort A of HOPE-3, which was reviewed by the Data Safety Monitoring Board (“DSMB”).

This resulted in a favorable recommendation to continue the HOPE-3 trial as planned.

The primary outcome measure of the HOPE-3 study will be the Performance of the Upper Limb (“PUL”) v2.0, a validated tool specifically designed for assessing high (shoulder), mid (elbow) and distal (wrist and hand) functions, with a conceptual framework reflecting weakness progression in upper limb function.

HOPE-3 will also measure various secondary endpoints including cardiac function assessments.

To support potential label expansion to treat DMD, we plan to provide clinical data on skeletal muscle myopathy by combining Cohorts A and B of the HOPE-3 clinical trial to serve as a post-approval study.

Furthermore, if necessary, the HOPE-3 study will also be supporting ex-U.S.

marketing authorizations.

Currently, we have initiated regulatory activities in Europe and Japan and will be working with the various health authorities to develop the most efficient path for regulatory approval of deramiocel in these regions.

The regulatory pathway for deramiocel is supported by RMAT designation as well as orphan drug designation.

In addition, if Capricor were to receive FDA marketing approval for deramiocel for the treatment of DMD, Capricor would be eligible to receive a Priority Review Voucher (“PRV”) based on its previous receipt of a rare pediatric disease designation.

Capricor retains full rights to the PRV, if received.

Further, Capricor has entered into two Commercialization and Distribution Agreements with Nippon Shinyaku appointing Nippon Shinyaku as its exclusive distributor of deramiocel in the United States and Japan.

● Exosome-Based Platform (Preclinical):

Extracellular vesicles, including exosomes and microvesicles, are nano-scale, membrane-enclosed vesicles which are secreted by most cells and contain characteristic lipids, proteins and nucleic acids such as mRNA and microRNAs.

They can signal through the binding and activation of membrane receptors or the delivery of their cargo into the cytosol of target cells.

Exosomes act as messengers to regulate the functions of neighboring or distant cells and have been shown to regulate functions such as cell survival, proliferation, inflammation and tissue regeneration.

Their size, low or null immunogenicity and ability to communicate in native cellular language potentially make them an exciting new class of therapeutic agents with the potential to expand our ability to address complex biological responses.

Because exosomes are cell-free substances, they can be stored, handled, reconstituted and administered in similar fashion to common biopharmaceutical products such as antibodies.

We are focused on developing a precision-engineered exosome platform technology that has the ability to deliver defined sets of effector molecules that exert their effects through defined mechanisms of action.

Aspects of our exosome pipeline have been supported through collaborations and alliances.

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 designed to address the cardiac and skeletal 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 Prescription Drug User Fee Act (“PDUFA”) target action date of August 22, 2026, for potential approval in the United States.

We currently have no products approved for commercial sale.

Our ability to generate product revenue and achieve profitability will depend on the successful development, regulatory approval and commercialization of Deramiocel and any other product candidates we may develop.

If approved, we intend to commercialize Deramiocel in the United States and may seek commercialization through strategic partners in other select international markets.

Our development efforts for Deramiocel for the treatment of DMD have progressed through multiple clinical studies, and we continue activities to support regulatory review and potential approval in the United States, as well as commercialization preparation, if approved.

Cell Therapy (Deramiocel)

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, for the treatment of Duchenne muscular dystrophy.

Deramiocel is designed to slow disease progression through the 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.

Our clinical development program for Deramiocel has focused primarily on adolescents and young adults with DMD, including many patients who are non-ambulatory and experiencing progressive cardiac and skeletal muscle decline.

We believe therapies that address inflammatory and fibrotic processes contributing to muscle degeneration may provide potential benefit across a broad population of individuals with DMD.

Exosomes Platform Technology (StealthX TM )

Extracellular vesicles (“EVs”), including exosomes and microvesicles, are nano-scale membrane-enclosed vesicles secreted by many cell types that contain characteristic lipids, proteins and nucleic acids, including messenger RNA (“mRNA”) and microRNAs.

These vesicles facilitate intercellular communication through the binding and activation of membrane receptors or through the delivery of molecular cargo into target cells.

Through these mechanisms, EVs may influence a variety of biological processes, including cell survival, proliferation, inflammation and tissue repair.

Exosomes in particular have attracted increasing interest as potential therapeutic and diagnostic platforms.

Their small size, generally low immunogenicity, and ability to deliver biologically active molecules to recipient cells may allow

them to modulate complex biological pathways.

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

Our exosome platform is supported by internal research and external collaborations.

Our collaborations and research around exosomes include the National Institutes of Health (“NIH”), the National Institute of Allergy and Infectious Diseases (“NIAID”), Johns Hopkins University (“JHU”), the Department of Defense (“DoD”), the U.S.

Army Institute of Surgical Research (“USAISR”), and Cedars-Sinai Medical Center (“CSMC”).

We have published preclinical data on our StealthX™ platform showing the rapid development of a recombinant protein-based vaccine for immunization and prevention against SARS-CoV-2, the virus causing COVID-19.

Our platform builds on advances in fundamental RNA and protein science, targeting technology and manufacturing, providing us the opportunity to potentially build a broad pipeline of new therapeutic candidates.

Recently, we were selected to be part of Project NextGen, an initiative by the U.S.

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.

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.

Our Pipeline – Key Programs

Duchenne Muscular Dystrophy Program:

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

Deramiocel is designed to slow disease progression in DMD through the immunomodulatory, anti-inflammatory, pro-angiogenic and anti-fibrotic actions of CDCs.

Through these mechanisms, Deramiocel is designed to slow disease progression and preserve both skeletal and cardiac muscle function in patients with DMD.

We have conducted a comprehensive clinical development program evaluating Deramiocel in patients with DMD, including randomized controlled trials and long-term follow-up studies designed to assess safety and efficacy across multiple measures of disease progression.

These studies include the Phase 3 HOPE-3 trial, the Phase 2 HOPE-2 trial and its ongoing open-label extension, and the earlier Phase I/II HOPE-Duchenne clinical trial.

Biologics License Application:

In late 2024, we completed our submission of a BLA to the FDA seeking approval of Deramiocel for the treatment of Duchenne muscular dystrophy.

The FDA accepted the BLA for review, granted Priority Review, and assigned a PDUFA target action date of August 31, 2025.

In July 2025, we received a Complete Response Letter (“CRL”) from the FDA stating that the application did not meet the statutory requirement for substantial evidence of effectiveness and requesting additional clinical data.

Following a Type A meeting with the FDA in August 2025, we aligned with the 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 Prescription Drug User Fee Act target action date of August 22, 2026.

If approved, Deramiocel has the potential to become the first therapy designed to address both skeletal and cardiac muscle manifestations of Duchenne muscular dystrophy.

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.

StealthX™ Exosome Platform:

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

Exosome Platform:

Engineered Exosome-Based Vaccines:

The StealthX™ vaccine is a proprietary vaccine developed internally by Capricor utilizing exosomes that were engineered to express either spike or nucleocapsid proteins on the surface.

Preclinical results from murine and rabbit models published in the peer-reviewed journal, Microbiology Spectrum, showed the StealthX™ vaccine resulted in robust antibody production, potent neutralizing antibodies, a strong T-cell response and a favorable safety profile.

These effects were obtained with administration of only nanogram amounts of protein and without adjuvant or synthetic lipid nanoparticles.

Exosomes offer a new antigen delivery system that could potentially be utilized to rapidly generate multivalent protein-based vaccines.

In 2024, 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, will conduct a Phase 1 clinical study with our StealthX™ vaccine, subject to regulatory approval.

At this time, manufacturing is underway for our StealthX™ vaccine and we have submitted an Investigational New Drug Application (“IND”) to the FDA, which is currently under review.

At this time, NIAID is planning for regulatory approval in the second quarter of 2025 with the clinical study initiated soon thereafter.

NIAID's Division of Microbiology and Infectious Diseases (“DMID”) would oversee the study.

If NIAID finds that our StealthX™ vaccine meets its criteria for safety and efficacy, they may consider our program for a funded Phase 2.

At this time, we are developing exosome-based vaccines and therapeutics for infectious diseases, monogenic diseases and other potential indications.

Our current strategy is focused on securing partners who will provide capital and additional resources to enable us to bring this program into the clinic.

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 which is currently ongoing.

Preliminary data indicate 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 in the second quarter of 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, for which we are actively preparing should that trial be initiated.

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.

At this time, we are exploring the use of our proprietary StealthX™ exosome platform for a broad range of therapeutic applications including targeted RNA, protein and small molecule therapeutics to treat or prevent a variety of diseases.

These programs represent our core technology and products.

Financial Operations Overview

As of December 31, 2025, we had cash, cash equivalents, and marketable securities totaling approximately $318.1 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.

Since our inception, we have raised approximately $600 million through a combination of equity financings, strategic collaborations, grants and other non-dilutive funding sources.

Due to our significant research and development expenditures, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception.

Our net losses were $40.5 million and $22.3 million, for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, we had an accumulated deficit of $199.8 million.

Our net losses were approximately $105.0 million and approximately $40.5 million, for the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, we had an accumulated deficit of approximately $304.9 million.

We expect to incur significant expenses and operating losses for the foreseeable future.

During the year ended December 31, 2024, we sold 6,252,229 shares of common stock at an average price of approximately $9.34 per share pursuant to a sales agreement by and between us and H.C.

Wainwright & Co.

LLC (“Wainwright”) under our at-the-market offering, resulting in gross proceeds of $58.4 million.

Additionally, in September 2024, we completed a private placement for gross proceeds of approximately $15.0 million.

In October 2024, we completed an underwritten public offering for gross proceeds of approximately $86.3 million.

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.

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.

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.

Financial Operations Overview

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.

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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.

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.

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Generally, the stock awards vest based upon time-based conditions.

Stock-based compensation expense is included in the consolidated statements of operations under general and administrative (“G&A”) or research and development (“R&D”) expenses, as applicable.

Stock-based compensation expense is included in the 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.

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Clinical Development Income.

Clinical development income for the years ended December 31, 2024 and 2023 was approximately $22.3 million and $25.2 million, respectively.

Clinical development income for the years ended December 31, 2025 and 2024 was zero and approximately $22.3 million, respectively.

As of December 31, 2024, the Company has fully recognized $50.0 million in development milestone payments received from Nippon Shinyaku related to the Exclusive Commercialization and Distribution Agreement (the “U.S.

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Stock-based compensation

Depreciation and amortization

Research and other

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● $11.9 million increase in compensation and other personnel expenses primarily due to increases in headcount;

● $4.4 million increase in DMD (deramiocel) program-related expenses primarily related to our HOPE-3 clinical trial, our HOPE-2 OLE clinical trial and expanded manufacturing production efforts for deramiocel in preparation for potential commercial launch;

● $11.2 million increase in our DMD program-related expenses primarily related to our HOPE-3 clinical trial, our HOPE-2 OLE clinical trial and expanded manufacturing production efforts for Deramiocel in preparation for potential commercial launch;

● $2.3 million increase in research expenses related to our exosomes platform, primarily related to our collaboration with NIAID;

● $3.2 million increase in facility expenses primarily related to expanded leased space;

● $1.7 million increase in stock-based compensation expense, driven primarily by increased headcount and higher grant prices, which led to a higher fair value of granted options;

● $0.1 million increase in depreciation expense primarily related to increased equipment purchases and capital improvements related to expansion efforts of our leased space.

● $5.3 million increase in stock-based compensation expense, driven primarily by increased headcount and higher stock prices, which led to a higher fair value of granted options.

General and Administrative Expenses .

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Facility expenses

Depreciation and amortization

Other corporate expenses

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The increase was primarily driven by the following:

● $0.7 million increase in stock-based compensation expense primarily due to increases in headcount;

● $2.1 million increase in stock-based compensation expense primarily due to increased headcount and higher stock prices, which led to a higher fair value of granted options;

● $2.8 million increase in compensation and other personnel expenses related to increases in headcount and recruiting costs;

● $0.2 million increase in depreciation related to leasehold improvements to our San Diego corporate headquarters;

● $1.3 million increase in professional services largely attributable to elevated legal and consulting costs related to our continuing regulatory initiatives;

● $1.9 million increase in other corporate expenses primarily related to increased overhead costs related to travel and corporate expenses due to increased headcount.

This increase was partially offset by a $0.1 million decrease in professional service expenses primarily due to a decrease in business development related expenses.

Other Income (Expense)

Investment Income .

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The increase in investment income in 2025 as compared to 2024 is due to a higher principal balance in our marketable securities, savings and money market fund accounts.

Interest expense .

Interest expense for the years ended December 31, 2025 and 2024 was approximately $3.0 million and $0, respectively.

The interest expense in 2025 was related to interest accrued related to CIRM Award.

Products Under Active Development

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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 2027.

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 consolidated financial statements.

Liquidity and capital resources

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Financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Our total cash, cash equivalents, and marketable securities as of December 31, 2025 were approximately $318.1 million compared to approximately $151.5 million as of December 31, 2024.

The increase in cash, cash equivalents and marketable securities from December 31, 2024 as compared to December 31, 2023 is primarily due to an underwritten public offering in October 2024, equity financings through our at-the-market offering and a $15.0 million private placement with Nippon Shinyaku, which is partially offset by our net loss of approximately $40.5 million.

The increase in cash, cash equivalents and marketable securities from December 31, 2025 as compared to December 31, 2024 is primarily due to an underwritten public offering in December 2025, equity financings through our at-the-market offering and proceeds received from warrants and options exercised, which is partially offset by our net loss of approximately $105.0 million, as well as investment made in purchases of property and equipment, and payments made for construction in progress.

The net loss for the year ended December 31, 2025 was driven by the increased R&D expenses in connection with our clinical program in DMD.

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Cash used in operating activities was approximately $69.8 million and $40.0 million for the years ended December 31, 2025 and 2024, respectively.

The net change of approximately $14.4 million in cash from operating activities is due to the milestone payment of $10.0 million from Nippon Shinyaku and reduction of deferred revenue.

Furthermore, there was an increase of approximately $2.4 million in stock-based compensation and an increase in net loss of approximately $18.2 million for the year ended December 31, 2024 as compared to the same period in 2023.

Furthermore, there was a net change of approximately $0.6 million in accounts payable and accrued expenses.

The net change of approximately $29.8 million in cash from operating activities is due to an approximately $64.6 million increase in net loss for the years ended December 31, 2025 as compared to the same period in 2024.

Furthermore, there was an increase of approximately $7.2 million in stock-based compensation, approximately $3.0 million in accrued interest liability, approximately $10.3 million in receivables, approximately $12.3

million in deferred revenue, and approximately $4.0 million in accounts payable and accrued expenses for the year ended December 31, 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, which will generate negative net cash flows from operating activities.

We had cash flow used in investing activity of approximately $116.2 million for the year ended December 31, 2024 and cash flow provided by investing activities of approximately $5.1 million for the year ended December 31, 2023.

The change in cash flow by investing activities for the year ended December 31, 2024 as compared to the same period of 2023 is due to the net effect from purchases, sales, and maturities of marketable securities as well as purchases of property and equipment and leasehold improvements.

We had cash flow provided by investing activity of approximately $97.5 million for the year ended December 31, 2025 and cash flow used in investing activities of approximately $116.2 million for the year ended December 31, 2024.

The change in cash flow by investing activities for the year ended December 31, 2025 as compared to the same period of 2024 is due to the net effect from purchases, sales, and maturities of marketable securities as well as purchases of property and equipment, leasehold improvements and construction in progress.

We had cash flow provided by financing activities of approximately $248.9 million and $152.8 million for the years ended December 31, 2025 and 2024, respectively.

The increase in cash provided by financing activities for the year ended December 31, 2024 as compared to the same period of 2023 is primarily due to the net proceeds from the sale of common stock.

The increase in cash provided by financing activities for the year ended December 31, 2025 as compared to the same period of 2024 is primarily due to the net proceeds from the sale of common stock and from exercises of warrants and stock options.

During 2025 we received net proceeds from the sale of stock of approximately $237.0 million compared to approximately $152.3 million over the same period of 2024.

During 2025 we received net proceeds from exercises of warrants and stock options of approximately $11.9 million compared to approximately $0.5 million in 2024.

From inception through December 31, 2025, we financed our operations primarily through private and public sales of our equity securities, government grants, and payments from distribution agreements and collaboration partners.

As we have not generated any revenue from the commercial sale of our products to date, and we do not expect to generate revenue for several years, if ever, we will need to raise substantial additional capital to fund our research and development, including our long-term plans for clinical trials and new product development.

We may seek to raise additional funds through various potential sources, such as equity and debt financings, government grants, or through strategic collaborations and license agreements or other distribution agreements.

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These factors include the following:

● the progress of our clinical and research activities;

● the progress of our clinical, regulatory, commercial, and research activities;

● the number and scope of our clinical and research programs;

● the costs involved in preparation for the potential commercialization of our Deramiocel product for the treatment of DMD;

● the progress and success of our preclinical and clinical development activities;

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Collaborations

Commercialization and Distribution Agreement with Nippon Shinyaku (Territory:

United States)

On January 24, 2022, Capricor entered into a Commercialization and Distribution Agreement (the “U.S.

Commercialization and Distribution Agreement (Nippon Shinyaku - United States)

On January 24, 2022, Capricor entered into the U.S.

Distribution Agreement with Nippon Shinyaku, a Japanese corporation.

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Pursuant to the U.S.

Distribution Agreement, Capricor received an upfront payment of $30.0 million in 2022.

Distribution Agreement, Capricor received an upfront payment of $30.0 million.

The first milestone payment of $10.0 million was paid upon completion of the futility analysis of the HOPE-3 trial whereby the outcome was determined to be not futile.

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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:

Commercialization and Distribution Agreement (Nippon Shinyaku - 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.

Under the terms of the Japan Distribution Agreement, Capricor received an upfront payment of $12.0 million in 2023 and in addition, Capricor will potentially receive additional development and sales-based milestone payments of up to approximately $89.0 million, subject to foreign currency exchange rates, and a meaningful double-digit share of product revenue.

Nippon Shinyaku will be responsible for the distribution of Deramiocel in Japan.

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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:

European Region Binding Term Sheet

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.

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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 various 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 April 30, 2025.

If the definitive agreement is entered into, Capricor will receive an upfront payment of $20.0 million upon execution of the definitive agreement, with potential additional development and sales-based milestone payments of up to $715.0 million.

At this time, Capricor and Nippon Shinyaku have entered into several amendments to the Term Sheet, pursuant to which the parties agreed to extend the date during which the parties shall negotiate the terms of the definitive agreement to April 1, 2026.

Financing Activities by the Company

December 2025 Underwritten Public Offering

On December 5, 2025, the Company entered into an underwriting agreement (the “2025 Underwriting Agreement”) with Piper Sandler & Co.

(“Piper Sandler”) and Oppenheimer & Co., Inc.

(“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 6,000,000 shares of common stock, including the exercise in full of the underwriters’ option to purchase 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.

October 2024 Underwritten Public Offering

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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 Common Stock until the six-month anniversary of the Closing Date.

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 which occurred on March 15, 2025.

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.

September 2023 Financing

On September 29, 2023, the Company entered into Securities Purchase Agreements, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Registered Direct Offering”), an aggregate of 4,935,621 shares of its common stock, par value $0.001 per share, at a price per share of $4.66 for an aggregate purchase price of approximately $23.0 million.

Each share of common stock offered was sold with a warrant to purchase one share of common stock at an exercise price of $5.70 per share.

Each warrant became exercisable beginning six months after issuance and will expire seven years from the date of issuance.

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.

September 2025 ATM Program

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.

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 this sale.

Subsequent to December 31, 2025, no additional shares have been sold under the September 2025 ATM Program through the date of this filing.

June 2021 ATM Program

The Company established an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $75.0 million (the “June 2021 ATM Program”) on June 21, 2021, pursuant to a Common Stock 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.

LLC (“Wainwright”) by which Wainwright sold our common stock at the market prices prevailing at the time of sale.

Wainwright was entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold plus reimbursement of certain expenses.

From June 21, 2021 through October 1, 2024, the Company sold an aggregate of 9,228,383 shares of common stock under the June 2021 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 under the June 2021 ATM program.

Effective October 1, 2024, the June 2021 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 Duchenne muscular dystrophy-associated cardiomyopathy.

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.

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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, California Code of Regulations Section 100608.

Such requirements include, without limitation, the filing of quarterly and annual reports with CIRM, the sharing of intellectual property pursuant to Title 17, 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 has 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.

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;

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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.

Depending on the timing of Capricor’s election, additional funds may be owed.

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 December 31, 2024, Capricor’s principal liability balance for the CIRM Award was approximately $3.4 million, excluding any accrued interest as the Company had not elected to convert the CIRM Award into a loan.

Subsequently, 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.

As of December 31, 2025, the total CIRM liability was approximately $6.4 million consisting of $3.4 million in principal and $3.0 million in accrued interest, of which the full amount is classified as current.

On February 26, 2025, Capricor notified CIRM of its election to convert the CIRM Award into a loan.

The terms of the loan agreement are currently under discussion with CIRM.

Depending on these discussions, accrued interest on the CIRM Award could range from zero to approximately $7.1 million, and will continue to accrue over time until the final payout, if it is determined that interest is due.

Depending on the results of these discussions and based on our reasonable best estimate for the anticipated loan terms, accrued interest on the CIRM Award could reach up to approximately $7.7 million, and may continue to accrue over time until the final payout.

The estimate is dependent on many factors, some of which have yet to be determined.

As of December 31, 2025, approximately $3.0 million was recorded as accrued interest.

Off-Balance Sheet Arrangements

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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.

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.

The Company accounts for its leases in accordance with ASC Topic 842, Leases (“ASC 842”), which requires lessees to recognize most leases on the balance sheet with a corresponding right-to-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.

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.

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.

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.

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.

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.

ROU assets and lease liabilities are recognized at lease commencement based on present value of fixed lease payments over the lease term.

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.

The Company uses its incremental borrowing rate to measure lease liabilities when the implicit rate is not readily determinable.

The Company has elected the practical expedient to combine lease and non-lease components for real estate leases.

This practical expedient is not elected for manufacturing facilities and equipment embedded in product supply arrangements.

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 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 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.

The determination as to when income is earned is dependent on the language in each specific grant.

Generally, we recognize grant income in the period in which the expense is incurred for those expenses that are deemed reimbursable under the terms of the grant.

Grant income is due upon submission of reimbursement request.

The transaction price varies for grant income based on the expenses incurred under the awards.

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using a five-step model to recognize revenue when control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled.

The Company’s arrangements may include fixed consideration, such as upfront payments and milestones, as well as variable consideration, such as sales-based royalties and shared revenues.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is resolved.

Revenue is recognized either at a point in time or over time, depending on when control of the promised goods or services is transferred to the customer.

For performance obligations satisfied over time, the Company recognizes revenue based on a measure of progress that depicts the transfer of services to the customer.

Upfront payments received in advance of performance are recorded as deferred revenue.

Research and Development Expenses and Accruals

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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 and the 2021 Plan and no longer issues stock awards under the 2006 Stock Option Plan, the 2012 Plan, or the 2012 Non-Employee Director Plan.

We have issued stock options and restricted stock awards to employees, directors and consultants under our six 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”), (v) the 2021 Equity Incentive Plan (the “2021 Plan”), and (vi) the 2025 Equity Incentive Plan (the “2025 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.

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As part of the process of preparing our 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.

objective is to reflect the appropriate clinical trial expenses in our consolidated financial statements by matching the appropriate expenses with the period in which services are provided and efforts are expended.

Our clinical trial accrual process is designed to account for expenses resulting from our obligations under contracts with vendors, consultants, contract research organizations (“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 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.

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Recently Issued or Newly Adopted Accounting Pronouncements

In December 2024, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) , which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid.

ASU 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024.

The Company adopted ASU 2023-09 in the fourth quarter of 2025 and applied it retrospectively.

Please refer to Note 13 - "Income Taxes” for further information and disclosure.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements , which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies.

Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP.

ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity.

ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software , which amends the guidance in ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software.

The amendments modernize the recognition and disclosure framework for internal-use software costs, removing the previous “development stage” model and introducing a more judgment-based approach.

The ASU is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted.

The Company is currently evaluating the impact this guidance will have on its financial statement.

In November 2024, the FASB issued ASU No.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis